Jan. 5, 2011 at 5:48 PM ET
TODAY Money expert David Bach, author of a new book "Debt Free for Life," joined us for a live Web chat Wednesday morning after the show's Money 911 segment.
David also talked about his Debt Free Challenge. For more information, click here.
Here are two of his answers to questions from the live chat. See below for the full Q&A and video of the Money 911 segment.
Question from Lisa Lybarger:
I received an inheritance with enough to pay for both of my girls' college education. One daughter will go to school in five years; the other in 9 years. Stocks are too risky; bonds aren't paying. Where do you recommend I invest this money to be certain I still have it in 5 years?!
Lisa, that is a great question. To get a decent rate that is guaranteed for five years right now is tough.
You could buy a government bond, a CD, a municipal bond or a zero coupon muni bond. In either case you could buy a five years bond. And be guaranteed the money will come back to you with interest. The problem is you are only going to earn about 2.25 to 3.5 percent.
If you want it guaranteed, I would personally split the money right now between a one-year CD and a two-year CD. I think rates are going up, and that rates will go higher by the end of the year.
Your other option is to invest in a 529 plan and pick an asset allocation that comes due in five years. It won't be guaranteed, however, because it will invest in stocks, bonds, etc.
I personally think a balanced account over the next five years will do well. I think market is going higher over the next five years.
Question from Scott:
I'm 27, have a steady well paying job and was wondering what the benefits are of a traditional vs. a Roth 401k ... which should I be contributing to more when I'm younger and should that mix change as I get older?
Scott, I love tax deductions ... and a traditional versus a ROTH 401k plan gives you that. With a ROTH IRA you will be putting after tax dollars in the plan. Still, with that said, if I were 27 today I would suck it up and use a ROTH 401k plan because all of the money will grow tax-free and come out tax-free. For most people I suggest splitting it. Put 50 percent in a traditional 401k plan and 50 percent in a Roth IRA plan. Then you have both options.
If you have a question for our TODAY Money experts, submit it here.
To sign up for an e-mail reminder for our next chat, click here.
Watch this week's Money 911 segment: