Help me convince my wife to diversify our investments
January 28, 2005 5:24 PM   Subscribe

My wife and I argue all the time about financial matters, but the problem certainly isn't one that I have heard from anyone else. The thing is, we have plenty of money -- more than enough to be comfortable. Hopefully someone here has an idea to help me (us). [MI]

The problem is that she thinks ALL money should be kept in a checking/savings account. She doesn't believe in maintaining retirement accounts or ANYTHING else. I believe having a diversified portfolio is prudent, including stocks, bonds, 401K, etc. We argue about this endlessly. Neither of us is willing to compromise. I think it is ridiculous to have 5 (or 6!) figures in an account earning zero-point-something percent. She likes the security. I suggest CDs. She says no. Help!
posted by bagels to Human Relations (49 answers total)
You're right. There are many, many good options for conservative investors. There's no debate to be had here. I think the challenge is to find a sensitive financial advisor who will take your wife's concerns to heart, and allay her fears. If she's not willing to take expert advice of this sort, then she might need therapy. Have you tried to ascertain whether there's any trauma in her past that might account for extreme (even irrational) risk-aversion?
posted by stonerose at 5:30 PM on January 28, 2005

If your wife is immune to reason and logic (and from your description, she is) perhaps you can simply agree to differ?

If you each took a proportion to manage as you saw fit, then in the end you would be half-way to where you want to be, which is better than nothing. Your wife is insisting on having the last word on the disposition of your assets, and that ain't fair. Maybe stressing the fairness angle will get you more traction than arguing about what makes financial sense.

You're not alone, by the way. My ex-wife could not be persuaded that it was better to pay off high-interest debt than to save.

Another angle - how much does your spouse need to feel safe? If you have 50% in cash, that's still a big bunch of cash. As her to name the figure that makes her feel safe. Every dollar over that figure can surely be invested somewhere.

(on preview, I agree with stonerose too).
posted by i_am_joe's_spleen at 5:37 PM on January 28, 2005

Good suggestions, spleen. I should also mention The Wealthy Barber, which has many fans as a primer for conservative, sensible financial management.
posted by stonerose at 5:41 PM on January 28, 2005

As with anything in life there needs to be a leader in this, either you or her. You can very closely lead and follow, to those outside this will seem as symbiotic experience, but there should always be a distinct 'forward.'

This is best resolved, at least with those who have analytical thinking minds, with facts and figures. Show her market returns, if necessary tell her stories of wealth gained and lost, as it relates to her existing or future children. Mainly, overpower her with knowledge, if this is not accepted, then overpower her with reason. If that doesn't work attempt to show your forwardness in other venues.

Bottom line, if you feel this is the way to go, be forceful and lead, even it if means hardship. It has for us, but we got through it and are currently enjoying fruitful returns.

Good luck.
posted by sled at 5:59 PM on January 28, 2005

You're right, and I know this even though my saving habits are more like your wife's, and I'm trying to mend my ways. There are ways to manage money that aren't crazy risky ventures but will allow it to grow more reasonably than in a savings/checking account. I think the main thing to do is figure out what her true objections are.

If she says "security" then there's nothing practical to prohibit CDs, a nice stable mutual fund, an IRA [do you have 401ks with work, either of you?] if you guys both agree that if there is some "emergency" need for liquiditiy, you can cash it out and take the hit. For me it was realizing that the chances of me having some major medical disaster were quite small while the chances of my money doing nothing at all when it was stuck in my bank account were basically 100%. As a result, I see it as gambling whatever the early-IRA/CD cashout punishment is in order to earn more interest. Plus the tax benefits for sticking money into an IRA are useful to me in my tax bracket.

