Investing Mother's Assets

[FlytilFIRE]

Greetings, Financial Wizards. Looking for advice.

My Mother just moved into a Senior Living apartment. She has a small Social Security income (approx $1000/mo). While she lives in a LCOL area, this will not cover her expenses. She recently sold her house, and I'm looking at investing her assets in a low risk area to boost her income while preserving as much principal as possible.

I'm looking hard at Vanguard VTINX (Retirement Income).

Is anyone thus invested? Any other ideas on conservative investing? She's 85, and I want to stay away from annuities, if possible. I also want to avoid situations requiring a lot of hands on rebalancing/monitoring.

Thanks in advance for your help

[wageslave23]

If she needs the money then probably should keep half the money in a high interest savings account. Sorry i have other suggestions other than that.

[cool7hand]

I often write about Ray Dalio's All Seasons (aka All Weather) Portfolio. It's a low volatility portfolio that might fit your needs. Give it a Google!

[ericrugiero]

If she needs the money then probably should keep half the money in a high interest savings account. Sorry i have other suggestions other than that.

Yes, keep some in savings but it might not be half.  I'd pick a certain number of years expenses.  Maybe 2-3?  That's more than most keep in their emergency fund but at that stage of life you probably need more available for unexpected medical. 

VTINX seems like it's designed for what you are asking.  I might do some cash, some VTINX and some VTSAX to get more growth.  It really depends on your goals as well as the actual numbers.  If she has $100K and spends $40K/year investing doesn't make sense because it will be gone in 2.5 years.  If she has $500K and spends $20K then a higher % can be invested.  My guess is she is somewhere in the middle.     

[ctuser1]

Her social security income ($1000/mo = $12k/year) should be considered a bond or fixed income equivalent. May be consider that to be an "imputed" portfolio worth 12 X 25 = 300k.

Remaining of her assets should be invested with an asset allocation as if she already has 300k in bonds.

[FlytilFIRE]

Thanks for the input. I'll check things out. Her expenses right now are approximately $24k, so she's halfway there just with SS. As long as she can stay out of assisted living, or a nursing home, she'll be fine, I think, with a conservative portfolio.

As has been discussed in other threads, once you go into assisted living/nursing home, it's a whole 'nuther ball game. Fortunately, there are some programs she'll be entitled to if she burns through her assets. Between that, and what I can afford to give her, she'll be o.k.

Thanks.

[NorCal]

While some may consider this heresy, here’s what we did for my FIL in a similar situation.

We convinced him to put the little money extra he extracted from his primary residence into an annuity.

We knew that if he had access to a big pot of money, he would spend it well above what he should. An annuity gives a small rate of return, but it keeps his spending inline with his means.

While not a mustachian optimal solution, this is frequently an optimal solution for those who haven’t developed healthy financial habits.

[Dicey]

While some may consider this heresy, here’s what we did for my FIL in a similar situation.

We convinced him to put the little money extra he extracted from his primary residence into an annuity.

We knew that if he had access to a big pot of money, he would spend it well above what he should. An annuity gives a small rate of return, but it keeps his spending inline with his means.

While not a mustachian optimal solution, this is frequently an optimal solution for those who haven’t developed healthy financial habits.

The OP said their mom is 85. Does an annuity make any sense that late in life?

[Much Fishing to Do]

While some may consider this heresy, here’s what we did for my FIL in a similar situation.

We convinced him to put the little money extra he extracted from his primary residence into an annuity.

We knew that if he had access to a big pot of money, he would spend it well above what he should. An annuity gives a small rate of return, but it keeps his spending inline with his means.

While not a mustachian optimal solution, this is frequently an optimal solution for those who haven’t developed healthy financial habits.

The OP said their mom is 85. Does an annuity make any sense that late in life?

I kinda look at lifetime immediate annuities the opposite way, its not until this late in life do they pay out enough per month that they are worth looking at.  If the sale of the house provides enough capital to fund one that would return the needed $1k/mth deficit with half or less of the proceeds I would think this a decent strategy on its face (as with needs covered it would allow one to be MUCH more aggressive with the rest of the money, which can either provide the owner or the heir more money to use in the end while the basic needs have been guaranteed for life).  All that said, there are many complicated factors to think thru, like its affect on programs later in life.

[FlytilFIRE]

Thanks again, everyone. I checked out the Dalios portfolio. From what I read, it is designed more for long term investors, and, at 85, I don't think that applies. Additionally, I'm spearheading the investments, but I have siblings who might look askance at 7.5% invested in a gold fund.

