Q: Where do you recommend a retiree invest a Roth IRA?
I'm looking to invest $40,000 with a ROTH account in a safe place for at least 10 years. Thank you.
-- Thomas, Lincoln
A: Risk-free investments include U.S. Treasury Bills, savings accounts or CDs with banks that are protected by the Federal Deposit Insurance Corporation (FDIC) or, if with a credit union, the National Credit Union Administration (NCUA).
These are all backed by the "full faith and credit" of the U.S. government.
The problem with these types of investments is that since you are not assuming any risk, you will earn little, if anything, on your investment. You will maintain the principal (original amount) of your investment, but it will not keep pace with inflation. The future purchasing power of your $40,000 investment will be less than what it is today.
If you are willing to assume some risk, you can invest in a no-load mutual fund that has a conservative allocation (e.g., Vanguard Wellesley Fund (VWINX), or buy a conservative mixture of equity and bond mutual funds/ETFs, or invest in individual bonds (high-quality ratings) that will mature when you think you'll need the money.