That said, I think going with a financial advisor you both trust and going into things gradually is the way to go with the understanding that neither one of you get what you want, but that a compromise is in order. This isn't a topic you should fight over, it is one that you should -- with any luck -- be able to agree to disagree on in principle, but in practice try something more in the middle ground. Some investing, maybe a money market account with a big chunk of change, or an ING account like was mentioned in the thread a few days back.
posted by jessamyn at 6:07 PM on January 28, 2005

Response by poster: stonerose - she has been "advised" by our friends and family that more investing might be better (I didn't bring it up). She doesn't want to hear about it.

sled and jessamyn - I try to use logic and calm reasoning and financial explinations but she just doesn't want to hear it.

spleen - I have mentioned splitting some money. No again.

That being said, we do have a small amount in stocks and such, just such a tiny percentage to make it hardly noticable. Our stocks made over 30% last year. She doesn't think it matters. I just try to keep the peace.
posted by bagels at 6:25 PM on January 28, 2005

Bagels, you've received some good advice and good reading suggestions already regarding saving/investing.

I see one more issue here - disagreements over money can also be disagreements over power within the relationship. Now, I don't know either of you, and I only read into the question what is asked into the question through the lens of my own life experience - but perhaps you might want to scratch beneath the immediate issue and see whether there's a larger disagreement brewing? "Neither of us is willing to compromise" and "I just try to keep the peace" raise some flags.

Talking to a financial counsellor that you both trust is a good idea - talking with a counsellor will also help. All the best to you both.
posted by seawallrunner at 6:39 PM on January 28, 2005

Does she have some sort of philosophical objection to making money via financial methods, as opposed to receiving it as salary?
posted by Mark Doner at 6:42 PM on January 28, 2005

You already know this, but by having money in savings over time you will be LOSING money as the currency declines in value due to inflation. There's no risk of it happening--it's pretty much certain.
posted by grouse at 6:50 PM on January 28, 2005

Man, that's a strange attitude. I have an irrational aversion to dealing with, or even learning about, the stock market, but I certainly had no problem buying CDs with some of the cash we made selling our condo. All I can suggest is to point out what grouse said (her approach means letting the money slowly vanish) and try to get her to agree to each of you investing (or rather managing) half, as joe's_spleen says.

My ex-wife could not be persuaded that it was better to pay off high-interest debt than to save.

This is even more bizarre, but apparently it's common -- I know several people who carry credit-card debt they could pay off. I just don't understand it. I pay my cards off every month, and the thought of incurring that high interest makes my skin crawl. Why, strange debt people, why??
posted by languagehat at 7:11 PM on January 28, 2005

From the sound of things, bagels, you no longer have merely money dispute. You have a spouse who is unwilling to compromise on one of the most important aspects of the marital partnership.

I don't know how you would broach it, but you guys need relationship counselling, or an all-out brawl, or a divorce.
posted by i_am_joe's_spleen at 7:12 PM on January 28, 2005

Response by poster: With no kids, we save a lot of money every year. Therefore she sees our balance rising all of the time. We could easily live off just my salary, so her's is all saved.

spleen - We are considering counselling because of this one stupid (but significant) problem. This is the only big problem in our relationship. Does it really go deeper than this? - I don't know the answer to that question. We rarely fight except over this issue.
posted by bagels at 7:41 PM on January 28, 2005

You could do a compromise and invest using a CD ladder and Treasuries which will almost definitely yield more than a money market savings account (which should anyways yield a lot more than zero-point something percent!), and would be just as safe as any anywhere.

Maybe she's concerned about the liquidity for some reason?
posted by shoos at 8:02 PM on January 28, 2005

If the return rate your money is earning is less than the rate of inflation, you're losing money. That simple.
posted by stavrosthewonderchicken at 8:19 PM on January 28, 2005

And if inflation worries you, you can put your money in TIPS (inflation protected treasuries). They're actually even safer than FDIC insured bank accounts. Tell her that!
posted by shoos at 8:30 PM on January 28, 2005

Your wife is wrong. A book that may be helpful if she's willing to read it: "Making the Most of your Money" by Jane Bryant Quinn. Simple, no nonsense advice.
posted by Nelson at 8:43 PM on January 28, 2005

Much simpler.

