From Jin Hee Park: “I am interested in opening an IRA for my parents. After reading your article, I have learned that the Roth IRA is probably not a good one for my parents, especially my father. He is 58 and has no savings or retirement plan. I think he may retire in about 10 years. He doesn’t make much money, but needs a plan that will produce growth in a pretty conservative manner in the 10 year period. What type do you suggest? Please write me soon. I would like to start his plan as soon as possible.”

I may be missing something, but it sounds to me as if a Roth IRA would be fine for your father. You say his income is modest, so he loses little by not getting the tax deduction of a regular IRA – yet he will never have to pay tax on the withdrawals. So as between a regular and a Roth IRA, the Roth would seem to me to make more sense.

The next question is how to get “conservative growth.”

Big question. It depends on how conservative you feel you need to be. Bear in mind that though he may retire in 10 years, we hope your dad will live for 40 years – or certainly 20 or 25 years if he’s in normal health. So in that sense, you have more than a 10-year time horizon. If you bought stocks or mutual funds that were depressed 10 years from now, nothing would force you to sell them all the day he retired.

There are a million possibilities. Here’s just one: Open a Roth IRA for each of your parents at a deep discount broker. Put the full $2,000 a year into each one each year, if possible $4,000 a year. Put $1,000 of it each year in SPY – “spiders,” as they are commonly known, which will more or less mimic the performance of the Standard & Poor’s 500 … $1,000 a year in MDY, which is the same thing, only for the S&P MidCap 400 … and split the remaining $2,000 a year among three or four WEBS – these are like index funds for various countries. My hope/guess is that some of these countries will still be here 10 and 20 years from now, despite their current problems, and we may actually look back and think their stock markets were unreasonably depressed in 1998. (If they crater further, as they well may, you’d just buy more in 1999. One day, I think, they’ll turn back up. But you never know.)

Or just put it all in Intel and hope for the best.

A really conservative and not entirely idiotic strategy, though, is to start your fund someplace really safe and convenient, like the local bank, and just let it grow there, at least at first. Your parents probably won’t have as much money over the long run, but they will have the security of knowing where it is and that it will not go down in value.

As I say, though, there are a million possibilities and no single “right one.” Good luck.



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