Should I pay off credit cards before retirement? Where should I invest my IRA money? What are some go-to websites for financial beginners?
This week, those personal finance questions get answered by Walt Romatowski, a certified financial planner in Roseville, who's one of our "Ask the Experts" writers.
I owe $40,000 in credit card debt (on eight cards). I am going to retire this year and have $40,000 after taxes in my savings account from work. Should I take this money and pay off my credit card debt?
You did not mention if you have adequate retirement savings and/or a pension that will provide for your normal spending during retirement, or if you have a mortgage or any other kind of debt.
Assuming that you do have adequate resources to cover your monthly expenses, it does make sense to pay off your credit cards, so that you can enter your retirement years with little or no debt.
You don't need eight credit cards, but you should hold on to one or two major credit cards to cover life's inevitable unexpected expenses and to maintain your credit rating.
Try to pay for most things with cash. When that's not possible, make it a habit to pay off your credit card balances each month, so that your debt does not build up again.
Where do you recommend a retiree invest a Roth IRA?
I want to invest $40,000 in a safe place for at least 10 years. Thank you.
Risk-free investments include U.S. Treasury bills, savings accounts or CDs with banks that are protected by the Federal Deposit Insurance Corporation or, if with a credit union, the National Credit Union Administration.
These are all backed by the "full faith and credit" of the U.S. government.
The problem with these types of investments is that since you are not assuming any risk, you will earn little, if anything, on your investment. You will maintain the principal (original amount) of your investment, but it will not keep pace with inflation.
The future purchasing power of your $40,000 investment will be less than what it is today.
If you are willing to assume some risk, you can invest in a no-load mutual fund that has a conservative allocation (e.g., Vanguard Wellesley Income Fund (VWINX); or buy a conservative mixture of equity and bond mutual funds/ ETFs; or invest in individual bonds (with high-quality ratings) that will mature when you think you'll need the money.
What sites do you recommend for doing research on financial investments, namely life insurance, stocks (for beginners, written in layman's terms) and mutual funds? Hopefully, the sites I researched match yours.
Two monthly magazines that are a good resource for getting to understand investments, insurance, budgeting and other financial issues that relate to just about everyone are Kiplinger's Personal Finance and Money.
Good luck with your research.
Compiled by Claudia Buck