Suggest a financial advisor give you both some ideas.

Since the diversification comes from a third party, this may reduce the conflict.

If you have to, insist that someone gave it to the two of you as a gift. Better yet, have a friend do that.

Oh, and you're complaining about something that the rest of us would die to have a as a problem.
posted by filmgeek at 9:03 PM on January 28, 2005

Does she have some sort of philosophical objection to making money via financial methods, as opposed to receiving it as salary? -- Mark Doner

I'd follow this up; my saving habits are exactly like your wife's. My objection to investment schemes is that I cannot arrive at a satisfactory explanation of where the money comes from and what it represents. It apparently defies rational analysis. I need to be able to trace it back to something concrete before I can think of it as more than pure illusion.

Money in my bank account has a certain density which I respect despite the bank fees that nibble away at it. In fact, in a strange way the knowledge that it is slowly declining in value due to inflation reassures me that it is actually worth something. All of this 'get million dollars when you retire' currently in vogue strikes me as some modern-day voodoo. Maybe your wife feels the same?
posted by Ritchie at 9:41 PM on January 28, 2005

bagels, you overlooked the best part of jessamyn's advice: I think the main thing to do is figure out what her true objections are.

"Logic" and "calm reasoning" won't work if strong emotions are motivating her here, and let's face it--most of us have strong emotions about money. Maybe fear of accidents or emergencies is driving her. Maybe something awful has happened to her before because she didn't have enough ready cash. Look for whatever's underlying this dispute (for you and for her), and address that instead. You may be able to find some non-financial solution to her concerns and be able to suit both of your real interests.
posted by equipoise at 9:59 PM on January 28, 2005

Bottom line: generally, you can't reason someone out of a position that they didn't arrive at rationally. Attacking the problem with a deluge of expert opinion, however correct and apparently persuasive, isn't gonna make it in all likelihood.

Attempting to find the underlying cause(s) of your wife's apparent fears and addressing it/them is the way to go. Good for you for taking this to couples therapy: a good start.
posted by enrevanche at 10:26 PM on January 28, 2005

Er, sorry, realized I misread your earlier post. I would *strongly encourage* you to seek couples counseling about this issue.
posted by enrevanche at 10:29 PM on January 28, 2005

Well, fundamentally, jessamyn, equipoise and enrevanche are right, in that this is probably coming from some kind of deeper, emotional stance, and that almost certainly needs to be addressed first before you're going to get anywhere on this front.

Nevertheless, insofar as logic _does_ apply here, one of the key factors is _taxes_. Whether or not she's willing to accept the basic premise that other vehicles are _safer_, there's still the undeniable point that vehicles like 401(k)s are tax-deferred or even tax-exempt. Using them can save you a _lot_ of money compared to a savings account where you put the money in after it's taxed--especially over the long term--and a good financial advisor can definitely help you illustrate that point.

Again, once you're at a point that you can debate things on a rational basis, you might also point out that even the returns from a bank savings account are based on the exact same premise. Sure, you're getting a guaranteed 2% or whatever on your savings account, but that's because they're averaging out your risk with a million other account holders. They're still basically generating that return by taking your money and investing it, but they're just taking a big chunk off the top, to mitigate their risk. It's still all being driven by the same mechanism.

I really don't mean to imply that she's being stupidly "irrational"....there are almost certainly deep personal and emotional reasons why she's so intransigent, and it's not going to do you or your relationship any good to just insist you're right until those things are dealt with. Nevertheless, hoping that you can get her to a stage where she's willing to at least debate some of these issues, these are a couple of points that might help.
posted by LairBob at 10:45 PM on January 28, 2005

A spouse who wants to save money, sock it away, and isn’t interested in hearing about investments is far better than a spouse who likes to run up credit card debt, spend frivolously, and plunk the kid's college fund into a Uncle Al's biotech startup. So even if the two of you can’t resolve this issue, you’ll be arguing about it on Easy Street rather than Skid Row.
posted by mono blanco at 1:33 AM on January 29, 2005

