We inherited money, and I don’t know what to do with it. We are pretty old57 and 60 — so where are the safe places for money right now? Or should we go for the not-so-safe places?A: This is an ongoing question, especially for those in the baby-boom generation. When should I start being more conservative with my investments? The answer depends on how many resources you have for the future compared to what your income needs will be with inflation and taxes. Inheritance or any windfall needs to be included as part of the strategy to build and preserve resources. Once this couple updates their financial plan — which includes determining how much risk they are willing to take for future opportunities; what other resources they have such as pensions, Social Security, 401(k) plans and other investments; and when they are planning to retire — then we can address how to properly allocate the investments for the inheritance. They should also consider their longevity. Age 60 is not old, especially if you will live until age 90 or longer. This would require 30 years of potential cost of living increases to consider. There may be decades of lost growth opportunity if the mind-set is “we are pretty old, we might need to invest in a safe place.” They may discover they have enough time to layer for conservative needs in the short term and also allocate for longer-term goals. This could include some growth investments designed to hedge against future tax and inflation. Layering investments for different time frames, allocating in different assets for diversification and adjusting the portfolio by rebalancing on a regular basis may take some of the fear out of where to invest right now. It is important to have a good solid strategy not only for their lifetime but also to consider proper estate planning. The benefit of a financial plan is that all of these areas including risk, longevity, taxes, retirement income needs and estate planning should be considered before they invest.
Patricia Kummer is president of Kummer Financial Strategies in Highlands Ranch.
