Even as we age, and are looking towards end of life decisions, financial matters remain important. Deciding on the best investment accounts not only helps your own peace of mind, but can also ease any burden placed on your loved ones in the event of your passing.
One concern facing us as we age is providing for our family, and ensuring that the inheritance process goes as smoothly as possible. We know our loved ones will face many difficult decisions after we die, but we want to continue to provide for them in the best possible manner. Investment accounts easily transfer to beneficiaries if you designate a beneficiary. Establishing a transfer on death registration for any non retirement account by designating a beneficiary allows the contents of the account to be transferred to your beneficiary after you pass away. Any accounts with a transfer on death registration do not have to go through the probate process.
In addition, any accounts held jointly, with a right of survivorship designation, transfer directly to the surviving individual after you pass away. Again, these accounts typically do not have to go through the probate process.
As we age, we tend to become more risk averse, looking for relatively safe investment options. Here are a few possibilities of safe investment choices.
Okay, a savings account is not actually an investment, but it is a way to earn interest on the money you worked hard to save over the years. Savings accounts in Federal Deposit Insurance Corporation insured banks are backed by the government, ensuring you will not lose your money if the bank folds. The same applies to online banks, which often pay higher rates of interest than the traditional banks.
US Savings Bonds
Again, these are not truly investments, but are savings instruments. However, as US savings bonds pay out their full face value after a period of 20 or 30 years, they are not the best choice for an individual in his or her seventies or eighties.
Certificates of Deposits (CDs)
Certificates of deposits, which are insured by the FDIC, are a risk-free investment. These CDs generally earn higher interest rates than money deposited in a savings account. Remember, though, that if you cash in the CD before it reaches maturity, you will likely have to pay a penalty. CDs are available for a variety of term lengths, anywhere from six weeks up to six years. If you stagger the maturity dates, you are more likely to have a CD available to cash in at point in time without penalty.
Money Market Accounts
Money market accounts consist of pools of investments that are considered low risk. These investments include CDs, savings accounts, and Treasury bonds. Money market accounts pay a higher interest rate than the typical savings account, but usually require a higher minimum balance.
Treasury securities are backed by the US government and, as such, are safe investments. Treasury securities include:
- Treasury bills – T-bills do not pay any interest, but you buy them at less than face value and receive the full value a year later.
- Treasury bonds – T-bonds have a 30-year term and pay interest every six months. The long term length is often not ideal for seniors. However, it does provide an income stream and a guaranteed inheritance for any heirs.
- Treasury notes – T-notes pay interest every six months, and you receive the full face value after they mature in two to ten years.
- Treasury inflation-protected securities – TIPS take into account inflation, which means that as the rates of inflation increase, so does the value of the securities.
Immediate Fixed Annuity
Annuities are sold by your insurance company. An immediate fixed annuity sends you fixed payments beginning the month following your investment, and every month after that. These annuities pay a higher interest rate than bonds, CDs, or money market investments.