Expert Q&A Archive

Start by asking yourself “What are the future contributions and rate of return that I need in order to retire in the lifestyle I deserve?”Once you have that information, you need to determine the asset allocation that will give you the highest potential of getting that return on a consistent basis. A financial advisor can help you determine this. Contribute to your plan on a regular basis regardless of what the overall market is doing.

As far as safe bets for 60+, i.e. Roth IRA's, etc., a Roth IRA is a type of account, not an investment. There is no difference with regards to safety. What makes your account safe vs. not safe is the investments you choose to invest in, not the type of account. The higher your allocation to fixed-income investments vs. stocks, the less volatility you should have.

[Editor's Note: According to investopedia.com, the term “asset allocation” refers to an investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon, and the three main asset classes are equities, fixed-income, and cash and equivalents.]

Anyone 60+ should have been saving for retirement before now; however, if no savings have been incurred at this point, a Roth IRA with good mutual funds with a 10-year track record would be a good investment, provided the individual is planning on not using any of the funds for at least 5 years. Since all types of IRAs are long-term investment instruments, they are not good for anyone planning to withdraw the money as soon as it's invested. A money market account should be used for short-term investing, as this instrument allows monthly withdrawals. The individual would need to shop for a good rate for this type of account.

I think the biggest mistake most people often make is that they bypass the establishment of an emergency fund, and, as a result of it, they become dependent on credit cards. The advantage of the Roth IRA (if you are eligible) at age 60 or any age is that you'll have access to the principal deposited a day after the contribution without penalties. The key at any age is to have a minimal emergency fund equivalent to 4 to 6 months' worth of expenses. If you are in need of an emergency fund, you should consider an FDIC-insured Money Market account, as well as an FDIC-insured savings account. You should check with your tax advisor as far as your Roth IRA contribution eligibility.

In my opinion, there is no way of answering this question in an email and without more information about the person. Everyone's situation is different, and many factors have to be taken into consideration; however, I will say that there are no safe bets, because every investment has some type of risk. Also, it is not the type of account that determines the amount of risk a person is accepting. It is the underlying investments in the account, so the amount of risk a person has with a Roth IRA will depend on the investments they choose to have in the account.

Starting over at 60+ is not impossible. Define a timeline. You may need to work longer than you originally thought. If you cannot stay in your current job, get your resume ready. The longer you work, the more time you have to contribute to retirement funds. If your "second career" pays less, consider supplementing your wage with Social Security. (Go to www.ssa.gov) After age of full retirement,
(currently 65 if year of birth is 1937 or earlier, increasing to 66 if born between 1943 and 1954) there is no cap on earnings while collecting Social Security. Perhaps your second career income and Social Security benefit will be the same as your current salary.

The difficult thing here is getting that resume ready. For someone over 60, that can be a challenge. Know that it will be a shorter career, so think about an area of employment that you may enjoy. Where to park your savings? The Roth will allow you to pay lower taxes today, while a regular IRA will give you a current tax break. There are some changes coming in the IRA/Roth IRA area, so it is a good idea to spend some time at a retirement planning seminar or with a financial advisor. They can be expensive, however, while local senior citizen [centers] and even high schools offer free seminars on retirement planning. There are many personal decisions that have to be made, as each individual is unique.