Retirement Money Languishing in Low-Interest IRAs

Dear Liz,

I have approximately $20,000 saved for retirement in two low-interest-paying IRAs -- one through my credit union and one through a bank. I am 55, and own my very modest, old house free and clear. My last child is done with college in December, God willing. He gets financial aid with grants and has not had to get any loans yet. I help him financially as much as possible, but make $21,000 a year, and the company I work for does not have a retirement plan. What would you do to make your retirement money grow as much as possible without the risk of losing any of it? I am single.

- Joanne

Dear Joanne,

There is no growth without risk. That's an immutable law of investing (and perhaps of the universe). Anyone who tells you otherwise is trying to con you.

You can see what happens when you keep your money "safe" in savings accounts. You're losing ground every day to inflation.

To get the growth you'll need to get through 20 or more years of retirement, you'll need to take some risk. That means investing in low-cost, diversified mutual funds or exchange-traded funds that give you exposure to a wide range of stocks and bonds. One of the easiest ways to get started is with a target-date fund, which does all the work for you: selecting the asset allocation (how much in stocks, how much in bonds) and rebalancing that allocation over time so that it becomes more conservative as you get older.

Sometimes the markets will go down and you will lose money. Over time, though, the stock market has offered better returns than any other investment class and those returns consistently beat inflation.

To keep your investing costs low, which is essential, you should move your accounts from where they are, combine them and invest with a low-cost provider. High expenses will eat away at your returns and leave you dramatically worse off, so you want to keep costs down as much as possible. Keep adding to the accounts as you can. Since you're over 50, you can contribute up to $6,500 a year in an IRA.

Finally, focus on yourself. You don't make enough money or have enough saved to help your son, and he can borrow money for school if necessary. No one is going to loan you money for your retirement, so you need to start putting your retirement savings first.

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