Advice needed for what to do with 50k

[jnc]

Hi there,
We are looking for some ideas on how best to invest 50k we got from the in-laws right now.They don't have a lot of money but inherited some recently and passed on some of this money to us. We worry about them needing these funds in the future for health or other age related expenses. They are 65 and 55 years old and have a low income.

We are looking for an investment that is "safe" but if possible a higher return than just a savings account. We have accounts with Vanguard and normally invest in VSTAX but think that might be too risky for this particular objective.

What would you suggest?

[MDM]

We are looking for an investment that is "safe"....

Depends on how one defines "safe."

See Asset allocation - Bogleheads and https://personal.vanguard.com/us/FundsInvQuestionnaire for some thoughts.

[letired]

The choice might be easier if we reframe it a bit. How much are you  willing to support your in-laws? If they need money, how much are you willing to give them? The entire 50k? More than 50k?

How stable are your finances? What is your emergency fund plan? Have you already worked supporting your in-laws at whatever level you've chosen into your plan?

And finally, what time-horizon are you working with? Are they in good health? Working? Already retired? And do they ask you for money?

I hope these questions are helpful and not obnoxious!

Unfortunately, I don't know of any 'safe' investment that returns better than 1%. And if the time horizon is a few years out yet, you might be better off just rolling it into your overall financial plan, whatever that looks like. Maybe you keep a larger cash cushion in a savings account for helping them, while you invest the other part with an eye to helping out later. If they end up needing any sort of long-term care in the future, 50k doesn't go very far. My friends' father was in hospice for less than a month and it was almost 10k.

[jnc]

The choice might be easier if we reframe it a bit. How much are you  willing to support your in-laws? If they need money, how much are you willing to give them? The entire 50k? More than 50k?

Definitely the entire 50k, and more if needed.

How stable are your finances? What is your emergency fund plan? Have you already worked supporting your in-laws at whatever level you've chosen into your plan?

Our finances are quite stable and we have a big (too big right now) emergency fund.

And finally, what time-horizon are you working with? Are they in good health? Working? Already retired? And do they ask you for money?

As I mentioned, one is 65 and just retired and the other is 55. They are in reasonable health, no major illnesses. Not quite sure about FIL retirement's income, given he was working a low income job. They have not asked for money...

I hope these questions are helpful and not obnoxious!

Unfortunately, I don't know of any 'safe' investment that returns better than 1%. And if the time horizon is a few years out yet, you might be better off just rolling it into your overall financial plan, whatever that looks like. Maybe you keep a larger cash cushion in a savings account for helping them, while you invest the other part with an eye to helping out later. If they end up needing any sort of long-term care in the future, 50k doesn't go very far. My friends' father was in hospice for less than a month and it was almost 10k.

I appreciate the thoughtful questions! It does help reframe the question. If there are more suggestions based on my answers, please fire away :)

[DavidAnnArbor]

The good news is the 65 year old is getting Medicare, and the important thing for this person is to make sure they have a medigap coverage of some kind to cover health expenses that will cover prescription drugs.
The 55 year old however will need good insurance, and hopefully they either have it through employment or the market place.

[MustacheAndaHalf]

Absolute safety in the medium to long term does not exist in investment.  If you invest in CDs for a decade, inflation could outpace your money.  If you invest in stocks and bonds you might lose value right when you need the money.  Of the two, inflation is far more certain than a very poorly timed market crash.  And you can always wait out a crash, while you can't wait out inflation (prices tend to go up).

How about a mix of stocks and bonds?  It can lose value, but with no risk you're looking at quietly ignoring the rising costs of everything.  If you split it half stocks and half bonds, it will be stable but not grow as fast as a higher allocation to stocks.  In a taxable account, you might look at a tax-exempt bond fund.

Consider carefully if you want to save money to help others - they won't be learning what you know about good habits and spending.  They could keep going broke and rely you save them.  In which case, you won't be pursuing early retirement.