Question: We are a couple in our 80s and we have accumulated $700,000 currently in CDs.
We are having a difficult time keeping track of our money, and were wondering if we could work out something with the trust department of our bank so that the money would come to us in our lifetime and then to our children during their lifetimes, and then to a charity of our choice upon our children's demise.
Does this make sense? — L.K., Burton, Mich.
Answer: It makes sense to me. The trust department or a law firm specializing in trust accounts can handle this kind of transaction.
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I would resolve this soon, because this is very much dependent on both you and your spouse being of sound mind and able to handle your own affairs when this decision is made.
Q: I will be 65 in February and the last thing that I intend to do is to retire. Should I take the Social Security payments when I turn 65 and invest them, understanding that I will have to pay income tax on Social Security, or wait until I'm 70 and take the payments? I will get $5,000 a year more if I wait. — Reader, via e-mail
A: You are betting that you are going to live a shorter period of time if you take the payments or a longer period if you do not.
What you have to do is to put this on a chart. Take the number of dollars that you would collect now, taking taxes into account, and put the additional dollars starting at age 70, once again taking taxes into account. When the lines cross, that will tell you whether you will be ahead or behind.
Up until the time the lines cross, you'd be ahead of the game collecting now. At the time they cross, sometime in your late 70s, every day beyond that you will be a loser.
You didn't include the numbers so I can't do the arithmetic for you, but I'm confident that you will be able to handle that without any problem.
Q: I received an inheritance of $10,000. I am a 45-year-old single female and own my home.
Unfortunately, I have saved next to nothing. I'm getting all sorts of suggestions from friends and relatives, which include buying stocks and mutual funds. What would you suggest? — Michelle, Philadelphia, Pa.
A: The first thing that I would do is to take $5,000 of this and put it into a Roth IRA. This will allow you to save the $5,000 and everything that it earns for the next 20 years, all totally tax-free.
From this point forward, without fail, you should put an additional $5,000 after-tax money into that fund annually.
You mentioned that some friends say that you should buy stock and others mutual funds. There is no right or wrong here. Generally. the person who has cursory knowledge of the investment avenues that are available would most likely invest in mutual funds where you are effectively paying a professional to manage your money.
Given your age and your circumstance, my choice would be an aggressive fund, one whose goal is strictly growth, not income.