2-Minute Money Manager: I’m Retiring Soon — How Should I Invest My Savings?

2-Minute Money Manager: I’m Retiring Soon — How Should I Invest My Savings? Photo by shurkin son / Shutterstock.com

Welcome to the “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.

Today’s question is about investing as retirement looms. It’s a time when you can’t afford to lose money, but at the same time need to earn as much as possible. Tricky.

Watch the following video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.

You also can learn how to send in a question of your own below.

For more information, check out “5 Blunders You’re Making When Investing for Retirement” and “Battle of the Best Savings Accounts.” You can also go to the search at the top of this page, put in the words “retirement investing” and find plenty of information on just about everything relating to this topic.

And if you need anything from a better savings account to help with debt, be sure and visit our Solutions Center.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by MoneyTalksNews.com, serving up the best in personal finance, news and advice since 1991.

Here’s our question for today. It comes from Anonymous:

“I have seven years until retirement, and $100,000 in a savings account. What’s the best thing to do with this money to prepare for retirement? I’m gonna need it liquid.”

Well Anonymous, I’ve got three things for you:

Thing No. 1: Best gain comes from potential pain

The best way to earn more on your savings is to take a little risk. When I say “take risk,” what I mean is to expose a little of your savings to the stock market. This is tricky — especially for Anonymous — for a couple of reasons. First, because since the stock market goes up and down, you really need to leave money there for at least five years. That’s pushing up on what Anonymous can do with a seven-year window.

In addition, as I speak in July 2018, the market’s really high, and I’m not that confident it’s going to keep going higher for much longer. [Note from the editor: As of March 2019 when this post was republished, the market is high once again, despite volatility in December and January. This analysis remains unchanged.] In short, within the next couple of years we could go into a recession and the market could tank. For those two reasons, I’m not really wild about Anonymous taking a lot of risk now. And apparently Anonymous isn’t wild about taking risk anyway, because Anonymous’ money is in a savings account.

For those with more time, however, learn a simple rule of thumb: Take your age from 100, and put that figure as a percentage of your savings in stocks, perhaps with an investment like the Vanguard S&P 500 Index Fund. So if you’re 65 years old, you’d put 35 percent in stocks. If you’re 35 years old, 65 percent.

Thing No. 2: Shop your savings

If you can’t stomach risk, at least try to get the best interest rates you can on your savings. Right now, some banks are paying 0.1 percent, but others are paying close to 2 percent. Wouldn’t you rather have 20 times the interest? All you have to do is shop insured savings accounts.

You definitely want to do this, folks, and it’s easy. A lot of websites, including MoneyTalksNews.com, make it simple. You can just go to our Solutions Center, click on savings accounts, and you’ll find rates a lot higher than you’re probably earning now.

That’s earning a lot more money without taking any more risk. You’re crazy not to at least do that.

Thing No. 3: Pay down debt

If you’re paying 10 percent interest on a debt, paying it off is the same thing as earning 10 percent risk-free and tax-free. You can’t beat that. So, if you possibly can, pay off those debts to prepare for retirement.

I hope that answers your question, Anonymous.

Got a question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter, just as you would with any email in your inbox. If you’re not subscribed, fix that right now by clicking here. It’s free, only takes a few seconds, and will get you valuable information every day!

The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and also have earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Got any words of wisdom you can offer on today’s question? Share your knowledge and experiences on our Facebook page. And if you find this information useful, please share it!

What's next?

Now that you've learned about critical components for a successful retirement, it's time to take the next step. To have the retirement you've dreamed about and the one you deserve, you need a plan that will show you:

  • How to discover fulfillment and live the retirement life you really want
  • Whether to downsize and where to live during your retirement years
  • A simple, proven system to destroy every debt you have
  • How to invest to reach your retirement goals and never outlive your savings
  • How to score up to $12,000 more in Social Security every year
  • Why you don't need a financial planner and how to be your own
  • How to stay in top shape and manage medical costs

The Only Retirement Guide You'll Ever Need is the plan that gives you the knowledge you need to approach retirement confidently -- with the peace of mind we're all after. Learn at your own pace, anytime you'd like, from the comfort of your home. Get expert, personalized advice and access to a special online community where you can connect with others and get your questions answered.

It's time to plan the best years of your life. Let's get started!

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