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Looking for suggestions... Mom's Roth
Old 05-03-2013, 03:13 PM   #1
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Looking for suggestions... Mom's Roth

Looking for some advice on Mom's Roth IRA. Mom is in her late 60's, lives on her spousal social security (waiting to claim her SS at age 70 which increases monthly income about $600) and rental income (surplus of $2k each month that goes into CD savings/I Bonds) that I bought her in the 90's. No traditional IRA funds.

In the last few months, I've consolidated her accounts over to Vanguard, about $50k. She told me countless times to just take the money and enjoy it. I don't want to touch it until after she passes (in about 50 years I hope). I will just invest it and let it grow tax free. The Roth would pass onto me when she passes.

Here's the question, how should I invest it.... consider it part of my asset allocation (85% stocks, 15% bonds/cash, plus about the same value in real estate) or just do Vanguard total stock market index? or do the pssst Wellesley, or split Wellesley/Wellington, or split between large, mid, small caps? It's been sitting in a money market fund for the last several years or so. Honestly, the amount wouldn't impact my AA much at all, but I haven't spent much time thinking about it. I don't believe it would change my thoughts on FIRE for me/my family at this time.

The intent is to rarely think about it in my lifetime, if possible and pass it onto my kids in 50-60 years! Hoping it doubles every 8 - 12 years or so.

Thanks for your ideas?
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Old 05-03-2013, 03:21 PM   #2
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I would be more conservative and still treat it as your Mother's money until it is not.
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Old 05-03-2013, 03:23 PM   #3
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The way I would look at is that it's her money and she trusts you to do the right thing with it. She may need a whole lot more in later years than she does now, so stay pretty conservative.

My mom was the same way; she always said "I wish I could just give it to you so you could enjoy it." And in fact she lived on very little most of her life, by choice.

However, as she aged she needed more. First it was the cost of living in a retirement community. Then it was assisted living. Finally it was an Alzheimer's assisted living facility that was very good but very expensive.

At her request, I managed her money after my father died, for about 20 years. Fortunately, I stayed conservative and was fortunate, but when mom died at 96 (just last year) her monthly expenses were approaching $6,000. There was a little money left over for me to inherit, although I never expected to see any, but the point is that you should plan on a similar situation but hope for the best.
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Old 05-03-2013, 03:36 PM   #4
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Wellesley sounds reasonable to me. Leaving it as money market will let inflation erode it away. Note that your children cannot inherit (as an IRA) a previously-inherited IRA. Once you inherit it, the RMDs will be based on your expected lifespan. Any amount left at the time of your death will need to come out of the IRA.
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Old 05-03-2013, 04:21 PM   #5
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I have a similar situation. I manage Mom's money but SS and net rental income exceed her living expenses and she had a good LTC policy, so for all intents and purposes, it is highly unlikely that she would ever need this money I manage for her.

I manage it about the same as my own - similar AA with bonds in tax-deferred accounts to minimize the tax bite.
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Old 05-03-2013, 07:44 PM   #6
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Originally Posted by heeyy_joe View Post
I would be more conservative and still treat it as your Mother's money until it is not.
Thanks for the reply. When you say "conservative", do you mean Total Bond index? Wellesley? or short term Bond index due to the possible bubble?
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Old 05-03-2013, 07:54 PM   #7
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Braumeister - thanks for sharing and I understand your point. In my culture retirement community would be moving in with my family. This is with DW's support. While that present other challenges, my ER in the near future will balance family needs. In a few days, it'll be 26 years since the passing of my dad and I've been managing her money/assets ever since.
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Old 05-03-2013, 08:01 PM   #8
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Originally Posted by GrayHare View Post
Wellesley sounds reasonable to me. Leaving it as money market will let inflation erode it away. Note that your children cannot inherit (as an IRA) a previously-inherited IRA. Once you inherit it, the RMDs will be based on your expected lifespan. Any amount left at the time of your death will need to come out of the IRA.
I like Wellesley even tho I don't own any personally.

Thanks for the information on inherited IRA. Would it be better to pass the Roth directly from my Mom to my kids? A big given will be the kid's maturity in the future, they are too young now, but 10 or 20 years from now will give better insight, I hope.
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Old 05-03-2013, 08:09 PM   #9
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Originally Posted by pb4uski View Post
I have a similar situation. I manage Mom's money but SS and net rental income exceed her living expenses and she had a good LTC policy, so for all intents and purposes, it is highly unlikely that she would ever need this money I manage for her.

I manage it about the same as my own - similar AA with bonds in tax-deferred accounts to minimize the tax bite.
Thanks pb4uski for sharing. I feel my mom and I own a fair amount of real estate (I view as a bond in my AA) and been considering Vanguard Total Market Index fund with the Roth for her funds, but going back and forth with Wellesley, so maybe 50/50 ... thinking of doing monthly purchases over 6 months to DCA.
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Old 05-03-2013, 08:11 PM   #10
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Grandparent-to-grandchild as beneficiary is worth considering since it maximizes the tax-free value of a Roth IRA. Note that if the value of the grandparent's estate is large (about $5 million currently) the Generation-Skipping Transfer tax can be triggered and take a large bite. Some info is at http://www.smartmoney.com/retirement...ent-tax-12635/
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Old 05-03-2013, 08:24 PM   #11
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GrayHare - Thanks for the GST link. We should not get close to the $5.5M limit, but would find that a good problem to have. If we're lucky, I might have that issue for my future grand kids if we are fortunate to be grandparents, investments hold up, etc.
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