Hi Everyone,
I'm stepping up to help my Dad and I would like your feedback on my ideas (please refrain from being too hard on him, we're aware that he is behind the curve). Fortunately, my parents are happily married and my Mom has invested consistently and has a relatively strong portfolio valued around 1.3 million (with God-awful fees, but my Mom is not interested in moving away from those expensive investments). The objective is to get my Dad and his finances settled up, so that he can be as efficient as possible during the remainder of his working years and into the early stages of retirement.
My Dad is 61 years old. He has a minimal portfolio of mutual funds (likely with high fees) that value at approximately $125,000 and other miscellaneous accounts (HSAs, CDs, etc) at about $50,000. My Dad owns an annuity that will pay $475 per month once he turns 62. My Dad is eligible for Social Security, but I am not sure of the benefit amount. He and my Mom own their primary residence outright (valued at approximately $950,000).
In recent years, my Dad has focused on paying off the rental property that they own. The mortgage will be gone in early 2018. The property generates about $1,300 per month in rent. Currently, my Dad has about $1,200 per month to invest and after the rental mortgage is gone that number will increase to $2,500 per month.
A few weeks ago my Dad was laid off. He is considered job-attached and will receive unemployment for the next several months and likely will continue this "off and on" work pattern until he retires sometime in the next 3-6 years. While he is healthy in early retirement, he plans to direct as much rental income as possible into investment accounts. He is willing to work part-time or re-open his home remodeling business. My Dad is relatively frugal and looks forward to a retirement of hiking, fishing, and hunting.
My plan and questions for fellow Mustachians:
1) Organize all accounts- rollover orphan 401(k)s from old employers into a single Roth IRA with either Vanguard or Schwab (looking into monthly contribution limits- we must automate this process to save my Dad from himself :).
2) Invest in only low-cost index funds. Use a combination of S&P 500, International, and Bond funds. I plan to create a moderate to high risk allocation for someone his age.
3) Open traditional IRA with the same company. Establish automated monthly contributions. Buy the same index funds and to create/maintain allocation selected above. Monthly contribution: $541.67 to max out on an annual basis.
4) Evaluate fees on existing HSA. Determine if existing account allows for investment into low-cost index funds. If no, move to HSA Bank which allows for investments with TD Ameritrade into low-cost index funds. Monthly contribution: $366.67 to max out on an annual basis.
Question: What is your favorite HSA that allows for index fund investing?
Question: What allocation would you recommend for this account? I am inclined to invest 100% in a short-term bond fund, but don't want to be overly conservative.
5) Because my Dad is not employed right now, I'm not sure where to invest the remaining $1,591.66 per month. In the past he established a SIMPLE IRA as part of his part-time business. Since landing the full-time job with benefits, he has halted the business (but may look for work in the coming months). I want to make sure I haven't overlooked any tax-advantaged options.
Question: Can he continue contributions into the SIMPLE IRA?
Question: What other account types would you recommend?
Thanks for reading!
