I really hope the wise Mustachians can figure out something I'm missing, because I'm kind of stumped.
My dad is 70 years old. He gets a small government pension, and has € 100.000 of his own saved in addition. In addition to the government pension, he needs €500 per month to live. This amount can't possibly be lowered. My dad's already embracing the ultimate Mustachian lifestyle - no pets, bikes everywhere, tiny grocery bills, doesn't eat out, doesn't go on vacation, his only hobby's a sport that costs him €25 per year, no cable, prepaid phone, etc. So somehow, I need to make those €100.000 yield €500 per month.
(If you're wondering why I'm butting in all over my dad's financial situation, it's because he has early-stage Alzheimer's and can't manage his money on his own anymore. He's already lost a couple thousand to an unscrupulous financial advisor who was happy to take advantage of an old man.)
Problem: The investment needs to be rock-solid safe. This is every penny my dad has saved, and he needs it now. If anything were to happen to it, he'd be really screwed. The best rates I could find that offer that kind of safety were 4 % per year.
You should also probably know that we're German, so some advice that would work for Americans might not work quite the same way for us.
Here's two ideas I've come up with:
- Invest the 100,000 at 4 % per year. Monthly income: 333.
I'd give him an additional 167 per month to make up the difference to the 500, and get the 100,000 when he dies.
If he dies at 90, that's an 8,38 % interest rate for me. If he dies at 100, ~3 %.
- Buy an apartment with the 100,000. In our area (Bavaria, Germany), 100,000 will buy an apartment you can rent out for € 500/month, possibly €600 if you're really lucky. (Yeah, when I first heard of the 2 % rule, or even the 1 % rule, I could do nothing but giggle-snort incredulously. Correct me if you know how to get better rates around here, obviously.)
Again, I'd cover whatever the difference would be to 500 after tax/vacancy/etc, and get the apartment when he dies.
On its face, 600 per month would obviously be a better return on investment than 333, but if the 50 % rule comes true and 300 of that go to property tax/repairs/vacancy/etc, it's worse. Also, more work. Also, we just finally finished a nightmarish battle with my mom's crazy last tenant that ended up costing us about a year's worth of rent, and I'm kind of wary of landlording now.
If anyone has any better ideas, I'd be very grateful. I'm really not looking to make money off my dad here, I just want him to be able to live comfortably and safely. But he'd really like it if there was something left he could pass on to me at the end of his life.