I, too, thought of annuities, and will do some research. She has one now, and I'll be conference calling my Mother and the annuities company to discuss keeping it or cashing in. Annuities aren't the same as they were 20 years ago. There are so many options and varieties. I may have to get a book out of the library to learn about them.

I'm extremely fortunate that my mother is frugal, and my parents were able to put away money. They were flush, till Dad passed away, along with HIS SS and the military retirement.

For now, though, I think I'm going to put most of her cash (sitting n a checking account) into VTINX, and some into VTSAX. She has plenty in an emergency reserve. I'll adjust as necessary. If I can get her a steady 4%, she should be good until she needs help with daily life.

Next question. Dump it in as one lump sum, or feed it in over a period of time?

Thanks again.

[Dicey]

Thanks again, everyone. I checked out the Dalios portfolio. From what I read, it is designed more for long term investors, and, at 85, I don't think that applies. Additionally, I'm spearheading the investments, but I have siblings who might look askance at 7.5% invested in a gold fund.

I, too, thought of annuities, and will do some research. She has one now, and I'll be conference calling my Mother and the annuities company to discuss keeping it or cashing in. Annuities aren't the same as they were 20 years ago. There are so many options and varieties. I may have to get a book out of the library to learn about them.

I'm extremely fortunate that my mother is frugal, and my parents were able to put away money. They were flush, till Dad passed away, along with HIS SS and the military retirement.

For now, though, I think I'm going to put most of her cash (sitting n a checking account) into VTINX, and some into VTSAX. She has plenty in an emergency reserve. I'll adjust as necessary. If I can get her a steady 4%, she should be good until she needs help with daily life.

Next question. Dump it in as one lump sum, or feed it in over a period of time?

Thanks again.

If annuities have changed a lot, a book might be out of date. With all the financial forums around, there has to be more current info readily available. Maybe early-retirement.org might be helpful. Also, your mom should be getting your dad's SS amount (or who ever's is larger). Is that the case?
Oh, and I believe statistically the lump sum method has the better track record, but it's always a tricky decision.

[FlytilFIRE]

Thanks, Dicey. Yes, she SHOULD be getting the larger of the two, but, of course, the SSA has different ideas. Mom is visiting my brother now, but has some correspondence from the SSA at home, so hopefully that will be sorted out.

And you're right about the book. I'll look online.

Just a caution to others, and I know it's been said on other threads. We started sorting out their finances a few years ago. Thought we had a handle on it. WRONG! Many accounts were in only my father's name, or my mother was a user, but not owner, of accounts. I couldn't convince them to make a trust, as the attorney they consulted said they "didn't have enough assets" BS! Talk to your parents, and try to get it sorted out BEFORE you really need to, including minor issues like credit cards, savings accounts, etc. My mother is far from helpless, and worked as an office manager, so she knows how to do much of this stuff. It was just easier for her to let my father do it. I'm not complaining, though. At least she can afford to live on her own, and stay close to her friends and family.

[NorCal]

My FIL got the annuity earlier this year, so we've looked at them fairly recently.

Compared with prior generations, there are a lot more options for annuities out there.

IMO, you don't need to bother researching the more complex annuities.  I have a masters degree in finance, and even I can't figure out some of the complex ones.  Stay away from those.

A good place to start is the Schwab Annuity estimator.  We didn't go with Schwab (my FIL found a place with a $20/mo higher payout), but I would trust them.

https://www.schwab.com/annuities/fixed-income-annuity-calculator

[FlytilFIRE]

Thanks, Norcal. I'll check it out right away.

[wageslave23]

My FIL got the annuity earlier this year, so we've looked at them fairly recently.

Compared with prior generations, there are a lot more options for annuities out there.

IMO, you don't need to bother researching the more complex annuities.  I have a masters degree in finance, and even I can't figure out some of the complex ones.  Stay away from those.

A good place to start is the Schwab Annuity estimator.  We didn't go with Schwab (my FIL found a place with a $20/mo higher payout), but I would trust them.

https://www.schwab.com/annuities/fixed-income-annuity-calculator

Those payouts aren't terrible.  I wonder what the payouts on an inflation adjusted annuity would look like if there is such a thing.  If they are decent it would be nice from a FIRE perspective to lock in a guaranteed payout, if that payout was sufficient for your needs.