Along the lines of what equipoise said... Is it possible that her fear (subconcious or concious, rational or irriational) is that the money won't be readily accessible if it's needed? I have strong pack rat tendencies and I find that, while having my treasure trove in boxes in storage is good, having it all lined up on the shelf where I can find anything I want at any time is much better. It makes me feel more relaxed, safer, better prepared. If you could get a pro (broker, advisor, banker, etc.) to explain to her what would happen if the money had to be pulled out of the investment/account suddenly, it might help.

Also, there could be a power issue here. If my money is in a bank or a bond or whatever, then going to the institution and taking it out, transferring it, etc. can feel like going to my parents to ask them for my allowance. Irrational, I know, but this is a little bit of an issue for me and, I'm willing to bet, much more of an issue for other people.
posted by Clay201 at 1:52 AM on January 29, 2005

The thing is, we have plenty of money -- more than enough to be comfortable.

FDIC insurance has a limit. If you're serious about the (potentially) 6 figures, it might be something to be worried about enough to consider diversifying.

It may also be worth considering weighing the value of the potential income against the strain the argument puts on your relationship.

Having said that, CDs are, of course, safe as any bank account, but sometimes there's just no headway to be made with a rational approach. Be glad she doesn't insist on keeping everything in gold bars stashed under the mattress.
posted by juv3nal at 3:50 AM on January 29, 2005

AFAIK, you do not need your wife's permission to open your own accounts, unless you live in a state (presuming US) with some very strange laws. Protect yourself and your retirement years from your wife, who will be eating dog food at age 65 unless she gets off the pot.
posted by sageleaf at 5:19 AM on January 29, 2005

Bagels, I think that your wife is being wholly unreasonable, and even if it causes some initial stress in the relationship, I suggest that you put as much as possible of the money that you earn into your company's 401(k) account. The tax savings alone are irresistible, and even if you take the safest investment options (cash equivalents or US treasuries), you'll be earning more than in a savings account. Having six figures in a savings account is NOTHING when it's time to retire. It could all be wiped out by an unforeseen event, and in any case, it's no more than two or three years worth of income. Perhaps you have disability insurance through work, but even so, you need something put away for later. Perhaps you can't convince her, but you can look out for yourself (and for her, too), and if you start building something up, she may want to go along with you.

Also, if your employer has a 401(k) match, it's downright criminal not to take advantage of it. It's free money.

And I second (or third or fourth or whatever) talking to a financial planner.
posted by anapestic at 5:25 AM on January 29, 2005

If she works, let her do what she will with what she earns. You invest yours.

I have a feeling you are wanting to invest with money she earns. Hence power struggle.

Couples counseling. Stat.
posted by konolia at 5:38 AM on January 29, 2005

I have a feeling you are wanting to invest with money she earns. Hence power struggle.

This is true, and may very well be a key to her feelings on the subject, but it's also something of a red herring. If she's living on the money he earns (as he said earlier) and all the investment money is coming from her paycheck, it may feel to her like it's all hers. But in fact, some of that money is money he earns in the sense that the money he earns has freed it up. Money stuff is complicated that way.
posted by redfoxtail at 6:59 AM on January 29, 2005

And that's a good argument for changing the financial arrangements. In theory there's no reason why a married couple shouldn't live on one member's income and invest the other's, but in this case it's causing serious problems. Would she be amenable to putting all income in a pot, living on whatever portion you need to live on, and each investing (or not) half the rest?

Ritchie: Paper money is also "pure illusion," no more real than invested money. It's created and destroyed every time debts are created or called in. Reading up on such things will either ease your mind or drive you to hoarding gold (and possibly living in a cave in Idaho).
posted by languagehat at 7:09 AM on January 29, 2005

Money managers typically recommend having three accounts: yours, hers, and household. You take all of your household expenses, and you each contribute the same proportion of your income towards those expenses, and the rest is yours to do as you choose with.

