Investing for elderly parents

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smallminnow
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Investing for elderly parents

Post by smallminnow »

My parents are both healthy at 70 y/o. They have $400k in their checking account earning 0.1% interest. They have no debt, no mortgage, and own real estate totaling $800k. Total income of ~$5k which includes SS, rental income, and a small government pension.

Where should they invest their $400k?
I am hesitant to have them jump into the market since it is at ATH, but the market doesn't seem to be slowing down.

They are comfortable living on $5k a month, and even have $$ left over. They don't need the investment income, but seems like a waste. Should they even look for investments? Or just leave it as is? I am not worried about my inheritance, I do well financially on my own. I learned to be a saver from my parents, but also learned investment knowledge. I'm more concerned about them living comfortably.
Last edited by smallminnow on Thu Dec 09, 2021 8:11 am, edited 3 times in total.
dbr
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Re: Investing for elderly parents

Post by dbr »

Can you reasonably identify contingencies where your parents would suffer due to insufficient real return from that checking account? That would be the first step.

A second step would be to ask what they want to do with that money. This would be with respect to possible better return but with some risk.

At present the situation is a little unique in that there is not a lot of opportunity to gain return by selecting more risky fixed income. Whether one would have a motivation to take risk in stocks to hope for more growth in savings could be a discussion.

But it comes to what one wants.
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KlingKlang
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Re: Investing for elderly parents

Post by KlingKlang »

Are your parents actually on SSI ( Supplemental Security Income)? In that case there are very strict limits on their assets and income. More likely they are collecting Social Security Retirement benefits.

Have your parents actually asked for help or are you just frustrated that they have so much non-productive cash laying around? For what it's worth I am in the same situation with my own 94 year old mother.
HomeStretch
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Re: Investing for elderly parents

Post by HomeStretch »

Does the $5k/month cover all expenses - living expenses, healthcare, income taxes, new car or home repair/maintenance, if needed? Or does their portfolio need to fund periodic large expenses such as a vacation, new car, new roof, rental property repairs?

Do they have long-term care insurance or will their portfolio need to fund care expenses, if needed, as they age?

Without knowing the answers to the above, it’s hard to say whether your parents should hold some equity (20-30%) to help their portfolio keep up with inflation.

If they don’t mind the complexity of additional accounts, they could consider purchasing I-Bonds at TreasuryDirect for a higher return that is relatively safe.

Review whether the return they are receiving on their rental property is sufficient or if it is better to sell and invest the proceeds.

If you will be helping your parents at their request with financial and/or healthcare matters now or in the future, be sure they each execute (now while competent) the appropriate power-of-attorney documents, that you have copied and they have the documents accepted by their financial institutions and healthcare providers. This can be a process that takes time and effort.
Last edited by HomeStretch on Wed Dec 08, 2021 10:18 am, edited 1 time in total.
delamer
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Re: Investing for elderly parents

Post by delamer »

It’s not clear if your parents have any interest in taking risk needed to get a bigger return on their $400,000.

If they don’t, then there isn’t any room to discuss stocks.

They could do a CD ladder or buy Treasuries or individual TIPS to get a bigger return without risking principal. (Bonds need to be held to maturity to maintain principal.)
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Topic Author
smallminnow
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Re: Investing for elderly parents

Post by smallminnow »

KlingKlang wrote: Wed Dec 08, 2021 10:14 am Are your parents actually on SSI ( Supplemental Security Income)? In that case there are very strict limits on their assets and income. More likely they are collecting Social Security Retirement benefits.

Have your parents actually asked for help or are you just frustrated that they have so much non-productive cash laying around? For what it's worth I am in the same situation with my own 94 year old mother.
You're probably right, it's SSR benefits. There's no restrictions to their assets.

They have not asked for help to invest. I know they wouldn't be against it. Also, I'm not frustrated at all...just wondering if there's a smarter way for them to manage that cash for the next 10-20 years.
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smallminnow
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Re: Investing for elderly parents

Post by smallminnow »

HomeStretch wrote: Wed Dec 08, 2021 10:16 am Does the $5k/month cover all expenses - living expenses, healthcare, income taxes, new car or home repair/maintenance, if needed? Or does their portfolio need to fund periodic large expenses such as a vacation, new car, new roof, rental property repairs?
The $5k/month covers all expenses, with leftover. They are happy to be frugal.
HomeStretch wrote: Wed Dec 08, 2021 10:16 am Do they have long-term care insurance or will their portfolio need to fund care expenses, if needed, as they age?
Medical insurance is not a concern.
HomeStretch wrote: Wed Dec 08, 2021 10:16 am Without knowing the answers to the above, it’s hard to say whether your parents should hold some equity (20-30%) to help their portfolio keep up with inflation.

