My mother has been conservatively investing in the Treasury Money Market for many years in the Vanguard IRA. Very little return from the $90k in that fund. She does not need the money for any use and the forced distribution each year only ends up in a savings account at the local bank. In your opinion, would she be better off investing in a more bond stock fund mix such as a Vanguard Wellesley Income fund Adm (minimum $50k) or Vanguard Wellesley Income Fund Inv (minimum $3k)? And do you have a suggestion fof the use of the $7k distribution each year? Thanks Terry and Happy 2017

Terry Says:

So this is an interesting question.  Let me assume that your mother is able to understand and manage her own money.  If that’s the case, I support her decision.  You have no idea what great peace of mind it gives her to have this “money in the bank.”  She worked for it, and she saved it.   And what’s the point of trying to earn a bit extra and expose her principal to even a slight bit of risk of loss?  This is truly “chicken money” in that it buys her complete peace of mind. That’s more important at this stage than earning a higher return.

Plus, you never can tell when she will need the money, perhaps for a caregiver or attendant, or even for a nursing home.  As long as she has this money safely stashed away, you won’t have to dig into your own savings to care for her.

But what I WOULD suggest is that you make sure she has named a beneficiary for her IRA (check my most recent column for details) and that the beneficiary understands the potential tax benefits of doing a rollover at her passing, instead of taking the money out.  AND, you want to make sure you have a health care power of attorney in case she cannot make these decisions on her own.  And possibly a “living will” — stating her wishes about care at end of life.

 

Have a Question?

Ask yours!