Need a plan for managing parents retirement portfolio

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tylerdurden23
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Need a plan for managing parents retirement portfolio

Post by tylerdurden23 »

Disclaimer: keeping details obscure for anonymity:

I am helping manage finances for a single person (retired mom or dad age b/w 60-65) living as part of multi-generational home. Current savings = around 75k in cash in HYSA, 7k invested in brokerage account, and 6k in Trad IRA all in index funds 80:20 stock:bond. Monthly income is around 2k from SS + pension (started withdrawing in early 60s and retired comfortably). No debt, no monthly expense of any kind - assume all taken care of by kids and will be taken care of for foreseeable future. How would you go about investing the cash. Is there even a need to if no expenses in near future? Any advice appreciated.
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Northern Flicker
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Re: Need a plan for managing parents retirement portfolio

Post by Northern Flicker »

If no expenses, then what are the goals for the assets? Investing is about meeting goals.
gotoparks
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Re: Need a plan for managing parents retirement portfolio

Post by gotoparks »

As you describe it they don't need the money for living expenses. It kind of depends on what they are investing for. I would take the HYSA and put some in Treasurys and/or CDs until it is decided if they even need to be in stocks. Most in my family don't own stocks and get by fine.
ehh
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Re: Need a plan for managing parents retirement portfolio

Post by ehh »

I assume you are investing to pay (hopefully far) future health care costs and for heirs. And taxes are not a consideration.

Convert the traditional IRA to a Roth IRA.

Move the HYSA to the taxable brokerage account.

Leave enough "cash" in the taxable brokerage account settlement fund to keep you comfortable and invest both the Roth IRA and the taxable account in either a Boglehead three fund portfolio or in an iShares Asset Allocation ETF. The Boglehead three fund portfolio requires a bit of attention and rebalancing. The iShares Asset Allocation ETF does not require rebalancing.

https://www.bogleheads.org/wiki/Three-fund_portfolio

https://obliviousinvestor.com/ishares-c ... egy-funds/

Invest the cash flow from SS and pension monthly, quarterly, or yearly - as you prefer.
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Blister
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Re: Need a plan for managing parents retirement portfolio

Post by Blister »

At some point as the person ages care in the home may no longer be possible. (Think bed ridden, incontinence, dementia, etc.) Those assests would quickly be gone with Long term care or even extra nursing assistance in the home. Sorry but it happens.
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tylerdurden23
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Re: Need a plan for managing parents retirement portfolio

Post by tylerdurden23 »

Northern Flicker wrote: Mon May 29, 2023 1:42 am If no expenses, then what are the goals for the assets? Investing is about meeting goals.
I would say the goal is to maintain the value of the assets with inflation (thus hysa account right now - i know this is temporary with higher than normal interest rates) and in the future via investing in index funds. The only "expenses" i can see are healthcare and possibly paying for vacations etc but again these are going to be mostly covered by others in the household and there health insurance via medicare for future health care needs.
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tylerdurden23
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Re: Need a plan for managing parents retirement portfolio

Post by tylerdurden23 »

Blister wrote: Mon May 29, 2023 7:47 am At some point as the person ages care in the home may no longer be possible. (Think bed ridden, incontinence, dementia, etc.) Those assests would quickly be gone with Long term care or even extra nursing assistance in the home. Sorry but it happens.
Absolutely. This is definitely a consideration but fortunately there are not many chronic health issues that make this a likelihood in the near future. Would you consider a plan towards long term care insurance etc or investing part of this money for nursing home etc as part of these funds? That is not something i have looked into much.
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tylerdurden23
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Re: Need a plan for managing parents retirement portfolio

Post by tylerdurden23 »

ehh wrote: Mon May 29, 2023 6:53 am I assume you are investing to pay (hopefully far) future health care costs and for heirs. And taxes are not a consideration.

Convert the traditional IRA to a Roth IRA.

Move the HYSA to the taxable brokerage account.

Leave enough "cash" in the taxable brokerage account settlement fund to keep you comfortable and invest both the Roth IRA and the taxable account in either a Boglehead three fund portfolio or in an iShares Asset Allocation ETF. The Boglehead three fund portfolio requires a bit of attention and rebalancing. The iShares Asset Allocation ETF does not require rebalancing.

https://www.bogleheads.org/wiki/Three-fund_portfolio

https://obliviousinvestor.com/ishares-c ... egy-funds/

Invest the cash flow from SS and pension monthly, quarterly, or yearly - as you prefer.
Yes my investment plan in accounting for future costs of healthcare etc although health issues are minimal and medicare etc will supplement some of the costs.

Curious about the reason for converting to roth ira?

My plan was along the same as yours - put most of the cash in a taxable brokerage slowly and invest in a mix of stocks:bonds that is not aggressive but still allows for growth. One question i do have is would you consider investing this along the timeline of the parent in a more "conservative" portfolio say 50:50 stocks:bonds or even more bonds or more aggressive say 80:20 stocks:bonds as the "expenses" are being taken care of by others.