I realize that is probably not your current arrangement, but the idea that your wife's money is hers and your money belongs to both of you is silly and unfair. That may have been workable for couples where one person was the breadwinner and the other person stayed home or worked part-time, but it makes no sense now or for your situation.
posted by anapestic at 7:17 AM on January 29, 2005

I understand that there is an eternally shifting definition of what it is that money is supposed to represent, but nevertheless money earned via salary seems to have some real-world connection that money earned by investment just doesn't. Someone upthread mentioned 'free money'. The point I'm making, the heart of my concern, is that it cannot possibly be free money. It must be costing something to someone somewhere. I also understand for all that it may be incomprehensible, investment works. But those arguments have less to do with rationality than they do with utility.

So gold, eh?
posted by Ritchie at 7:26 AM on January 29, 2005

When I mentioned "free money," it was in the context of an employer match to your 401(k) account. That means that (in my case), for the first 4% of my salary that I put in my retirement plan, my employer matches half. That means I get 2% of my salary into my retirement plan without having to do anything except sock money away for retirement.

The money you put into the bank doesn't stay in the bank. The bank invests it in securities or in home mortgages or in something else. That's how they can pay you interest. And while it's generally very safe, banks can still fail, and then if you have over $100,000 in a bank, there's a chance you won't get the excess over $100k back. It's rare, but remember the S&L crisis of the 90s?

And gold (or any other commodity) is only valuable because people decide that it's valuable. Ultimately, all forms of wealth carry some risk. That level of risk varies greatly from investment to investment, but nothing is really entirely safe.
posted by anapestic at 7:35 AM on January 29, 2005

Bank interest still makes sense though; they are paying me for the use of my savings (and interest on a debt is the cost of borrowing someone else's savings in turn). However the amount they pay me is not disproportionate to the inconvenience I incur (which is nearly nil).

That the bank takes my money to use for investments from which they will profit does not make me an investor - that blood is on their hands. Also, the fact that my savings share an attribute with investments (risk) does not mean my savings are actually investments. Lastly, the form that value takes matters not to me - bits of paper, gold, cowrie shells - but the method by which investment creates more value.

Sorry for this semi-derail, bagels. Hopefully it provides some insight into the mind of an investment-avoider that will help you in negotiating with your wife.
posted by Ritchie at 8:03 AM on January 29, 2005

Ritchie: I highly recommend the book Your Money Or Your Life, if only because it will give you a way to make money more tangible to you, and make (very safe) investments seem more utilitarian. It really helped me come to terms with money, which was a foreign country to me.
posted by frykitty at 8:28 AM on January 29, 2005

Bagels, try to devise a fair way to separate some money so that you have money to invest, and she has money to save. Invest at least some of your part cautiously. Instead of stocks, put it in an indexed mutual fund or other conservative choice. Short term cds don't pay much interest, but are safe and allow you to get the money back out promptly. If she sees you investing cautiously, it may help.

If a 401(k) match is available, it's such a great deal that not taking is is financially irresponsible, and that's how I'd try to sell that. Same with paying credit card interest while you have money in the bank.

Consider buying a house. Putting extra earnings into a house can be a way of putting it to work that she may find comfortable.

Get some good, solid, cautious books about managing money. I like Andrew Tobias. There are plenty of viewpoints. Be happy that you are arguing about an excess of money, rather than the reverse, and try to give her some space to meet her needs. It can be much worse.
posted by theora55 at 10:34 AM on January 29, 2005

It seems obvious to me that the issue isn't about money at all, it's just manifesting that way. Maybe it's about security, maybe it's about not trusting "money people", or what-not. You need to find out why she's so unwilling to do anything but let the dollars rot in a savings account, and address that issue, instead of trying to win her over with figures and more money-talk.
posted by Jairus at 2:06 PM on January 29, 2005

I would recommend both of you read Smart Couples Finish Rich.

