'We live on Social Security': We lost $2,000 in an IRA after 5 years - so we fired our adviser. We put the money in CDs. Now what?

By Alessandra Malito

'They put all our money in mutual funds and the only person making money was our broker'

Dear MarketWatch,

I am 80 years old, my husband is 72. We have about $200,000. We took it out of an account because our adviser put all our money in mutual funds and the only person making money was our broker. We lost $2,000 in my husband's IRA after it had been open for five years! I fired him and put the money in CDs.

We live on Social Security. Our cars are paid off, we have no debt, and our mobile home in a 55-plus park is paid off, but the lot rent is $1,450 per month. We live pretty comfortably on this budget. We did all of our traveling in prior years so it's not on our bucket list.

My husband is a veteran and has healthcare through the military. I am on Medicare Advantage. Luckily I have no health problems now, so our healthcare is good at this time. I don't have longevity in my family so I really don't think I will live to be 100.

Should we put the money in EE Bonds, annuities, or something else as they mature?

Reassessing Assets

Related: We're in our 60s and plan to claim Social Security at 70. Does delaying for maximum benefits really make sense?

Dear Reassessing,

Having no debt, a paid off mobile home and cars as well as healthcare covered is a great way to live a comfortable lifestyle in retirement. And don't worry about living to 100. You're probably not alone there.

With so much of your expenses paid with Social Security benefits, the most important question to ask yourselves regarding your savings is what purpose it serves. If you need an emergency savings fund, you also need something very liquid. But if it's meant for longer-term goals or to fund your current retirement needs, you do have more options. So first and foremost, ask what you want that money to do.

"Define the timeline and objective first and then find the right vehicles that support those goals," said Alastair Stansfield, a certified financial planner and partner at Rise Private Wealth Advisors.

CDs aren't a bad choice these days, especially as rates are still pretty high. You can ladder CDs, where you choose different maturity periods, but keep in mind rates will eventually decline. When that happens, you run a few risks, including reinvesting at a lower rate and fighting inflation. Regardless of your goals for this money, you don't want it to lose value over time and unfortunately, when you use accounts with rates that are lower than inflation, you're doing just that.

You may find EE Savings Bonds and I Bonds to be attractive, but they're not available in IRAs, said Paul Caylor, a certified financial planner and founder of Prudent Wealth. They're also not exactly a good fit for short-term goals - they usually have a maturity period of 30 years, though technically you could cash them in sooner.

Do you have questions about retirement, Social Security, where to live or how to afford it at all? We want to hear from you. Join the conversation in our Facebook community: Retire Better with MarketWatch.

EE Bonds were very popular years ago, especially for birthday and graduation gifts, my colleague Beth Pinsker previously explained to a reader, but you have to be mindful of the rules around them. For example, they stop earning interest after their maturity date and you have to pay the taxes when it's time to cash out. (I Bonds might be more favorable for long-term goals, because of the fixed rate at purchase and the variable rate that adjusts based on inflation for the term of the bond. They also do not incur state or local taxes on interest, Pinsker writes here).

As with any of these options, you need to understand the tax implications of your decisions. When reviewing your options, think about how moving this money around or the interest earned will affect your current and future tax liabilities.

If you want this money for "safety and growth," rather than using any interest or returns for present income, then an annuity can work, Stansfield said, since it will lock in current rates for a longer period and can also offer tax deferral on the interest. But be careful with the product you choose. There are many types of annuities, and each has its own set of rules, including how and when you can access your money. You should think carefully about how much of your assets you intend to put into an annuity, as you should always have quick and easy access to some of it. You should also think about how long you expect the annuity to work for you, since you and your husband are older.

For a longer-term goal, investing the money would offer "greater potential growth," Stansfield said - but this should only be considered if you don't anticipate needing the money and you're OK with volatility.

Before you make any additional changes, especially drastic ones, it is crucial you understand your risk tolerance. You'll want to "align investments" with your risk profile as well as your goals, Caylor said. For example, investing in equities could provide you with higher rates of return, but there will be dips over the years, and you need to have some appetite for risk to handle those moments of stress.

The market does play a role in whether or not your account balance grows over time.

You might find there's no one solution (as there often isn't). "Consider a mix of savings, CDs, and market investments rather than an all-or-nothing approach," Caylor said.

I'm sorry you had such a bad experience with your financial adviser. Unfortunately, the market does play a role in whether or not your account balance grows over time, but you should never feel as though the only person making money is the professional you hired to help you be financially secure.

If you're not opposed to working with someone else, I would suggest searching for a qualified and trustworthy adviser who can give you a full comprehensive overview of your finances and is acting in your best interest. If you decide to try working with someone else, ask them if they are fiduciaries (which means they are required to act in your best interest) and how they're compensated. Certified Financial Planners are a good place to start, as they can review your finances, recommend investment vehicles and products, and explain how they work for your personal circumstances.

You don't need to choose the first person you meet, and you probably shouldn't. Someone once told me prospective clients should treat the search for an adviser like they would dating - look around, make sure you're a good match for each other, and find someone you're comfortable talking to about such important matters.

Ask questions, including how often they review your investments and what strategies they rely on, but also ask if they work with many other clients similar to you. Some advisers have niches, such as they primarily work with doctors or they specialize in financial planning for military servicemembers - you might be more at ease if your adviser understands your perspective on money, as well as if you understand theirs.

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Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com

-Alessandra Malito

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09-05-24 1439ET

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