Dave Says: Learning and Living

Dear Dave,

I’m a recently retired widow, and my husband always took care of most of our finances. We never had any debt, but after starting to learn a little bit about how money works, I’m worried that there may be too much of it invested in CDs (certificates of deposit). The total nest egg is a little over $1.5 million, with $300,000 of that in CDs. There’s also a $317,000 annuity, a 403(b) and around $900,000 in IRA mutual funds. I also have two homes and a new car that are paid for. How do you think I should handle things going forward?

Joan

Dear Joan,

I’m really sorry to hear about your husband, but you two did a fantastic job with your finances. You’re worth at least $1.5 million, and you have no debt. You’re set for life, but you’re wise to want to be careful.

The CDs give you some stability, but obviously, they’re not earning much of anything. I think of them as money kicked up in a hammock — it’s not working for you. You both worked hard for that money, so personally, I’d like to see it working hard for you now. If you’ve had good luck with a variable annuity, that’s fine. You’ve also had very good luck with your mutual fund investing. So, with all this money in different areas, you’re definitely diversified. It’s just a matter of wrapping your arms around it all and developing a deeper understanding of things going forward.

At this point, I would urge you to find an investment professional in your area with the heart of a teacher — someone who’s not trying to sell you stuff. You want to learn, Joan, and I’m really impressed by that. It’s a smart and necessary thing. Every time you see an investment person, whoever it may be, your goal should be to leave the room smarter and with more understanding than you had before.

— Dave