What would you do with my money?
October 27, 2008 10:28 PM Subscribe
Looking for opinions here. My husband just retired, we have a government pension of $1,600/month. House paid for, ditto basic health insurance; we can live comfortably (high speed net access, Netflix, newspaper) if we're careful. We have $12,000 in savings, in cash. SO: save it all & add to it (last summer's plan) or spend some or all of it on useful items that may get scarcer and/or more expensive. What would you do?
It would help to know what your monthly expenses are, and what sort of things you would like to spend your money on.
posted by zippy at 10:55 PM on October 27, 2008
posted by zippy at 10:55 PM on October 27, 2008
$12,000 isn't that much if you have to replace a car and a furnace in the same year. You have many years of retirement ahead - I would keep your cash savings intact for now. If it is literally in cash you might want to put some of it in a very conservative investment - maybe inflation adjusted Treasuries or, if you want more liquidity, a money market fund. Personally I think Vanguard is a good choice - not the highest payout but very low expenses and conservative investments.
posted by metahawk at 11:00 PM on October 27, 2008
posted by metahawk at 11:00 PM on October 27, 2008
$12K in cash is frankly not much. In the case of any catastrophic expense, you'd be underwater very fast. Sorry to be doom-and-gloom, but your first priority should be drastically growing that savings account.
posted by LittleMissCranky at 11:04 PM on October 27, 2008
posted by LittleMissCranky at 11:04 PM on October 27, 2008
Absolutely need to invest or save that money. $12k is not very much to rely on if you suddenly need money.
posted by Joh at 11:15 PM on October 27, 2008
posted by Joh at 11:15 PM on October 27, 2008
invest.save. DON'T SPEND.
be comfortable with being comfortable.
posted by docmccoy at 11:21 PM on October 27, 2008
be comfortable with being comfortable.
posted by docmccoy at 11:21 PM on October 27, 2008
No question. Save.
posted by nakedcodemonkey at 11:27 PM on October 27, 2008
posted by nakedcodemonkey at 11:27 PM on October 27, 2008
You might consider getting one of those new fusion checking accounts. They let you earn interest and still use the account like a normal checking account. Would only amount to a few hundred bucks a year, but hey, free money. In my area the credit unions are competing for people's business. I've seen rates as high as 6% (though with low balances maximums... 1,000 to 2,500 or so). There are also online accounts for the same thing, which will have higher maximum limits, but probably less support/ATMs/etc.
posted by wastelands at 11:32 PM on October 27, 2008
posted by wastelands at 11:32 PM on October 27, 2008
Absolutely save the $12,000.
If something went wrong with your house, you could burn through half of it within days.
posted by yellowcandy at 12:04 AM on October 28, 2008
If something went wrong with your house, you could burn through half of it within days.
posted by yellowcandy at 12:04 AM on October 28, 2008
Guard that $12K as if your life depended on it. It may.
Frankly, that's far below what anyone should have available the day they retire, pension or not -- but that's pretty frighteningly common in the US these days. The current retiring generation is notorious for this condition. Are you both too young for social security? You should consider whether you should draw on that if you are, even given the lower benefits from activating early.
A little bit should be liquid, the rest in secure vehicles like CDs. It's probably too late/not enough to seek realistic higher yields in this risk environment.
In any case, don't take our investment advice. Look for a certified financial planner, who will consult with you for a flat fee.
posted by dhartung at 1:54 AM on October 28, 2008
Frankly, that's far below what anyone should have available the day they retire, pension or not -- but that's pretty frighteningly common in the US these days. The current retiring generation is notorious for this condition. Are you both too young for social security? You should consider whether you should draw on that if you are, even given the lower benefits from activating early.
A little bit should be liquid, the rest in secure vehicles like CDs. It's probably too late/not enough to seek realistic higher yields in this risk environment.
In any case, don't take our investment advice. Look for a certified financial planner, who will consult with you for a flat fee.
posted by dhartung at 1:54 AM on October 28, 2008
You didn't say whether you work and have any income. You or your husband might want to look into doing some part-time work to supplement your income and savings pot. Perhaps something enjoyable and/or fulfilling? My retirement is a very long time off but I always dreamed of working in a specialist jazz record shop when I reach that point. Not that there will be any record shops before too long...
posted by Dan Brilliant at 4:16 AM on October 28, 2008
posted by Dan Brilliant at 4:16 AM on October 28, 2008
I'm quite uncomfortable with your low savings. you are literally one major medical emergency away from losing your house. most basic health care plans top out at a certain number (perhaps your gov plan differs) and then you're on your own. one week in ICU is enough then.