I had a similar attitude regarding fat, comforting savings accounts until my wife and I started seriously thinking about retirement, ran the numbers, and realized,"Wow, we can't get from here to there at .1% interest."

Another motivator for us was discussing fancifully what we could do with our money: retire at 40? travel the world? start a bed and breakfast? If you're just discussing finances in terms of "we need a 401k 'cause that's what you're supposed to do," it's a dreadfully boring and impersonal conversation.

[We've decided to hire and train a personal ninja army. Your tastes my vary.]
posted by Loser at 2:26 PM on January 29, 2005

My mother and her husband had a similar conflict. Their solution was to decide, mutually, on a financial advisor who they trusted, and allow him to make decisions based on both their needs. They had to agree to trust him, and had to agree on the probability that nobody would be perfectly satisfied.

I think they saw a counselor in re their differing attitudes toward money, as it's such a dealbreaker. It's worked out very well for them.
posted by goofyfoot at 4:31 PM on January 29, 2005

You could do a compromise and invest using a CD ladder and Treasuries

With all due respect to the other posters, I don't think it's totally irrational to want totally safe investments. The stock market has crashed before. People lose jobs all the time.

As others have mentioned, but I think it merits reiteration - there are 100% guaranteed-to-be-safe investments that have a lot higher returns than a bank account, and provide all the liquidity you need.

If I were the financial counseler here (and not a marriage counseler), I'd propose:

* An agreement with your wife that no more than X% (say, 20) can be invested in stocks, and only by investing in mutual funds offered by Prudential, Vanguard, or Scudder (these are firms with lowish costs, and prudent choices).

* An amount equal to six months of income (net, not gross) to be kept in savings and checking accounts.

* The remaining money to be invested in things that are (a) 100% safe and (b) where at least 10% of the amount is available within six months, 20% within 12 months, etc., without penalty. A CD ladder is perfect for this. Some of the money could go into treasury securities as well. Insured municipal bonds (pdf ) may also make sense if you're in a state with an income tax, or in a higher tax bracket.

In short, as much as everyone believes that a diversified portfolio is a good thing (TM), and that a diversified portfolio must (repeat, must) include stocks, commercial bonds, etc., I think that you should be able to improve your financial returns while making peace with your wife, if you agree with her that a very large percentage of your saving should be absolutely safe. No one has EVER lost their money when it was invested in a CD - within the FDIC limits - or a U.S. treasury bond or an insured municipal bond (with a financially strong insurer).

P.S. Congratulations on your stocks making 30% last year. I do recommend that you never again mention that fact to your wife. She isn't interested in gambling, and it doesn't move the conversation forward when you tell her how lucky you were during a one-year period.
posted by WestCoaster at 4:42 PM on January 29, 2005

About the bank interest: look into credit unions. I got tired of my account being gobbled up in yet another bank takeover, and moved all my cash to a credit union. They pay roughly double the interest of the commercial banks on both checking and savings accounts. The one I joined even pays a year-end dividend on the interest accrued. CUs have the same FDIC backing as banks.

I know this isn't going to solve your dispute with your wife, but at least you can get more interest than the bank gives.
posted by Kirth Gerson at 4:15 AM on January 30, 2005

Response by poster: Wow, there is so much good advice and a variety of viewpoints here. I need to read this thread multiple times and devise a plan on how to move forward. Some people say she is totally wrong and others that things aren't so bad. There must be a compromise possible somehow.

