I’m a single, 56-year-old female. I’m currently unemployed and am going to sell my house. I will walk away with at least $100,000. This is all the money I have at the moment. I will be looking for work (I was laid off).
I’m wondering where to put or invest the $100,000 to maximize my interest. But I need to be able to get to it easily, as I will be living off this until I find employment.
My condolences about the loss of the job. You are not alone: More than half (56%) of workers 50 and older endure at least one involuntary job loss after age 50, according to an analysis from ProPublica and the Urban Institute. And that can, of course, lead to a significant financial hardship. So we asked experts the smartest ways for you to handle that $100,000 that you will be living off — and what you can do in the future to protect yourself from another financial setback.
Then, make a plan for both the present and the future that includes a budget. “Realistically ask yourself how long this process of finding a new job is going to take. Next, realistically ask yourself how much you will earn,” advises Mitchell Hockenbury, a certified financial planner at 1440 Financial Partners in Kansas City, Mo., who adds that you should consider lowering expenses as much as you can, including maybe moving in with a roommate to save on housing. You should also factor in that “you may have increased health care costs while you are between jobs,” explains Andrew Westlin, a financial planner at Betterment. And Hockenbury says that: “Your full-time job needs to be looking for a full-time job,” he says.
You also need to find a smart place to put that $100,000: “You’ll definitely want to keep your sales proceeds liquid and safe from loss due to short-term market action,” says Foss, who adds that you’ll want them in a federally insured account like one of these three options:
1. High-yield savings account, which she says you can open “conveniently online and earn higher rates of interest.” (You can now find rates slightly above 2%). “These accounts are typically liquid, but you should check account requirements and fees carefully before depositing money,” Foss says.
2. Short-term certificate of deposit (CD). “You’ll give up some liquidity, but you’ll still have federal insurance and you can earn slightly more interest with a CD,” Foss says. “Currently, three-month CDs are yielding up to 2%, but keep in mind that if you withdraw your funds prior to the maturity date (three months, in this case), you’ll pay a penalty. You can get a shorter term (1 month is usually the minimum), but you’ll earn a lower interest rate.”
3. Money market account.Current rates are up to about 2%. “Before you open the account, be sure to ask about minimum balance requirements and account fees,” Foss says.
Now that you have this $100,000 in a smart spot, you need to make sure you spend prudently: “The $100,000 is not to be fully used,” advises Hockenbury “Open an online money market account wherever you can earn the highest rate. Then link it to your checking account. Once a month send your budgeted amount from the money market to the checking account. No more. You have to be fanatical about controlling expenses in this transition period.”
When you’re once again employed, you’ll want to begin to build up savings to protect yourself in the event of another loss. “Once you have a new job in place, stick to your budget. Take a look at how much you need in an emergency fund (3-6 months expenses) and look to use the rest for retirement planning,” says Hockenbury.