Author Topic: Investing options for elderly parent  (Read 929 times)

Zoot Allures

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Investing options for elderly parent
« on: September 21, 2020, 10:59:56 AM »
I've been helping my 79-year-old mother with her finances for a while and am trying to simplify things for her. She's got about $280k spread across a savings account, an IRA, and an annuity at three different companies. I'm planning to bring all of this into Schwab and then set up regular transfers into her Schwab checking account to supplement her SS payments.

The question is: How to invest her money at this time of rock-bottom interest rates? Stability is our main concern at this point, but she's the type to keep everything in cash and I've been explaining to her that we need enough growth to stay ahead of inflation. She's healthy and I expect her to stick around awhile, but I may be overestimating the need for growth, I'm not sure. In any case, I know there really aren't any good fixed-income options at the moment.

Thoughts, advice? Would love to put her in a single low-cost fund if possible.
« Last Edit: September 21, 2020, 11:05:01 AM by Zoot Allures »

TomTX

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Re: Investing options for elderly parent
« Reply #1 on: September 21, 2020, 11:10:01 AM »
I've been helping my 79-year-old mother with her finances for a while and am trying to simplify things for her. She's got about $280k spread across a savings account, an IRA, and an annuity at three different companies. I'm planning to bring all of this into Schwab and then set up regular transfers into her Schwab checking account to supplement her SS payments.

The question is: How to invest her money at this time of rock-bottom interest rates? Stability is our main concern at this point, but she's the type to keep everything in cash and I've been explaining to her that we need enough growth to stay ahead of inflation. She's healthy and I expect her to stick around awhile, but I may be overestimating the need for growth, I'm not sure. In any case, I know there really aren't any good fixed-income options at the moment.

Thoughts, advice? Would love to put her in a single low-cost fund if possible.

Before messing with the annuities, make sure you can do better.

Note that I'm not advocating buying an annuity - but the fees/commission for setting it up is already sunk cost. Evaluate whether it's better to liquidate.

GizmoTX

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Re: Investing options for elderly parent
« Reply #2 on: September 21, 2020, 11:18:07 AM »
SNAXX has been good but recently Schwab devalued it to nothing. We'll be searching for other online money market funds.

+1 to checking out the annuities first.

Zoot Allures

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Re: Investing options for elderly parent
« Reply #3 on: September 21, 2020, 11:18:50 AM »
Before messing with the annuities, make sure you can do better.

Note that I'm not advocating buying an annuity - but the fees/commission for setting it up is already sunk cost. Evaluate whether it's better to liquidate.

Thanks--I still need to figure out what the deal is with this annuity. She inherited it from her father and doesn't really know how it's structured. It may indeed be best to just liquidate it instead of trying to transfer it to a similar instrument at Schwab.

Reynold

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Re: Investing options for elderly parent
« Reply #4 on: September 23, 2020, 12:38:59 PM »
Thanks--I still need to figure out what the deal is with this annuity. She inherited it from her father and doesn't really know how it's structured. It may indeed be best to just liquidate it instead of trying to transfer it to a similar instrument at Schwab.

Also, as a note, some older annuities carry GREAT interest rate payouts, they didn't float down with the market like modern ones do, so check it carefully.  If it pays out over 5% fixed rates, you can't touch anything like that today, so it could be a replacement for the "bond" part of a portfolio. 

Kevin K.

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Re: Investing options for elderly parent
« Reply #5 on: September 23, 2020, 04:59:57 PM »
This is an issue I've had to help several elderly relatives and friends with and yeah, there just aren't any great answers given the unprecedented low rates, volatility and richly-valued stocks.

I think the first thing to make sure she is clear about is whether any of the money is for legacy purposes or it's all for her needs. Assuming the latter, buying a couple of fixed annuities may indeed be the best (or least bad) option if she is only comfortable with guaranteed income. You'd want to compare yields with the best available 1-5 year CDs from online banks like Ally.

Otherwise, this Vanguard fund is not well-known (and certainly not likely to be a favorite in the ER world given its 20% equity allocation) but it could be just the ticket for her:

https://investor.vanguard.com/mutual-funds/profile/portfolio/vasix

Speaking of obscure, Vanguard's short bond fund BSV is 70% Treasuries & Agencies, 30% corporates, short duration. It has never had a losing year and is arguably a decent cash substitute for part of a portfolio. Like I said, least worst choices only and not just for old folks!


