Hi All,
Much appreciate all the input I've received from the forums. My father-in-law recently asked me for investment advice. Made me happy that our relationship had grown that he actually trusted and thought enough of me to ask me. He had quite a hodge podge of assets and wanted to simplify it as he was closer to getting to retirement. He wanted to talk to me as he knew I had an interest in financial planning and he has a mistrust in general of the financial industry (probably good for him). As such he has always described himself as a conservative investor so I had always worried he was too conservative.
The other reason he wants to simplify is that he has recently been engaged and before he gets hitched wants to simplify his investment assets so he has a clear picture he can bring to his attorney to ensure that if he dies (or divorces) that his assets are protected and they would go to his kids and not his future spouse. His future spouse is on board with this plan and from my understanding is doing just fine financially.
Here are his stats:
Age: 57
Divorced 20 years ago, but now engaged
Makes around $80k/year
We didn't go too much into spending, but he is very frugal
Maxes out 401k now with catchup provision
Has 1 daughter my wife, we are very financially independent from him
Assets:
#1 - Misc 401ks with previous employers
$365k - 75/25 equity/bond mix - VERY long list of index/active managed mutual funds and stocks from previous companies he has worked for.
#2 - Short-Term Cds. Mix of Roth and taxable
$200k
#3 - 401k with current employer
$125k - Balanced Fund 60/40 equity/bond mix
#4 - Variable Annuity bought in 2001 (NOOO! wish I knew him then!)
$76k surrender value - invested aggressively in high fee funds
#5 - Current Primary Home
$250k-$300k - Plans to sell in 3-5 years. Payed Off. High cost of living area.
#6 - Retirement Home
$200k - Plans to live in retirement. Payed Off. Low cost of living area.
Overall Asset Allocation on the little over $1 million in assets (not counting retirement home which will be future permanent residence)
42% equities
33% bond/cds
25% saleable real estate
My initial advice to him was:
1. Move all those 401ks from previous employers and short-term cds to Vanguard or another low cost broker and simplify it all by purchasing 4-5 index funds (Large Cap/Small Cap/Int'l/Fixed Inc).
2. When sell house reinvest keeping in mind benefits of using different investment asset types for taxable vs. tax advantaged accounts.
3. Likely want to look into cashing out of that Variable annuity although admitted I'm no expert on variable annuities other than to know to generally stay clear from them. I believe it is in an IRA because states it is subject to 10% penalty if surrendered before age 59 ½.
Would be interested to know what people think the general asset mix would be for a person of this age, probably hoping to retire at 60, currently 57 and the temperament of a fairly risk averse investor. He would not have any trouble living on 40k a year with a fully owned home before taxes. He is also eligible for social security which would just be gravy at 65 or whenever determines he should take it. Would love any additional advice you might all have ?
Much appreciate all the input I've received from the forums. My father-in-law recently asked me for investment advice. Made me happy that our relationship had grown that he actually trusted and thought enough of me to ask me. He had quite a hodge podge of assets and wanted to simplify it as he was closer to getting to retirement. He wanted to talk to me as he knew I had an interest in financial planning and he has a mistrust in general of the financial industry (probably good for him). As such he has always described himself as a conservative investor so I had always worried he was too conservative.
The other reason he wants to simplify is that he has recently been engaged and before he gets hitched wants to simplify his investment assets so he has a clear picture he can bring to his attorney to ensure that if he dies (or divorces) that his assets are protected and they would go to his kids and not his future spouse. His future spouse is on board with this plan and from my understanding is doing just fine financially.
Here are his stats:
Age: 57
Divorced 20 years ago, but now engaged
Makes around $80k/year
We didn't go too much into spending, but he is very frugal
Maxes out 401k now with catchup provision
Has 1 daughter my wife, we are very financially independent from him
Assets:
#1 - Misc 401ks with previous employers
$365k - 75/25 equity/bond mix - VERY long list of index/active managed mutual funds and stocks from previous companies he has worked for.
#2 - Short-Term Cds. Mix of Roth and taxable
$200k
#3 - 401k with current employer
$125k - Balanced Fund 60/40 equity/bond mix
#4 - Variable Annuity bought in 2001 (NOOO! wish I knew him then!)
$76k surrender value - invested aggressively in high fee funds
#5 - Current Primary Home
$250k-$300k - Plans to sell in 3-5 years. Payed Off. High cost of living area.
#6 - Retirement Home
$200k - Plans to live in retirement. Payed Off. Low cost of living area.
Overall Asset Allocation on the little over $1 million in assets (not counting retirement home which will be future permanent residence)
42% equities
33% bond/cds
25% saleable real estate
My initial advice to him was:
1. Move all those 401ks from previous employers and short-term cds to Vanguard or another low cost broker and simplify it all by purchasing 4-5 index funds (Large Cap/Small Cap/Int'l/Fixed Inc).
2. When sell house reinvest keeping in mind benefits of using different investment asset types for taxable vs. tax advantaged accounts.
3. Likely want to look into cashing out of that Variable annuity although admitted I'm no expert on variable annuities other than to know to generally stay clear from them. I believe it is in an IRA because states it is subject to 10% penalty if surrendered before age 59 ½.
Would be interested to know what people think the general asset mix would be for a person of this age, probably hoping to retire at 60, currently 57 and the temperament of a fairly risk averse investor. He would not have any trouble living on 40k a year with a fully owned home before taxes. He is also eligible for social security which would just be gravy at 65 or whenever determines he should take it. Would love any additional advice you might all have ?