MW 'She's not working outside the home': My mother, 63, inherited $100,000. Is she too old to invest in the stock market?

By Quentin Fottrell

'Are the only options to create a CD ladder or leave it in a high-interest savings account?'

Dear Quentin,

I'm exploring some savings options for my 63-year-old mother. She has been staying at home to care for her grandchildren for several years, so she's not working outside the home. She owns her home and my siblings and I split her utilities, so she doesn't necessarily have high expenses.

She had a windfall a few years ago and came into $100,000 that's currently sitting in a savings account. I feel like she's too close to retirement age to invest in the stock market. She's wondering what options she has because the savings account interest is basically negative after inflation.

Are the only options to create a CD ladder or leave it in a high-interest savings account? Is she too old to invest in the stock market?

The Family

Related: 'I believe myself to be an honorable person': Do I have the right to ask my husband if I'll inherit his house after he dies?

Dear Family,

No, she's not too old to invest in the stock market. Just don't invest all of it in the stock market, or, put another way, don't invest all of her personal wealth in the stock market. You leave out the most important part of her story: Is this $100,000 10% of her net worth? Or 90%? Or somewhere in between? Your mother's overall financial security is key. Does she have rent or a mortgage to pay? Does she have an emergency fund that is easily accessible at a moment's notice for unexpected events? There's also the question of whether she has any personal or credit-card debts; if so, they should be paid off right away.

Your mother can still get CD and high-yield savings-account rates of between 4% and 4.5%, although there are often conditions on the amount she can invest, which gives her a slight advantage on inflation, which is currently running at 3% and an ongoing concern for the Fed. There is one important difference between the two: the latter are more liquid and withdrawals are limited to half a dozen per month. With CDs, you are committing to a set period of time. Interest rates can also change with HYSA - even after you deposit your money - based on the Fed's benchmark rate. When you buy a CD, the rate does not change.

Sixty-three is the new 53. "At just 63 years old, your mother is actually still quite young. Even though she is fast approaching retirement, it's quite likely she could live for another twenty or thirty years," says Martin Schamis, head of wealth planning at Janney Montgomery Scott in Philadelphia. "With such a long time horizon and the low expenses that you cite, investing in a well-diversified portfolio would provide her with the best long-term results in trying to keep ahead of inflation. But that doesn't necessarily mean she should simply put everything in the stock market."

Your mother isn't the only one facing cost-of-living pressures. The average 65-year-old in the U.S. today will live until around 85 years.

But what does a "diversified portfolio" actually mean? "From a financial planning standpoint, we're mostly concerned with three main categories of investment: cash, stocks and bonds," he says. "The first decision is how much to set aside in cash. As you correctly point out, the real return on cash is quite low and often negative once accounting for inflation. You want to have enough cash that you won't need to sell other parts of your portfolio to cover your basic spending needs over the next year to two years. In the case of your mother, it doesn't sound like she has much need for the cash in the portfolio."

The next decision is to determine how much growth your mother needs and, given the unpredictable political and economic landscape, her risk tolerance. "In most market periods, stocks have given us the best opportunity to outpace inflation and, over time periods longer than a decade, have generally delivered positive returns," Schamis adds. "Fixed-income assets, on the other hand, can provide diversification and help stabilize your portfolio returns during times of increased volatility. There are many risk questionnaires and tools available for determining the appropriate allocation for your mother's specific situation and risk tolerance."

With the Trump administration's pledge to introduce tariffs, which would increase the cost of imported goods and likely add to inflation, many economists are bracing for a period of stock-market volatility. (In his annual letter to Berkshire Hathaway shareholders, Warren Buffett said he still prefers stocks over cash.) If and/or when the market undergoes a correction - which would represent a 10% decline - your mother could invest a portion of her windfall (25%) in an exchange-traded fund that tracks the total market, the S&P 500 or some other diversified index - perhaps a Vanguard Total Stock Market ETF.

Your mother isn't the only one facing cost-of-living pressures. The average 65-year-old in the U.S. today will live until approximately 85 years. About one-third of 65-year-olds will live until at least age 90, and 1 out of 7 could live until at least age 95, the Social Security Administration says. "Depending on your retirement age, your retirement savings may have to last three decades or longer," says U.S. Bank. "A person who withdraws $50,000 from savings and investments to fund retirement's first year. If inflation averages 3% per year, after 30 years, close to $118,000 would need to be withdrawn to maintain the same living standard."

She is fortunate to have a family who wants to help her make investments, but also helps with utility bills.

Related: 'She's still waiting by the phone': My grandmother gave her life savings to a man she met online. What now?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

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Previous columns by Quentin Fottrell:

'She acted as a mother to me growing up': My stepmother remarried after my father died. How can I claim my inheritance?

'I believe myself to be an honorable person': Do I have the right to ask my husband if I'll inherit his house after he dies?

'Is this ethical?' I want to leave my home to my children from my first marriage - and not to my second husband.

-Quentin Fottrell

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February 26, 2025 05:06 ET (10:06 GMT)

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