As I read this week's question, from a reader named Pauline, I was overwhelmed by one feeling.
Pauline and her husband are in their early 50s, and the issue they are pondering is one I would love to face.
"All of our children are married," Pauline wrote. "My husband is self-employed, and I have a job with benefits. We are debt free (yeah!) and have a combined annual income of (approximately) $80,000.
"We already have money in several different 401(k) accounts, and $100,000 in a money market savings account at the bank. Within this next year or two we will be inheriting a large sum of money ($250,000). We don't need this to live on now, but want it for retirement.
"We would like to know how best to invest this so that it will make the most amount of money for about 15 years until we retire. At that time we would want to have access to it when we need it for our retirement years. Do you recommend CDs, money markets, mutual funds, annuities, real estate or what?"
Can you see why I'm envious?
But I must put that aside in the name of professionalism. So, for help with Pauline's question, I contacted Roger Smedley and Sharla Jessop of Salt Lake-based Smedley Financial Services.
While both say it is hard to give specific advice based on the information Pauline provides, they do have a few thoughts for her.
The basic idea in such a situation, Roger says, is "to protect what you have, and then acquire more." Protecting means having insurance and making sure you don't make foolish investing mistakes. Acquiring more means making wise investments.
Sharla says that, when it comes to investing for retirement, Pauline and her husband are ahead of the game.
"They have good income," Sharla says. "They're out of debt, which is huge as they get close to retirement. ... They're early in the planning cycle. Her questions all lend themselves to having a plan."
So, she says, what Pauline and her husband should do right now is put together a concrete retirement plan.
Roger says that means focusing not only on their years until retirement, but also on the 15 to 30 years they will live after they have retired.
Their plan should take into account what their needs will be at retirement, Sharla says, as well as the effects of inflation. In other words, they should invest with a purpose in mind. They should ask: "When are we going to use it? How much are we going to need, and when do we intend to really access it?"
Sharla says their plan should be balanced. For example, it should include money for an emergency fund, and it should account for future tax liabilities by using funds like a Roth IRA or Roth 401(k).
She also says that, as they get closer to retirement, Pauline and her husband may want to consolidate several different 401(k)s or IRAs into a smaller number of funds. That will make it easier to plan and track their strategy.
Regarding specific investment possibilities, Sharla says the relatively long period of time remaining until their retirement means they probably can be more aggressive than CDs or money markets allow.
That said, both Roger and Sharla would caution Pauline against counting on an inheritance that has not yet arrived.
"We've heard too many stories ... over too long a period where people really don't get that," Roger says.
If and when they do get the inheritance, they should revise their financial plan to reflect it.
"The secret is to implement and stick with their plan and not get deterred," Roger says. "They're in a really good position. The secret is making the most of where they're at."
I hope you are able to do so, Pauline. Drop me a line and let me know how everything comes together.If you have a financial question, send it to [email protected] or to the Deseret Morning News, P.O. Box 1257, Salt Lake City, UT 84110.
E-mail: [email protected]