Money Watch: Making insurance benefits last
- Consider tax-deferred saving plans
- Consult with a good financial adviser
- Outpace inflation by investing in diversified mutual funds
Money Watch, a personal finance column that runs every Saturday, features a financial planner from the National Association of Personal Financial Advisors answering reader questions about saving, protecting and growing your money. To submit a question, e-mail USA TODAY personal finance reporter Christine Dugas at: cdugas@usatoday.com
Q: I am a widow in my early 30s with a 4-year-old son. My husband left a substantial life insurance policy to both myself and our son. What are the best long-term investment options for this money? This money needs to sustain us for many years to come.
A: Give yourself time before making big financial decisions and organize your thoughts. Determining the best investment approach will involve looking at a number of factors.
Ask yourself what the money is for and when you need it. Does it need to cover current living expenses, your son's college, your retirement, or all of the above? Do you work now or plan to in the future? This will help you know how far your money needs to stretch and how much investment risk you can take.
To pay expenses for the next two to three years, think low-risk investments like FDIC-insured savings and short-term bond funds. You'll trade growth for the comfort of knowing you will have the money when you need it.
To fund future expenses, you may be able to take greater risk to outpace inflation and grow your money. Investing for longer-term needs should be diversified across U.S. and international stocks and include some bonds. No-load mutual funds and exchange traded funds can provide a broad mix.
A 529 college savings plan for your son and, if you're eligible, an IRA or Roth IRA for retirement are tax-advantaged, which can help your money go further. Since your portfolio needs to sustain you and your son for many years, care for it with ongoing monitoring and rebalancing because the markets are volatile.
You may want to hire a financial adviser to help. Look for someone who puts your best interests first, and puts that fiduciary oath in writing. They should be able to help you increase your financial knowledge, plan for a comfortable future and provide ongoing investment advice.
Ask lots of questions when interviewing advisers. You can check their credentials and regulatory history by going to the FINRA website. It will list any complaints or awards.
The National Association of Personal Finance Advisors (NAPFA) is an association of fee-only financial advisers. Its website provides tips and questions to ask an adviser.
Know that some advisers are fiduciaries who represent their clients, while others represent a brokerage or insurance company. Finding the right adviser involves some work, but the benefits to you and your son will be significant on the road ahead.
David O'Brien, NAPFA-Registered Financial Advisor
O'Brien Financial Planning, Midlothian, Va.
Previous Money Watch columns:
Maximizing your Social Security