Investment advice for 69 yr olds?

[jeromedawg]

Hey all,

I was wondering what advice you would give on behalf of my in-laws, who are both around 69 years old and are not retired. They are restaurant owners who work tirelessly every day. Unfortunately, their finances have been the source of much anguish, especially for my wife, for a long time now. They are too stubborn to think about retirement right now so we definitely need to have one of *those* talks with them because they refuse to think and plan ahead and live in the moment (e.g. "if I have money, why shouldn't I just spend it on stuff that I need and want?").

In terms of retirement accounts, they don't have any. I'm guessing it might not hurt to get them started with one at least? But would they qualify for a Traditional IRA since they're still working and under 70.5? Would we also want to open a Roth IRA for them on the side?

I'd imagine catch-up contributions apply here, so they could technically open up an IRA this year and each max it out at $6500? Is this correct?

Is there any other advice you might give on their behalf? I'm not sure exactly what their take-home salary is but they have to deal with rent for the restaurant building, employee salaries, and also their own mortgage, which I'd say are probably the biggest expenses. They have a CPA friend but he seems to strictly only help them with filing taxes for the restaurant. I think they're too embarrassed to ask him to help in their personal finances. They're the type who think that holding a lot of physical cash (e.g. bills and coins) is the best way to keep money...

[GizmoTX]

There are no age limits for contributing to an IRA, just for when you must start pulling accumulated contributions out. Either Roth or traditional must have earned income to qualify. Yes, catch up contribution limits apply.

Do they each have a current will & legal directives for managing their healthcare & finances should they become unable to? It's a nightmare if they don't. If they do, someone needs to know where to find them. This is a bigger priority than investments.

[wtjbatman]

They are too stubborn to think about retirement right now so we definitely need to have one of *those* talks with them because they refuse to think and plan ahead and live in the moment (e.g. "if I have money, why shouldn't I just spend it on stuff that I need and want?").

I have to ask... why? They are adults, they can make their own decisions. Yes you can (and should) offer advice, which it sounds like you have already. But why do you think it is your responsibility to choose how they act and how they spend their money? Are you supporting them? Giving them money? Because if you, you're enabling them. And if you're not, then maybe you should give it a rest and let them make their own decisions.

[Gone Fishing]

A Traditional IRA might help if they are in a higher tax bracket now, but they would have to be aware of RMD's as they would be right around the corner.  If they are not interested in these sort of things it would only complicate matters.  You would probably be doing good just to get them to put some money in a high yield savings account.  The next step up would be a conservative income fund.  At this point, there is not much time for compounding to work, your best bet is to just get them to put something back.  Their largest retirement asset may be the value of the restaurant, which may not be much considering the real estate is leased.  If they do manage to sell the business for something when they decide to call it quits, an annuity (as much as I hate to say it) may be a good option for them to prevent them from burning through the cash.  At their age, their annual payout would probably be pretty good maybe 8%+.   

[Bikeguy]

They are too stubborn to think about retirement right now so we definitely need to have one of *those* talks with them because they refuse to think and plan ahead and live in the moment (e.g. "if I have money, why shouldn't I just spend it on stuff that I need and want?").

I have to ask... why? They are adults, they can make their own decisions. Yes you can (and should) offer advice, which it sounds like you have already. But why do you think it is your responsibility to choose how they act and how they spend their money? Are you supporting them? Giving them money? Because if you, you're enabling them. And if you're not, then maybe you should give it a rest and let them make their own decisions.

+1. If they don't want the advice,  why offer it.   You will only end up irritating both parties.   If I thought they'd be receptive,  I'd start with "Are you interested in my thoughts on the subject". Then,  wait for a clear yes or no.   

This is coming from someone who tried to help others not seeking help.  It was a waste of both of our time.

[jeromedawg]

There are no age limits for contributing to an IRA, just for when you must start pulling accumulated contributions out. Either Roth or traditional must have earned income to qualify. Yes, catch up contribution limits apply.

Do they each have a current will & legal directives for managing their healthcare & finances should they become unable to? It's a nightmare if they don't. If they do, someone needs to know where to find them. This is a bigger priority than investments.