With the HYSA interest rates being high right now it has made it easy to procrastinate as i know that money is not just "losing value" sitting in that vehicle for now.
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tylerdurden23
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Re: Need a plan for managing parents retirement portfolio

Post by tylerdurden23 »

gotoparks wrote: Mon May 29, 2023 5:52 am As you describe it they don't need the money for living expenses. It kind of depends on what they are investing for. I would take the HYSA and put some in Treasurys and/or CDs until it is decided if they even need to be in stocks. Most in my family don't own stocks and get by fine.
As mentioned to another response the investing goal would be to maintain value of the cash with inflation and some growth as well. The idea is that there are no expenses right now but if the others that are helping take care of parents ever run into the need to dip into any of this portion of the parents assets for the parents care it would be there for them to use (think healthcare, emergencies etc).
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Mike Scott
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Re: Need a plan for managing parents retirement portfolio

Post by Mike Scott »

First they need a goal.... Future health care costs? Fun cars? Travel? Gifts? Long term inheritance?

If there is no earned income, some sort of taxable saving/investing will be necessary. There should be minimal income taxes. Pick something in the range of 25/75 to 75/25 based on their risk and need. This may be a case where one of the single balanced funds makes sense.
Northern Flicker
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Re: Need a plan for managing parents retirement portfolio

Post by Northern Flicker »

tylerdurden23 wrote: Mon May 29, 2023 12:34 pm
Northern Flicker wrote: Mon May 29, 2023 1:42 am If no expenses, then what are the goals for the assets? Investing is about meeting goals.
I would say the goal is to maintain the value of the assets with inflation (thus hysa account right now - i know this is temporary with higher than normal interest rates) and in the future via investing in index funds. The only "expenses" i can see are healthcare and possibly paying for vacations etc but again these are going to be mostly covered by others in the household and there health insurance via medicare for future health care needs.
Stock index funds would come into play if you want an expected return that is higher than inflation, but you have to take risk of a lower return to get the higher expected return.

To just keep up with inflation, Series I savings bonds (I bonds) are a virtually risk-free way to do that. They are limited to purchases of $10K/person/per year. Up to an additional $5K can be obtained by directing a tax refund to be paid through issued I bonds, so make a January estimated tax payment to target a $5K refund.

I bond interest is deferred until they are cashed and is exempt from state income tax. I bonds cannot be cash in the first year of holding, and there is an early withdrawal penalty of a quarter's interest if cashed in holding years 2-5, but they can be held for up to 30 years.

I would suggest a $10K I bond purchase in June and in January plus a $5k I bond tax refund for 2023, which will invest about 1/3 of the asset. The remainder could be split 50/50 between cash and short-term TIPS (VTAPX, VTIP, or STIP). Then continue to move $10-15K/yr into I bonds.

An 80/20 stock and bond portfolio only makes sense to me if investing for heirs or if the retiree wants growth beyond the inflation rate, and is willing to take substantial risk to try to get it.
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Re: Need a plan for managing parents retirement portfolio

Post by ehh »

tylerdurden23 wrote: Mon May 29, 2023 12:41 pm Curious about the reason for converting to roth ira?
Nobody knows what the future might hold. If it can be done now at zero or minimal tax, why not? Given the small balance, not a big deal.
tylerdurden23 wrote: Mon May 29, 2023 12:41 pm One question i do have is would you consider investing this along the timeline of the parent in a more "conservative" portfolio say 50:50 stocks:bonds or even more bonds or more aggressive say 80:20 stocks:bonds as the "expenses" are being taken care of by others.
A traditional retirement portfolio is anything between 30/70 and 70/30 stocks/bonds. As you say, with expenses being taken care of by others, even 80/20 might be ok. Select a percentage you can live with when the market crashes. You don't want to sell stocks during a market crash.

You have a pretty long timeline to consider. Someone 60 or 65 years old and with no particular health problems might be around for a long time. Twenty-five or thirty years, no problem. With a little luck, longer!

For example, about twenty years ago, when my mother was about 75 years old, we put her investments into Vanguard Life Strategy Conservative Growth (40/60). Today she is 96 and going strong. With hindsight, we should have invested in the 60/40 option.
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22twain
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Re: Need a plan for managing parents retirement portfolio

Post by 22twain »

tylerdurden23 wrote: Mon May 29, 2023 12:10 amMonthly income is around 2k from SS + pension
So about $24k per year. How much of this are they spending? Do they have any expenses beyond what the rest of the family is covering?
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tylerdurden23
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Re: Need a plan for managing parents retirement portfolio

Post by tylerdurden23 »

22twain wrote: Mon May 29, 2023 9:08 pm
tylerdurden23 wrote: Mon May 29, 2023 12:10 amMonthly income is around 2k from SS + pension
So about $24k per year. How much of this are they spending? Do they have any expenses beyond what the rest of the family is covering?
That is correct. No spending other than discretionary gift giving, travel, and general daily expenses (shopping etc) etc. Rest of the major expense (housing, bills etc are covered). They/we all live very frugally and are just at a point where there are not many recurring expenses.
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delamer
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Re: Need a plan for managing parents retirement portfolio

Post by delamer »

With less than $100,000 in assets, nothing should be invested in stocks.

A CD or Treasuries ladder is the best option.
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