The Elder law Forum by Professor Michael Myers Editor's Note: The Elder Law Forum is a public service of the University of South Dakota School of Law, an extension of the SENIOR LEGAL HOTLINE available at no cost to persons 60 and older at 605-677-6343 and email@example.com during regular business hours. The Elder Law Forum delivers information and educational material by radio, a weekly newspaper column, and Law School research papers placed on the USD School of Law Web site. Professor Myers teaches Elder Law at the School of Law.
Where to Invest:
That is the Question!
You and your spouse are in your mid-70s. You've sold the family home, and its proceeds, $154,000, are in your saving account at the local bank, drawing 1 percent interest.
You plan to buy a smaller, less expensive home, or you may lease a townhouse or condominium, or you may move into a multi-level retirement community. You haven't decided.
In the meantime, while living in a motel-like residence inn and deciding what to do, you're looking for a better return than 1 percent.
That was the situation described by a couple who called the USD Senior Legal Helpline (1-800-747-1895; mmyers@usd .edu).
"We lost $40,000 in the stock market over the past two years," they said. "We're afraid of the market, and yet it's painful to watch our money languish at the bank. Where can we get a better, yet safe, return?"
"I don't give investment advice," I responded. "I only provide factual information."
Here are some of the hard facts: The 2003 market displayed a promising 26 percent resurgence from its 2002 low, then hit a wall in 2004. Standard & Poor's 500-stock index is down 1.5 percent and the Nasdaq composite is off 8.2 percent this year. At best, the market appears to be treading water.
There may be some good boats on those choppy seas, but overall the water level is down. The Employee Benefit Research Institute reports that investors in their 60s were down almost 9 percent for the 2000 through 2003 period. The market remains fickle, fully capable of depleting the couple's $154,000.
"I won't suggest where to invest your money," I advised, "but I know what to look for: (1) no risk, and (2) liquidity." U.S. treasury notes fit that description.
Should they reinvest in the housing market? It's beaten the socks off the stock market over the past three years. But, they asked, what about the "housing bubble?" In the short run, it looks better than the Standard & Poor's and Nasdaq bubbles.
The bull market run that began in 1982 and lasted until 2000 was a lesson in patience; that the buy-and-hold strategy is the surest path to gains in equity. But people in their 70s don't have time for that strategy. They should seek a safer bubble.