A clarification: We have all joint accounts. I didn't mean to imply that my money is used only for expenses and her's for investing. It just works out that we could comfortably live on my salary and her income is all gravy (and she makes nearly what I do). This is the advantage of living in the Midwest.
posted by bagels at 5:06 AM on January 30, 2005

A Roth IRA makes a great "emergency fund," by the way. You can take your contributions out at any time, tax-free (well, because you already paid taxes on them); however, your earnings are never ever taxed. At 7.2% earnings, which attainable using reasonably safe investments, you will double your money every ten years. So if you have 30 years to retirement, and put in $10,000 now, you could have $80,000 when you retire, and not have to pay any tax at all on $70,000 of it. And if you get in a jam, you can still get the original $10,000 back out. The downside is there are maximum annual limits for contribution (currently $4,000 a year, it was $7,000 last year).
posted by kindall at 2:08 PM on January 30, 2005

The Roth limit for 2003 was actually $3,000, and it is a very good investment. It's not available to couples with an adjusted gross income of over $160,000 (the limit is reduced if your AGI is over $150,000), but that limit affects very few couples.

And not to be contrary, but I do think that such fear of the stock market is irrational. The stock market has crashed once in the last hundred years, and there have been major reforms since the depression. At any other time when the market had a big downturn, you would still have been better off leaving your money in. There was a big loss in 1987, but even though stocks went down by about a third, if you had a balanced portfolio in the market before the crash, it would still be worth over four times as much today. Moving from half a percent to two percent is all well and good, but it will not get you very far towards retirement.
posted by anapestic at 5:18 PM on January 30, 2005

You may be doing this already, but if your bank offers a Money Market/Savings that you can link to your checking as Overdraft protection, that may be a good way to edge out her having to have every single red cent in one account. The OD is there in cast someone makes a math boo-boo, so no worries on that. My best friend's grandmother is this way, too, by the way, but in her case it's having grown up in the depression and some weird thing about not wanting to have to balance the checkbook. She keeps 10K in her checking account, 'cause she's an old lady and she wants to, by God. But she lets her daughter do some prudent investing for her. She's an old lady with a lot of money because of this, by the way. I don't know if your wife is similarly averse to checkbook-balancing . . . I don't know, maybe that little story is instructive. I sort of think it is. Good luck!
posted by Medieval Maven at 8:27 PM on January 30, 2005

Important point: the Federal Deposit Insurance Corporation insures deposits (like your chequing account) up to a balance of $100,000. If you have more than this amount in your accounts, it is NOT SAFE.

As mentioned above, there are low risk investments - such as term deposits & savings bonds - that can help you earn better interest, but that don't involve the risk of the stock market.
posted by raedyn at 8:40 AM on January 31, 2005

the Federal Deposit Insurance Corporation insures deposits ... up to a balance of $100,000.

To be more exact: The basic insurance limit is $100,000 per depositor per insured bank. Joint accounts (two people) are insured to $200,000.

In short, for a couple, if their regular checking and savings accounts at a bank exceeds $200,000, they should open up a second second of accounts at another bank to make sure everything is insured.

Credit unions are similarly insured by the NCUA. (Money at credit union is considered to be "shares" rather than just deposits, so the terminology at this website is slightly different.)
posted by WestCoaster at 9:40 AM on January 31, 2005

there are low risk investments - such as term deposits & savings bonds

Actually, U.S. savings bonds are no risk investments if you hold them to maturity, at least in terms of not getting your principal returned with promised interest.

Another specific suggestion: Treasury Inflation-Protected Securities. You can buy them new (for 5 year or longer maturities), or you can purchase existing TIPS from a broker (here's a page describing how these securities get to brokers), and build the equivalent of a CD ladder.

TIPS are nice because you're guaranted to NOT lose ground to inflation if you hold them to maturity. You won't make a lot beyond inflation (I think the typically real return - beyond inflation - has been in the range of 2 to 3 percent since these started being sold), but you remove any worry that (say) inflation will restart with a vengence, and your (say) 5 percent bonds will be actually worth less (in real terms) when you redeem them than when you bought them.
posted by WestCoaster at 9:49 AM on January 31, 2005

Yeah, DUH, the Roth limit was $3000 last year. I opened one and for some reason I put down $7000, which is the total I'll have put in mine after this year. %)
posted by kindall at 4:10 PM on January 31, 2005

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