If they don’t mind the complexity of additional accounts, they could consider purchasing I-Bonds at TreasuryDirect for a higher return that is relatively safe.

Review whether the return they are receiving on their rental property is sufficient or if it is better to sell and invest the proceeds.

If you will be helping your parents at their request with financial and/or healthcare matters now or in the future, be sure they each execute (now while competent) the appropriate power-of-attorney documents, that you have copied and they have the documents accepted by their financial institutions and healthcare providers. This can be a process that takes time and effort.
They don't want complex accounts that they don't understand. Power of attorney is a good idea.
ZWorkLess
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Re: Investing for elderly parents

Post by ZWorkLess »

I'd start by helping them put $20k into I bonds right now (before the end of December) and then another 20k into I bonds in January. I'd keep buying 20k in I bonds every January (10k max per person per year) indefinitely. The I bonds can be used as their E fund and also count as bonds in their AA, and so I'd want to stuff as much cash as possible into I bonds. (You can't access them for 12 months after purchase, but can access it anytime after that. So, 40k would be tied up until January 2023, but after that, assuming annual purchasing, you'd just have 20k -- the most recent purchase-- tied up at any given time.)

Beyond that, I'll leave it to others more knowledgable than I.
HomeStretch
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Re: Investing for elderly parents

Post by HomeStretch »

smallminnow wrote: Wed Dec 08, 2021 11:03 am
HomeStretch wrote: Wed Dec 08, 2021 10:16 am Do they have long-term care insurance or will their portfolio need to fund care expenses, if needed, as they age?
Medical insurance is not a concern.
Medical insurance is not the same as long-term care insurance nor would medical insurance usually cover long-term care costs, if needed.
Fallible
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Re: Investing for elderly parents

Post by Fallible »

smallminnow wrote: Wed Dec 08, 2021 11:03 am
HomeStretch wrote: Wed Dec 08, 2021 10:16 am Does the $5k/month cover all expenses - living expenses, healthcare, income taxes, new car or home repair/maintenance, if needed? Or does their portfolio need to fund periodic large expenses such as a vacation, new car, new roof, rental property repairs?
The $5k/month covers all expenses, with leftover. They are happy to be frugal.
HomeStretch wrote: Wed Dec 08, 2021 10:16 am Do they have long-term care insurance or will their portfolio need to fund care expenses, if needed, as they age?
Medical insurance is not a concern.
HomeStretch wrote: Wed Dec 08, 2021 10:16 am Without knowing the answers to the above, it’s hard to say whether your parents should hold some equity (20-30%) to help their portfolio keep up with inflation.

If they don’t mind the complexity of additional accounts, they could consider purchasing I-Bonds at TreasuryDirect for a higher return that is relatively safe.

Review whether the return they are receiving on their rental property is sufficient or if it is better to sell and invest the proceeds.

If you will be helping your parents at their request with financial and/or healthcare matters now or in the future, be sure they each execute (now while competent) the appropriate power-of-attorney documents, that you have copied and they have the documents accepted by their financial institutions and healthcare providers. This can be a process that takes time and effort.
They don't want complex accounts that they don't understand. Power of attorney is a good idea.
When you say they don't want complex accounts they don't understand, are you referring to I-bonds or POA, or the rental property? Your main concern seems to be investing some of the checking account money, but would they understand the risks involved there?
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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JoeRetire
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Re: Investing for elderly parents

Post by JoeRetire »

smallminnow wrote: Wed Dec 08, 2021 9:54 amShould they even look for investments? Or just leave it as is?
Have they asked for help?
If so, do they have a feel for how much risk they are willing to take on?

I'm 67, and we have a 60/40 asset allocation. But I don't need help from my children managing my finances.
And I don't consider 70 as "elderly"! :wink:
I'm more concerned about them living comfortably.
Are they living comfortably now?
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delamer
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Re: Investing for elderly parents

Post by delamer »

JoeRetire wrote: Wed Dec 08, 2021 2:27 pm
smallminnow wrote: Wed Dec 08, 2021 9:54 amShould they even look for investments? Or just leave it as is?
Have they asked for help?
If so, do they have a feel for how much risk they are willing to take on?

I'm 67, and we have a 60/40 asset allocation. But I don't need help from my children managing my finances.
And I don't consider 70 as "elderly"! :wink:
I'm more concerned about them living comfortably.
Are they living comfortably now?
Well, as a fellow 67-year-old, I know that younger people look upon me as elderly. :annoyed

What I am not is enfeebled in mind or body.

