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Need advice on where best to invest
Old 02-25-2015, 01:01 PM   #1
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Need advice on where best to invest

I have lurked on this site and found the people very knowledgeable and decided to see if I could get some advice on the best places to invest.

I am 57 yrs old and at present am taking care of a parent of which I receive a monthly tax free stipend from the state. Since this money is tax free, I assume that it is not considered earned so that I cannot invest in an IRA, correct??

Presently I am invested 55% stock, 30% bond and 15% cash. It is the cash portion I am not sure what to do with. I have it all in a checking/savings account earning nothing. I really do not need all that I have in it, since my expenses are relatively low. I am looking to move about $40k and want it grow as much a possible. I was thinking of increasing my bond allocation, but that means in a taxable account since it wouldn't make sense to do tax free seeing that my only income is dividend income and that comes to about $10k/yr Am I correct on this?

What are my best options with growing this money? I would like it to be tax deferred if possible since I would like to keep my income down for the health care subsidy, but at the same time I do not want to be sacrificing as much growth as possible even if it means I pay more for healthcare.

Again, just looking for the best options.

Thank you
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Old 02-25-2015, 01:47 PM   #2
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I would need more information to comment.
  • Are you otherwise financially independent?
  • After you no longer need to care for your parent, what are you going to live on?
  • Will you then retire?
  • How much risk can you take?
  • How much income would cause ACA subsidy issues?
To reduce taxable income, I'd be inclined to look at equities. You would get dividends but could not take capital gains until the time was right financially.
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Old 02-25-2015, 01:55 PM   #3
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2B,

Thanks for your reply. I have run my numbers in firecalc and would have enough to last 25 years. When I need to no longer take care of my parent, I would look for a part time job at least.

As far as risk, I would put myself about a 5 on a scale of 1-10. I would have to start paying something for healthcare once my income hit about $16,100.
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Old 02-25-2015, 02:23 PM   #4
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You would only get about $800/yr in dividends on $40,000 of stock. That's about the same as you would get with a 5 to 7 year CD. There's more upside (and downside) to the equities.
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Old 02-25-2015, 04:37 PM   #5
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Your sort of asking the wrong question when you are looking for the best option for growing your money since that would necessarily imply investing in equities, which would increase your current 55/30/15 AA to a higher percentage in stocks and a lower percentage in cash. On the other hand, you say your risk tolerance is only 5 on a scale of 1-10 so I'm not sure if a higher equities allocation is consistent with your stated risk tolerance.

What you should do first is decide what you want your overall AA to be as that decision will derive whether this $40k goes into equities or into bonds. For simplicity I'll assume that you would not be comfortable with anything more exotic than stocks, bonds or cash.

If it ends up that you will buy more stocks, since we are trading near all-time highs, I would either wait for a dip or value average in over 10 months or so. If you decide to value average, you would initially buy $4,000. A month later, buy however much you need to to bring you balance to $8,000. A month later, buy however much you need to to bring you balance to $12,000. If there is a dip you'll be investing more than $4,000 and if there is a rally you will invest less. Repeat until the $40,000 is fully invested.

Once you have decided your overall AA then decide about how to place your investments between taxable, tax-deferred and tax-free accounts to be most tax efficient. typically, one would keep their bond allocation in tax-deferred accounts. See http://www.bogleheads.org/wiki/Princ...fund_placement for more guidance on how to do this.

While it sounds complicated, once you have things set up maintaining it is relatively easy.
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Old 02-25-2015, 07:03 PM   #6
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I suggest she keep in simple. Open an account at Vanguard and invest in Wellesley Income. Decent return in up and down markets.
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Old 02-25-2015, 07:44 PM   #7
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Invest in what you use from the time you wake up to the time you go to bed. Consumer staples, utilities, tech, oil/gas, clothing, telecom, medical. Symbols: PG, UL, GIS, KRFT, SJM, K, AVA, LNT, WR, WEC, PNY, WMB, VPU, AAPL, CSCO, INTC, MSFT, CVX, XOM, COP, OXY, VDE, VFC, NKE, VZ, T, BAX, JNJ, ABBV. Those will generate some good dividend income with above inflation dividend increases.
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Old 02-25-2015, 10:35 PM   #8
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I am not so wise as others here. Look again at pbu4ski. Depending on your level of "involvment", look for a market in the world that's not trading at all-time highs. I have not a clue if that's "out there" or not, since I'm a rebalancing robot.
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