We'll have to figure that stuff out for sure. My wife told me they setup a trust but I think that might be it. We'll have to discuss that other stuff with them.

I have to ask... why? They are adults, they can make their own decisions. Yes you can (and should) offer advice, which it sounds like you have already. But why do you think it is your responsibility to choose how they act and how they spend their money? Are you supporting them? Giving them money? Because if you, you're enabling them. And if you're not, then maybe you should give it a rest and let them make their own decisions.

I think they are in denial about their situation and probably feel like they need to keep working as long as possible or they're gonna go broke. The situation isn't as bad as it was a few years ago but I don't think it's great for them either. I think part of the issue is that we don't understand their full financial situation - even if we talk to them I don't think we know *everything* either because they're withholding information or are oblivious about it, or a mix of both. My wife and her brother feel obligated to helping them out whether financially or by other means if they can't help themselves. We want them to make wise(r) decisions now so that it does come back to bite us in the @$$ and causing tension between her (well, us) and her brother later down the road. I can easily foresee this happening too.

+1. If they don't want the advice,  why offer it.   You will only end up irritating both parties.   If I thought they'd be receptive,  I'd start with "Are you interested in my thoughts on the subject". Then,  wait for a clear yes or no.   

This is coming from someone who tried to help others not seeking help.  It was a waste of both of our time.

Agreed, I think they're open to help but are oblivious. My wife, in a sense, has 'enabled' them their entire lives by [over?] helping out at their restaurant and doing a lot of bills for them on their behalf, etc. They speak very limited English so she was basically like a translator for them growing up. Now she feels even worse because she moved over an hour away from them once we got married. What's worse is that sometimes they just write-off what she has to say or kind of brushes it off, without realizing the implications of what we just said. My wife says they'd probably be more willing to listen if I have something to say (except, she has to translate for me so I'm sure things get lost in translation). It's one of those catch-22 situations: my wife feels obligated to help and doesn't want bigger problems in the future but her parents are either oblivious/naive about many things and probably tell us not to worry because they know this. I think we're partly making this effort to protect ourselves though (especially after what GizmoTX points out about establishing wills and what not for deciding what happens when they're both in the hospital and unable to make their own decisions, etc)

A Traditional IRA might help if they are in a higher tax bracket now, but they would have to be aware of RMD's as they would be right around the corner.  If they are not interested in these sort of things it would only complicate matters.  You would probably be doing good just to get them to put some money in a high yield savings account.  The next step up would be a conservative income fund.  At this point, there is not much time for compounding to work, your best bet is to just get them to put something back.  Their largest retirement asset may be the value of the restaurant, which may not be much considering the real estate is leased.  If they do manage to sell the business for something when they decide to call it quits, an annuity (as much as I hate to say it) may be a good option for them to prevent them from burning through the cash.  At their age, their annual payout would probably be pretty good maybe 8%+.   

RE: the restaurant - that's what I was thinking in terms of worth. Since they rent the building their in, the business itself probably doesn't have much value. We need to talk to them about getting more aggressive on selling and have in the past but their excuse for not being as aggressive is that they don't want the entire staff to find out and then end up leaving. Not sure how realistic of a concern that is in terms of logistics with running a restaurant. This all said, I think we need to have another long talk with them about what their plans are. I want to say they'd be open to it but we'll see. 

[rmendpara]

Other touched on the help part, so I'll offer another tip.

At this point, retirement accounts won't do them much good. The whole purpose of IRAs is to invest while young and allow compounding and tax deferral to work their magic.

It's really just minimizing the fallout now (assuming they run into problems later). Two things might help, life insurance and long-term care/assisted care insurance. This will help to protect you/wife in the event they become unable to work or need more assisted care.

[Mighty-Dollar]

I would say keep it simple. https://personal.vanguard.com/us/funds/tools/recommendation?reset=true
For a second opinion about bond/stock allocation check out this site https://gps.ricedelman.com/
Personally I own VOO and AGG. That's it! And I'm diversified.