If someone reaches Social Security age without knowing much about investing and other financial issues, that’s on them.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
AvidGardener
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Re: Investing for elderly parents

Post by AvidGardener »

My dad is 89 at 60 / 40
amateur
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Re: Investing for elderly parents

Post by amateur »

May I ask do they have any retirement account like IRA?
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Sheepdog
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Re: Investing for elderly parents

Post by Sheepdog »

At 88 I have been happy with my wife's and my 30-32% stock allocation for over the last 20 years or so with income from that and SS giving decent retirement to cover health and other spending needs and some growth (nominal, but that is all we need.) I still like Wellesley as my main income producing stock containing fund, but hold nothing against Target Income...I just have came to like Wellesley.

I should add that I added some Balanced Index 3 years ago to my wife's Traditional and Roth accounts, not much, but some, for a little growth as she is a younger 81. We haven't touched her accounts for any expense needs. As part of our annual partial conversion of our traditional to Roth IRAs, to try to reduce taxes for the "kids' when they inherit.. Hers is now in Roths, but mine will take more years to do so.

( We have some of those 2000-2001 I Bonds which are now equal to about 22% of our investments I won't touch them for expense needs as they became my Long Term Care fund, if needed. They aren't really part of my allocation as I wouldn't touch it.) My wife does have a LTC policy though.

Our children (now in their 50s) don't live near us, but they are able to visit over the Thanksgiving, Christmas and Easter periods every year. I make it a point to sit them down with them and keep them up-to-date our our savings and spending. They have never even suggested any changes for us. One said this Holiday, "We know that you wanted to just not run out, live well, not grow beyond needs. " This time we did discuss a change in our Revocable Trust we were considering. They even didn't make a recommendation for that. We may make that change, for their sake, but changing that thing seems like such a pain. I regret getting it back then as we really didn't need it.) If your parents are willing, an annual review might be helpful to them and you.

Have a good day.

Woof Woof
Unless you try to do something beyond what you have already mastered you will never grow. (Ralph Waldo Emerson)
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dogagility
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Re: Investing for elderly parents

Post by dogagility »

Agree with buying 10K in I-bonds/person/year via Treasury Direct.

After that, suggest investing the remainder in a single (i.e. nothing to manage), low-cost, balanced, index fund to keep up with inflation.

Two suggestions are Vanguard Life Strategy Income fund (VASIX) (20% equity/80% bonds) and Blackrock iShares Core Conservative Allocation ETF (AOK) (30% equity/70% bond).
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ModifiedDuration
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Re: Investing for elderly parents

Post by ModifiedDuration »

$20k into iBonds right now (and again every January thereafter) is a good idea.

Then, put the remaining cash in an online high-yield savings account, like Marcus by Goldman Sachs (FDIC insured). 0.5% is a lot better than 0.1% in checking.

If they are alright with the risk, 20% or 30% in a low cost / no cost Total Market Index Fund, like VTSAX at Vanguard or FZROX at Fidelity.
Last edited by ModifiedDuration on Thu Dec 09, 2021 8:13 am, edited 2 times in total.
Topic Author
smallminnow
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Re: Investing for elderly parents

Post by smallminnow »

Sheepdog wrote: Thu Dec 09, 2021 4:51 am At 88 I have been happy with my wife's and my 30-32% stock allocation for over the last 20 years or so with income from that and SS giving decent retirement to cover health and other spending needs and some growth (nominal, but that is all we need.) I still like Wellesley as my main income producing stock containing fund, but hold nothing against Target Income...I just have came to like Wellesley.

I should add that I added some Balanced Index 3 years ago to my wife's Traditional and Roth accounts, not much, but some, for a little growth as she is a younger 81. We haven't touched her accounts for any expense needs. As part of our annual partial conversion of our traditional to Roth IRAs, to try to reduce taxes for the "kids' when they inherit.. Hers is now in Roths, but mine will take more years to do so.

( We have some of those 2000-2001 I Bonds which are now equal to about 22% of our investments I won't touch them for expense needs as they became my Long Term Care fund, if needed. They aren't really part of my allocation as I wouldn't touch it.) My wife does have a LTC policy though.

Our children (now in their 50s) don't live near us, but they are able to visit over the Thanksgiving, Christmas and Easter periods every year. I make it a point to sit them down with them and keep them up-to-date our our savings and spending. They have never even suggested any changes for us. One said this Holiday, "We know that you wanted to just not run out, live well, not grow beyond needs. " This time we did discuss a change in our Revocable Trust we were considering. They even didn't make a recommendation for that. We may make that change, for their sake, but changing that thing seems like such a pain. I regret getting it back then as we really didn't need it.) If your parents are willing, an annual review might be helpful to them and you.

