I am 50 years old. I have $20,000 to invest. Which would you choose to do?

Keep it in CD's (various rates around 4% and various short terms (6, 9 mos) and keep rolling it over, or a fixed annuity at 4.10 that has 100% guaranteed principal, 5 year term. No other options (I have other investments), just want opinions (plusses & minuses) for each. This money needs to be SECURE, it is part of the "safety net" I want to keep for retirement.
Additional Details
I have other investments, 401k, mutual funds, stock, flex annuity, ira etc. This is just 20,000 I want to keep secure. Of the TWO above (only) which do you think is better? I am not sure how safe an annuity is..

Don't go for stocks. Since the stock market is not going so well, overseas investments would be the best choice.

Starting a small business would be the way to go if you have time.
Alternatively try to invest in someones business. You may receive up to 20% guaranteed interest a year. You will not get such high guaranteed returns on stocks, mutual funds, bonds or CD's.

If you invest $20,000 at 20% annual interest rate, you will get back $24,000 in 1 year, $28,800 in 2 years, $34,560 in 3 years.
I run my own business and my net profit is over 5% a month (over 60% a year).

Email me at investment4us@hotmail.com and I'll give you a valuable advice if you are serious about investing.

Best of luck!

It is very hard to say do this or that without knowing about your true financial picture.

I would seek a professional advisor to go over your specific situation.

If all you have is $20K you need to start putting more $$$ away every month, as 20k will burn out your first year in retirement.

If the money is intended all for retirement - at what age? 59 1/2 or later? then I'd tax defer as much as possible.

After tax money such as held in banks could be used in a ROTH IRA. You can still buy CD's etc, in a ROTH IRA. Why is a ROTH better? After 5 years and 59 1/2 all your gains (all interest, etc) are 100% tax free when you withdraw them in part or whole.

Bank CD's are safe but you will pay federal and state income tax on the interest. US Treasury Bills ($1000 min) are federally tax exempt, and guaranteed by the US government. U.S. Gov. Treasuries - The safest of all investments, but also not the highest interest rate.

Remember a lower rate is sometimes better when you are not paying federal income tax on the interest. Ask your financial professional about what your "tax equivalent yield" would be if you buy CD's verses US treasuries. Rates on US Treasuries are low as interest rates drop. Same will apply to CD's

I don't recommend bond funds because they have no maturity date, and can be leveraged (greater risk).

Annuities.
Benefit: Tax deferred to retirement and beyond. You pay ordinary income tax on the gains (not the original principle) when money comes out of the annuity.

Limitation. Annual fees or account charges, contract fee, contract charge, (what ever they call them) can run $30 or higher a year. if you can get one with no annual fee, that might be doable. They are making money with your money anyway.

Consider:
Max out Roth contributions each year.

ROTH FAQ
http://en.wikipedia.org/wiki/Roth_IRA

Please see my recent post about indexing (mid post, link below).

Note to the post below: RE: market is a scam

Yes, there has been corruption, laws broken, rip offs, and people have lost money in the financial markets. There also has been good corporate governance, new laws get enacted, old laws are enforced, people go to jail who violate the system (including CEO's), and millions of people have made money in the stock market.

The U.S. stock market has been around since 1792 - over 200 years. The money that has been brought by investors helped build America, and the rest of the world as it is today. Scams donâ€™t last long, as people wise up sooner or later.

If it werenâ€™t for the stock market and those investing in tech companies we wouldn't be posting these Q&A's on Yahoo, or a computer.

I know everyone gets upset when the market has a down cycle, or the economy is slowing, etc., but no one seems to get upset when the market is marking money. This is just how the free market system works.

Try to have some faith. The system does work, and the entire world has sought to model the US financial markets. That has got to count for something.

Best of luck everyone!

The stock market appears to me to be a scam.

I think people in the future will look back at us and say "They kept giving them their money, even though they SAW those CEOs running the companies into the ground and retiring with multi-millions? How stupid WERE they back then?"

Fixed annuities are as safe as the underwriting company. They are not FDIC insured. They are not an obligation of the US gov't. If the company that "guarantees" the principle has problems..... so could you!

Yep, I would keep that money in high yield online CDs and money market accounts or funds. You can get a much better rate online.

I'm assuming that retirement is in 5 yrs (that's the only length of time you mentioned). You said you want it 100% safe - then CDs are the best strategy for a return. Rates have been falling and will fall in 2 weeks, so buy a 1 or 2 or 5 yr CD this week or next. Maybe break into several, in case you need to get to one, and have to pay a 10% penalty on the interest.

Hi,
Good question; post it on other sites that are dedicated to investment questions. 2 sites are
www.moneyrec.com- free to users, designed for questions like yours and gives you your own "space" to include your portfolio, info and delete posts yourself.
Other is morningstar.com free board for questions- pay for other info.
Check it out before you make decisions and get input from people with experience in investing.
Best of luck to you!

Bunny

I would go with CD's, and I would not go short term on the ladder right now. It looks like the Fed will have to continue to drop rates on for the short term, and even more if things get worse. If you really don't need the money but want to be safe go out at least a year on your first CD and ladder from there. "IF" rates do in-fact go lower over the next 6 months you want to lock in current rates longer. If you think you will need the $ sooner ladder the cds at 6 month intervals. Last prediction I saw from a "smart" source is that the Fed funds rate goes to 2.5% in the 3rd quarter, that is 1.75 lower than where we are right now and it will take some time to get back to where we are right now once rates start to recover.

I prefer cd's bacause, as mentioned before, they are FDIC ins. Don't get into a money market you will "float" lower as rates do. Yield curve in CD's are flat right now (4.25% to 4.6% between 6 months and 5years) so, you should be able to beat the 4.1% of the annuity and be FDIC insured.

Of the two I would put the money in the CD's. If you are laddering your CD's you will always have access to a portion of your funds if you should need them and there is little or no cost to continuing to renew them. With an annuity you can not always have access to the funds and they tend to have fairly high costs associated with them.

you can get 5% from some banks (cd)

Right now, the economy seems to be sliding into a recession, so I would keep the money in a money market fund, like Vanguard's Prime Money Market.

When the market is finished going down, put the money in Oakmark Equity and Income fund OAKBX, a good balanced mutual fund which invests about 60% into conversative value stocks and 40% into very safe treasury bonds. This fund seems to do well in almost any market conditions.

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