But it could be that your security, as well as your bottom line, is being victimized by the deadbeat of the financial world — “lazy money.”
Lazy money is money that just sits there, not really working for you the way it can and should.
And it’s money that can end up being eaten away by fees, taxes, and inflation — not to mention the potential opportunity loss of any return on investment.
Not long ago, I encountered a good example of money that wasn’t being put to its best use. A widow in her 70s, already struggling to get by, was devastated when the homeowners’ association in her condo complex announced a substantial fee increase. She was in tears, worried that she would have to move because she didn’t know if she could make ends-meet.
A friend convinced her to let me review her financial situation.
What I discovered was she had $300,000 in her portfolio and was never shown how to turn that into income. That was “lazy money.” I was able to show her how she could earn an extra $24,000 per year in income by making this money go to work for her.
Lazy money can affect people of all ages, but is especially burdensome for people at or near retirement who need their money to perform to its maximum potential.
Otherwise, they could end up struggling to survive as the money disappears and they still have plenty of life ahead of them.
If you want to put a little energy into the lazy money in your life, I suggest a few places too look:
• Checking and savings accounts. When you’re in retirement, you want to be conservative with your investments — to a degree. But you can go overboard.
Sometimes people keep higher than necessary balances in their checking accounts and savings accounts. They have quick access to that cash, which is great, but the money isn’t growing the way it could.
• Old 401(k) plans. People often change jobs, but are uncertain what to do with their 401(k). So they just leave it with their previous employer and it sits there and does nothing. You could roll it into a traditional IRA and structure it in a different way to be either conservative or more aggressive — it’s your call. Another option is to consolidate it into a 401(k) with your new employer.
• Little-used options with current employee-benefit plans. Sometimes it’s worth having a financial professional review how you’re investing in retirement plans offered by your current employer. Many employees assume they don’t have access to that money until they are age 59½, other than possibly to borrow from it, but sometimes they might have access. I reviewed the plan for one client — a woman in her 40s — and discovered she was allowed to take the company match portion of her 401(k) and contribute it to a separate IRA.
So many people don’t even realize they have lazy money and that they have opportunities to put that money to work. A good financial professional can help them determine whether their money is doing everything that it can.
Alexander Joyce is president and CEO of ReJoyce Financial LLC (www.ReJoyceFinancial.com), a retirement-income planning firm based in Indianapolis. He has hosted radio shows, such as “The Safe Money and Income Radio Show” and “The Ask Mr. Annuity Radio Show.”