Have a good day.

Woof Woof
Great suggestions. I’ll research these options. I think an annual review is a great idea to slowly get them familiar with investment options.
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smallminnow
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Re: Investing for elderly parents

Post by smallminnow »

JoeRetire wrote: Wed Dec 08, 2021 2:27 pm
smallminnow wrote: Wed Dec 08, 2021 9:54 amShould they even look for investments? Or just leave it as is?
Have they asked for help?
If so, do they have a feel for how much risk they are willing to take on?

I'm 67, and we have a 60/40 asset allocation. But I don't need help from my children managing my finances.
And I don't consider 70 as "elderly"! :wink:
I'm more concerned about them living comfortably.
Are they living comfortably now?
They have not asked for help. But I think it’s because they don’t understand that there are safe options out there to invest. They are immigrants from a country where people typically hold cash. But I don’t think they realize holding cash in the US is not the norm.

They live comfortable for their standards. Most people would not be comfortable living frugally like they do. They seem happy.
sureshoe
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Re: Investing for elderly parents

Post by sureshoe »

smallminnow wrote: Thu Dec 09, 2021 8:05 am They have not asked for help. But I think it’s because they don’t understand that there are safe options out there to invest. They are immigrants from a country where people typically hold cash. But I don’t think they realize holding cash in the US is not the norm.

They live comfortable for their standards. Most people would not be comfortable living frugally like they do. They seem happy.
One word of advice is that if they are not actively asking for help, I'd be very careful offering it, particularly if it is anything that involves any risk - if you put them in something that loses money, it creates a bad situation.

The fact is that there are very few good options right now for getting a reliable, safe return.

One area to look at are Immediate Annuities. However, because rates are so abysmal, the return on a $300k immediate is probably around $1500 a month. The nice part is you can safely predict their income for the next 15, 20, 25, or even 30 years. That doesn't account for runaway inflation, so that risk is ever present.
hudson
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Re: Investing for elderly parents

Post by hudson »

smallminnow wrote: Wed Dec 08, 2021 9:54 am My parents are both healthy at 70 y/o. They have $400k in their checking account earning 0.1% interest. They have no debt, no mortgage, and own real estate totaling $800k. Total income of ~$5k which includes SS, rental income, and a small government pension.

Where should they invest their $400k?
Situation:
$5K per month which covers expenses
They are risk averse.
They have not asked for help.

I'm in the same age group, and I'm also risk averse.
If my children offered advice, I would politely listen and then probably change the subject.
If you dropped me in your parents' shoes today, I would instantly put $250K in an FDIC high yield savings account; that would payout $1250 per year...at today's rates.
I might put some of the remaining $150K in duration matched TIPS....I might not.

If I were you? I would congratulate them on being in excellent financial shape. I might mention in passing that there were some very safe money moves that they could make. I would stop there and wait for them to request more information. Sometimes I'll mention Bogleheads; then I'll shut up; usually there are no follow up questions. Other times I've brought up that bank X was offering great rates on 5 year CDs. I've gotten more follow up questions and compliments with that.

UPDATE...ADDITION: My suggestion to go with high yields savings and TIPS might not be a good fit for your parents because of their background. It would be a good fit if they were savvy Bogleheads.

Do they have the willingness or need to take additional risk? No

If your parents needed more income, they might be more comfortable doing real estate since they could have some experience there.
Last edited by hudson on Fri Dec 10, 2021 7:29 am, edited 2 times in total.
Robot Monster
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Re: Investing for elderly parents

Post by Robot Monster »

dogagility wrote: Thu Dec 09, 2021 6:05 am Agree with buying 10K in I-bonds/person/year via Treasury Direct.

After that, suggest investing the remainder in a single (i.e. nothing to manage), low-cost, balanced, index fund to keep up with inflation.

Two suggestions are Vanguard Life Strategy Income fund (VASIX) (20% equity/80% bonds) and Blackrock iShares Core Conservative Allocation ETF (AOK) (30% equity/70% bond).
There's also Vanguard Target Retirement Income Fund (VTINX). link

Inflation adjusted return from Jan 2021 - Nov 2021
VASIX -4.34%
AOK -2.34%
VTINX -1.82%
Cash -5.79%
link
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tennisplyr
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Re: Investing for elderly parents

Post by tennisplyr »

A number of years ago my mom was in a similar situation and thought about “helping” her. Glad I didn’t, the market dropped after that. Things seem fine, leave it alone. What if you gave advice and their assets dropped considerably….how would you feel?
“Those who move forward with a happy spirit will find that things always work out.” -Retired 13 years 😀
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