Author Topic: Financial advice for my mother in law please  (Read 2563 times)

Mitch76

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Financial advice for my mother in law please
« on: June 03, 2017, 01:49:23 PM »
I'd really appreciate some financial advice for my mother in law. We live in the UK, she's 68 years old, and lives on a very low income of 6350. She's had to lead a very mustachian lifestyle since her marriage brake up. She lives in a very expensive area and after many years of trying, we've finally managed to persuade her to sell her house and get something cheaper to free up some capital. Her house is worth over 600,000, and she's decided to move nearer us, where a similar sized house costs 300000, and a nice smaller house can be bought for about 180000. So my questions are if she manages to free up a minimum of 300000, where would be the best place in invest it? Vanguard funds are now available here in the UK, I'd like to hear people's thoughts on suitable stock/bond ratio. And regarding the 4% withdrawal rate, would she take that out annually by selling some units? Or monthly? Many thanks in advance, I've learned so much from this group already. Cheers.

former player

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Re: Financial advice for my mother in law please
« Reply #1 on: June 03, 2017, 02:19:44 PM »
Does she really want a house or would a flat suit her better?  In 10 years time (or 20) she may or may not want to be going up and down stairs, and may not want the maintenance and gardening that go with a house.

Your MIL might perhaps start by putting 20,000 a year into an ISA (various platforms make Vanguard available for ISAs) to get the tax free returns if her investments will be enough to take her into income tax - the monevator site has comparisons of costs for ISAs, and Moneysavingexpert is another source of UK information.

Vanguard is a good place to put taxable funds.   What would be an appropriate stock/bond ratio might depend on your MIL's attitude to risk, her health and likely longevity, etc.  I think she would want an income rather than accumulation fund, and probably one with a monthly distribution.   She may have to sell on top of the distributions to get the income she wants -the 4% returns quoted here (3% is more realistic for the UK) include some capital sales in the early years.  If she is selling enough to worry about the capital gains tax limit in any year, she could avoid that tax by selling anything over that limit from her ISA.

She should probably keep the first couple of years worth of the additional income she wants in cash savings, as it's probably not worth investing it for that period of time.

One thing that moving will do is take your MIL out of the means-tested limits for benefits - at present she should probably have been claiming pension credit, and it might be worth checking whether a back claim is possible - but she should be getting the non-means tested benefits for pensioners regardless.


Mitch76

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Re: Financial advice for my mother in law please
« Reply #2 on: June 03, 2017, 02:48:28 PM »
Thank you so much - she definitely only gets the basic state pension of 6359, it should increase to 8286 with pension credit, and if she can get a back claim even better.

BTDretire

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Re: Financial advice for my mother in law please
« Reply #3 on: June 04, 2017, 07:08:07 AM »
How much could she rent a property for?
4% of 300,000 is 12,000, if she can rent
for less than 8,000 or 9,000 she might be better off
not buying and putting the other half of the 300,000
to work for her. Also depends on her health, if she will live to 90,
might be better to buy.
 Seems if she is living on 6,350 adding another 12,000 to
that would put her in a very good position.

Mitch76

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Re: Financial advice for my mother in law please
« Reply #4 on: June 04, 2017, 10:11:56 AM »
Yeah her health is good, no chronic diseases, and she'd prefer to buy anyway.

The Happy Philosopher

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Re: Financial advice for my mother in law please
« Reply #5 on: June 04, 2017, 10:21:20 AM »
Although many here may disagree with this strategy, at age 68 she may be able to generate a higher cash flow by annuitizing the profit from the sale of the house. My guess is at that age she could get one that pays around 6-7%.

Mitch76

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Re: Financial advice for my mother in law please
« Reply #6 on: June 04, 2017, 10:30:35 AM »
Yeah I've considered using a portion of the sale to buy an annuity.

FrugalToque

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Re: Financial advice for my mother in law please
« Reply #7 on: June 09, 2017, 08:13:13 AM »
[Locked by moderator due to duplication: please reply further here] https://forum.mrmoneymustache.com/welcome-to-the-forum/financial-advice-for-my-mother-in-law-please