Dear Liz: I am 68 and not in very good health due to heart disease. I'm not sure what do with my savings of over $1 million, which sits in online bank accounts, earning 1.25% to 1.35% in 18-month certificates of deposit. (No account contains more than $250,000 to remain under the FDIC insurance limits.) The money will eventually go to my daughter, though I could use it for my retirement. I don't have the appetite for market swings. What should I do with my money?
Answer: Your money currently is safe from just about everything except inflation. If you want to keep your nest egg away from market swings, you'll have to accept that its buying power will shrink. There is no investment that can keep your principal safe while still offering inflation-beating growth.
If you do want a shot at some growth, you could keep most of your savings in cash but also invest a portion in stocks — preferably using low-cost index mutual funds or ultra-low-cost exchange-traded funds.
Before you know how to invest, though, you'll need to think about your goals for this money. A fee-only financial planner could help you discuss the possibilities and come up with a plan. You can find fee-only planners who charge by the hour through the Garrett Planning Network, www.garrettplanningnetwork.com.
Good reasons why one spouse’s inheritance doesn’t belong to the other
Dear Liz: You recently told a husband who wanted to spend his wife's expected inheritance that the money would be her separate property. Is that true of all states or just community property states like California? Even if it can be kept legally separate, should it be? Isn't it better for couples to share their money?
Answer: Inheritances and gifts are considered separate property in every state. Where community property and equitable distribution states differ is in how other assets and debts acquired during marriage are treated.
For inheritances and gifts to remain separate property, though, a recipient must be careful not to commingle them with joint funds. Recipients would need to keep such windfalls in separate bank or brokerage accounts in their names alone, for example, rather than storing the money in jointly held accounts, using it to improve a jointly owned asset such as a home or paying down a joint obligation such as a mortgage.
Why would people want to keep funds separate? There are good reasons, even in marriages where all other money is shared. The couple may divorce, or the wife could die before her husband. If she commingles her inheritance with joint funds, the money her mother intended her to have could ultimately get spent by her husband's next wife.
The wife may well decide to share some or all of her windfall with her husband. But she shouldn't be pressured or bullied into doing so, especially with the notion that it's the "right" thing to do. She would be smart to talk — alone — to a fee-only financial planner who pledges to put her interests first before she makes any decisions about the money.
When a government pension doesn’t reduce Social Security benefits
Dear Liz: I have contributed to Social Security for 40 years and have no government pension. My husband selected a reduced teacher's pension so I would receive that same amount should he predecease me. Will my Social Security be reduced in this scenario?
Answer: No. The provisions that may reduce Social Security payments such as the government pension offset and the windfall elimination provision apply only to the person receiving the pension, not the spouse. If he dies first, your income would remain the same. If you die first, his survivor's benefit from Social Security could be reduced or eliminated.