I am an unemployed individual in my early 60's. I have no retirement savings nor pensions. I am looking for work but my prospects are dim.
Recently I have been compensated $15,000 from a lawsuit. What's the best way to invest that money?
I'd appreciate any advice!
Donbey since you mention your expenses are very low, I'm going to assume that social security will cover your expenses once you qualify for it. Since you have no savings currently the first and most important job for this money is to make sure that you can live comfortably until social security kicks in. Social security could start for you as early as 62 so you need to set aside at least two years worth of money plus another chunk as a safety measure.
Also, if you don't have health insurance please look to get a plan through your local ACA exchange as not having health insurance is by far the most common way someone your age ends up bankrupt. Insurance will eat up a good chunk of the money, but will be much cheaper after the first year if you continue to have no income.
Now, if your expenses are low enough, you can look to use this money to delay when you start taking social security as long as possible as the longer you delay social security the more money you get. The AARP has a calculator where you can see how much more per year you will get from social security if you delay taking it as long as you can. This is a great way to insure you live as comfortably as possible even if you live to 120. Assuming you are reasonably healthy, this is a very secure and very meaningful way to "invest" this windfall.
Once you have set aside the money for your expenses, emergencies, health care and delaying social security in a combination of checking and high-yielding savings accounts, yhen it can be in your interest to invest any remaining amount. Common, solid, low-risk investments for a 10+ year time frame would be either:
While Glen is correct that it is possible for even the best bond fund to lose money it is rather unlikely that you will end up losing money over a period of 10 years. The nice thing about the bond fund is that most funds (find the right one) don't charge a fee if you need to need to take your money out early. CDs guarantee that you won't lose your money, but if you have to take the money out in an emergency the fees will eat up way more money than a bond fund would normally lose. Also, a good bond fund will generally yield a bit more than a CD.
Investing in stock is generally much too risky for this sort of time frame without large savings to back it up.
Until you find a job, I would recommend doing nothing more than a bank checking account or a checking and savings account. Some alternatives, such as savings bonds, would be okay if you were perfectly sure you did not need the money in the next six months. Consider working for a place such as McDonald's in the meantime.
Once you have stable employment, there are two paths you could take. The first is a bond fund. It would provide fair market returns for the time between now and the collection of social security. The second would be a traditional annuity. You have to be careful with them. If it sounds much better than what others are offering, it is probably a scam. Your interest in an annuity is that it will pay you money for as long as you live. If you live to be 105 you will still be getting payments. A bond fund would have run out of money long ago by that time.
The biggest thing for you right now is getting to when Medicare takes over from private health. Looking for any job is important right now to preserve cash.
Although I do not normally recommend annuities, I do with smaller amounts of cash. It is unlikely you will ever recover this sum again and the time remaining to save is very short. The greatest challenge with an annuity is regret. You can't get the money back once you have turned it into an income stream. On the other hand, it will last as long as you live.
The only important caveat is that if you are in poor health, then the bond fund would be better for you because you may not live to be very old.
Assuming you can understand and emotionally handle the volatility, a good indeed fund would be wise. These are low fee funds which perform as well as our better than most managed investments and since they don't cost as much, they typically out perform most other investment vehicles. The S&P 500 is traded as SPDR. Another option is the Dow Jones Industrial Average, which trades as DIA. Average returns over the long term are 10-12%.
If you expect to need the money in the short term (5-8 years), you have a non trivial chance of needing to pull the money out when the market is down, so if that's unacceptable to you, choose something with a guarantee.
If you're terrified of losing money in the short term, don't think you can handle waiting for the market to go up, especially when every news caster is crying hysterically that the End of Economic Life on Earth is here, then consider a CD at your bank. CDs return much lower rates (around 2% right now) but do not go down in value ever. However, you need to lock your money into them for months to years at a time.
Some people might tell you to buy a bond fund. That's horrible advice. Bond funds get lower returns AND have no guarantee that you won't lose money on them, unlike aactual bonds.
As you're new to investing, I encourage you to read "The Intelligent Investor" by Benjamin Gramm.
Well, sorry to hear about your struggles! For your question, $15,000 is sadly not enough money to build a career on investing for yourself, if you’re referring to the stock market. Unfortunately you need I believe $25,000 to even have a day trading account, plus the best investors in the world probably net 5-10% which is only tops $2,500 per year!
On the other hand, $15,000 maybe you could use an FHA loan and buy a small condo that you could renovate and flip. FHA lenders only require 3.5% down plus closing costs.
I would need more information on what type of investing you’re referring to.