Abe

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Re: Investing options for elderly parent
« Reply #6 on: September 23, 2020, 09:36:31 PM »
It sounds like you all are mostly wanting to protect her assets from inflation rather than making major market gains. Her median life expectancy is 10 years, for reference. That means you should aim for a potential 15-20 year life horizon. An all fixed-income allocation may not be a good idea, so look into both an index equity and index bond fund.

For equity:
Schwab's total stock market index fund, SWTSX has a very low fee (0.03%). They have an international index fund (essentially Japan & Western Europe, so not as high-risk as developing market funds) with a reasonable fee of 0.06%. I'd probably just go with SWTSX to keep it simple.

Schwab has SWRSX, a low-fee fund that invests in US Treasury Inflation-Protected bonds (TIPS). The fee is half of the Vanguard funds suggested above. (0.05% vs 0.11%, or $50 vs $110 per year for $100k invested). Yields are about 3% per year, after taxes.

Their aggregate bond index fund invests in more junk bonds, and has marginally better performance in its short existence, so I'd steer away from that.

Between the annuity and social security, she may have enough fixed income that you can consider some balance between stocks and bond. For reference, I manage my parents' retirement accounts (about a decade younger) and have it 40/60 stock / fixed income. It's been stable over the last 15 years with 3-4% returns.

Zoot Allures

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Re: Investing options for elderly parent
« Reply #7 on: September 24, 2020, 02:58:45 PM »
Appreciate the feedback, folks. The goal here is just to get her to the finish line on her own money! In a different time, laddered CDs and a high-yield savings account probably would have worked just fine. But I like the idea of a simple 2-fund portfolio using bonds/TIPS and maybe 20% equities.

AdrianC

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Re: Investing options for elderly parent
« Reply #8 on: September 25, 2020, 08:34:49 AM »
We extracted my 90 year old father-in-law's money from a "financial advisor" and put it all into a single Vanguard LifeStrategy fund.

https://investor.vanguard.com/mutual-funds/lifestrategy/#/

Simple. Vanguard send his RMD to his bank account each quarter (they'll do monthly if you want). We don't have to do anything, and can't be accused of any kind of malfeasance by my wife's sibs.

Schwab probably have something similar. I'm partial to Vanguard (not for profit).

trollwithamustache

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Re: Investing options for elderly parent
« Reply #9 on: September 25, 2020, 08:44:12 AM »
FWIW I've got my mother 90% in cash.  not quite as old, but risk adverse and capital preservation are everything at that age.

Sibley

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Re: Investing options for elderly parent
« Reply #10 on: September 29, 2020, 11:13:54 AM »
I put my parents into a Vanguard Life Strategy fund as well. For their purposes, it's working well so far. They've seen FAR less volatility than I have in my nearly pure equity setup. They're not in distribution phase yet, so we'll see how that goes.

Another vote for carefully evaluating the existing annuity before you touch it.

robartsd

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Re: Investing options for elderly parent
« Reply #11 on: September 29, 2020, 11:43:35 AM »
Last I talked with my Mom (not yet 70) about investing her very small IRA (she has SS and a pension taking care of her fixed income needs), I provided a few Vanguard balanced funds ranging from 20% to 60% equity for her to choose from. I'm still trying to get with her about dealing with another IRA that has an annuity and to consider Roth conversion before RMDs start.

FINate

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Re: Investing options for elderly parent
« Reply #12 on: September 29, 2020, 11:56:11 AM »
We extracted my 90 year old father-in-law's money from a "financial advisor" and put it all into a single Vanguard LifeStrategy fund.

https://investor.vanguard.com/mutual-funds/lifestrategy/#/

Simple. Vanguard send his RMD to his bank account each quarter (they'll do monthly if you want). We don't have to do anything, and can't be accused of any kind of malfeasance by my wife's sibs.

Schwab probably have something similar. I'm partial to Vanguard (not for profit).

Thanks for this! I'm also helping my parents with this and the LifeStrategy funds are exactly what I've been looking for.