I’m retiring and recently sold my home and downsized to a smaller home in Florida. I picked Florida because of lower property taxes and no state income tax. Tired of paying Illinois high rates on everything. I purchased a town house in a golf community with no mortgage. After purchasing this town home I have $200.000 left over from the sale of my home. My wife and I have a 401k with approximately $ 320.000 in various investments. My question is where should I invest this money where it would be the safest and yet get a good return. Some say annuities, other say tax free bonds. Any advice ??
Terry Says: Well, to me this is the ultimate in “chicken money” — money you can’t replace easily, and therefore can’t afford to lose. For the time being, just put it in the bank earning almost nothing, or open an account at www.TreasuryDirect.gov/Individual and buy some 6-month Treasury bills, staggering maturities, with half of the cash, leaving the rest in a bank money market fund for now. That will give you safety, liquidity, and peace of mind. The other ideas you suggested — annuities, tax-free bonds, are just sales pitches that will likely earn the salesperson more in commissions than you earn!
Now, I’m assuming that you have some exposure to stocks in your 40l(k) plan, and that will give you much-needed growth in the future. If you really want to understand this advice, and how to balance your investments and withdrawals, I suggest you contact T. Rowe Price (800-638-5660) and inquire about their Retirement Income modeling program. You work with a financial planner, and it’s very low cost (free if you have a small amount of assets with them) and used the “monte carlo” modeling scenarios described in The Savage Number. That will give you a plan for both investing and withdrawing over your lifetime, to give the greatest likelihood that your money will last as long as you do! And enjoy Florida!