I would save and look into whether there are penalties for you two earning something extra to your pension to build savings for a few years while you are still young and capable. this should do wonders for later times.
posted by krautland at 6:35 AM on October 28, 2008
I would save and look into whether there are penalties for you two earning something extra to your pension to build savings for a few years while you are still young and capable. this should do wonders for later times.
posted by krautland at 6:35 AM on October 28, 2008
Even if it's a typo and it's $120,000, that is not really a lot of savings to have for two people at the beginning of a retirement. I would save.
posted by onlyconnect at 9:52 AM on October 28, 2008
posted by onlyconnect at 9:52 AM on October 28, 2008
@dmd - Even if it was a typo for $120,000... $120,000 savings and a $19,200 a year pension isn't very much financial security for retirement.
Save the money.
posted by JFitzpatrick at 9:52 AM on October 28, 2008
Save the money.
posted by JFitzpatrick at 9:52 AM on October 28, 2008
19,000 a year is okay for now, but costs will go up, and you don't say if the pension has a cost-of-living adjustment built in. With 12,000 in savings, I'd be trying hard to save more, and would be working part-time to increase the savings. You do have home equity, but dipping into capital is risky.
I like Andrew Tobias' advice. Stock up on things you normally use when they're on sale. But only as much as you can use in a year. There may be inflation. or not. This economy is too volatile to predict, so you have to stick with the tried & true.
posted by theora55 at 10:39 AM on October 28, 2008 [1 favorite]
I like Andrew Tobias' advice. Stock up on things you normally use when they're on sale. But only as much as you can use in a year. There may be inflation. or not. This economy is too volatile to predict, so you have to stick with the tried & true.
posted by theora55 at 10:39 AM on October 28, 2008 [1 favorite]
Gack! I'm no where near retirement age, have more in the bank than that (not bragging; just a point of reference), and if I got laid off tomorrow, I'd feel very cash-strapped.
You need to carefully incubate that nest egg. Spend none of it. Put it in a safe bonds fund, preferably a low expense-ratio bond index fund (expense ratio no more than 0.5%; preferably 0.1-0.2%), and don't touch it.
posted by IAmBroom at 7:28 PM on October 28, 2008
You need to carefully incubate that nest egg. Spend none of it. Put it in a safe bonds fund, preferably a low expense-ratio bond index fund (expense ratio no more than 0.5%; preferably 0.1-0.2%), and don't touch it.
posted by IAmBroom at 7:28 PM on October 28, 2008
Response by poster: Thanks to everybody who replied; interesting that all the answers seem to reflect a solid belief that our economy will pretty much stay as it is. Save, save, save -- inflation (oh, do I remember the '70s) hits and you don't have so much anymore. Save, save, save -- deflation (and yes, it could happen here) and you don't have so much anymore. Save, save, save your money (worldwide distribution difficulties, shortages) -- it doesn't matter how much you have.
I asked in the first place because my son, who's very good with money and has plenty of it, strongly feels that we ought to use the money to buy things we can use, like top-of-the-line down jackets and that router my husband's got his eye on. Of course, one excellent mountain bike and the whole amount's gone; we have to stay in perspective.
And I loved the suggestion that the amount must be a typo! Very generous of you, but actually it is possible to live lives of abundance on surprisingly small amounts of money, and some of us do think $12,000 is a significant amount of money to think about.
We're very lucky to have Tricare (government health insurance). Frankly, I don't think most people can possibly save enough to cover a major health emergency without insurance.
posted by kestralwing at 8:09 AM on October 29, 2008
I asked in the first place because my son, who's very good with money and has plenty of it, strongly feels that we ought to use the money to buy things we can use, like top-of-the-line down jackets and that router my husband's got his eye on. Of course, one excellent mountain bike and the whole amount's gone; we have to stay in perspective.
And I loved the suggestion that the amount must be a typo! Very generous of you, but actually it is possible to live lives of abundance on surprisingly small amounts of money, and some of us do think $12,000 is a significant amount of money to think about.
We're very lucky to have Tricare (government health insurance). Frankly, I don't think most people can possibly save enough to cover a major health emergency without insurance.
posted by kestralwing at 8:09 AM on October 29, 2008
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posted by mmdei at 10:52 PM on October 27, 2008