Q: We sold two houses and want to invest the money in safe areas. We're looking at short-term CDs, money-markets, Roth IRAs, etc. We have been thinking about putting some money into socially responsible mutual funds. How would you split up $100,000 to provide income now and keep the principal basically intact? We're in our early 50s and risk averse.
M.M., via e-mail
A: This money requires some thought about where and how to properly place it, says Darin Pope, a certified financial planner in Secaucus, N.J. Among the questions to mull over: Where do these funds fit into your overall portfolio? What are your goals? Could investments with "tax advantaged" features be beneficial? What income do you need today, versus the future?
Based on the information you've shared, Mr. Pope recommends that you invest some of the funds for income today and some with more of a growth component for tomorrow.
"We should look at several different types of risk, diversifying our exposure to any single type of risk," which he says makes it important to know where else you are already invested. Only funds needed for the short term should be in short-term investments, such as money-market accounts or short-duration CDs.
Socially responsible investments might be a good spot for long-term money. But Pope points out that this is not necessarily risk-free. Some would argue that they're riskier than general investments, because they restrict themselves from certain areas of the market (tobacco, alcohol, weapons, pollutants, etc.) and that could make them less diversified.
You have enough money at stake here, and different directions where you want to take it, to warrant involving a financial planner in your decisionmaking, says Pope. For a self-tutorial on socially responsible investing, though, try Good Money, at www.goodmoney.com.
Q: Besides the fact that you're spending your children's inheritance, what is the downside to a reverse mortgage? Can reverse mortgages be taken more than once? If the home equity is $150,000, can $50,000 be taken first, then an additional $50,000 be taken a couple of years later?
A.E., via e-mail
A: One big downside is that you may run out of money, says Justus Baird, a certified financial planner in Alpharetta, Ga. If you take a reverse mortgage for $150,000, for instance, and get $1,500 per month, you can only do that for so long before you reach your limit. The question then becomes: What's your backup plan?
Yes, you can take mortgages as many times as you can find lenders – provided that you have paid each off.
No, the lender will not go above a certain percentage of the equity that you've built in the home. Normally it's 80 percent, although it could be lower depending on your credit record and the condition of the house.