Advice for Investing for 86 year old

[Ready]

An 86 year old should not have such a high exposure to equities. The FA was not doing him any favors by keeping so much in the market. If I were 86 years old I would have no more than 20% in equities, and maybe none at all.

Unfortunately we are now going through a correction, but it is what it is. You will likely have to sell equities to cover living expenses, but you will need to do some tax planning to minimize capital gains taxes.

 

[akck]

As others have pointed out, I’d be leery of the FA just because of the asset allocation for an 86 year old wasn’t appropriate. Fire him immediately and sell the funds as the tax situation allows.

 

[stephenson]

Any FA selling or even pushing front load or expensive funds should be terminated.

I see lots of FA talk on ER ...many have some major flaw like this.

If the broad financial world is like this, it may NEVER make sense to hire an FA.

Hmmm ... anyone interested in forming a pro bono FA team? Since it would not be for profit, could we avoid being licensed, etc? Maybe only do it for stressed individuals like the elderly?

 

[gerntz]

An 86 year old should not have such a high exposure to equities.

We just totally disagree.

 

[target2019]

Any FA selling or even pushing front load or expensive funds should be terminated.

I see lots of FA talk on ER ...many have some major flaw like this.

If the broad financial world is like this, it may NEVER make sense to hire an FA.

Hmmm ... anyone interested in forming a pro bono FA team? Since it would not be for profit, could we avoid being licensed, etc? Maybe only do it for stressed individuals like the elderly?

I look for new threads like this. I'm interested because in-laws fell victim to the FA thing.
I think most of the posts in similar topics are very much like pro bono work. Sometimes hard to see this if the number of posts is long, though.
Great idea!

 

[target2019]

An 86 year old should not have such a high exposure to equities. The FA was not doing him any favors by keeping so much in the market. If I were 86 years old I would have no more than 20% in equities, and maybe none at all.

Unfortunately we are now going through a correction, but it is what it is. You will likely have to sell equities to cover living expenses, but you will need to do some tax planning to minimize capital gains taxes.

For a rule-of-thumb, I'd start with a range of equities, something like 20-40%. Then tune it based on specific individual factors.
For an 86-year old, 50% growth stock fund with up-front load is something state authority would be interested in. I would like to believe that the OP can get back some money after filing complaint.

 

[Octogirl]

+1 No suggestions but want to follow this thread for my 90 yer old MIL

 

[GravitySucks]

Following.
85 yr old DM is getting a buyout of her retire health insurance benefit. It's going to generate a tax hit this year, and I need to invest it so she can purchase Medicare supplemental. I was thinking straight cd/bond ladder but now think a small stock addition might be wise for in case she holds on for another 15 years.

 

[clifp]

With respect to what assets he has in a taxable brokerage account through his FA, here is what he has (percent of total in brokerage account):

Money Market (15%)
POGAX (65%)
JAMCX (14%)
PHYIX (11%)

In addition, FIL pays .5% AUM.

I looked up the funds and they appear to be funds that required a sales fee to purchase and all have higher than average ERs. I can't tell from the brokerage statements if those fees were paid, they are not listed in what I have.

Now FA wants to move funds to a new brokerage account and will advise on which funds to move to. FA says the move is to a better service provider for accessing monies to direct pay nursing home. I don't want to move to any new funds until the funds are first identified and we can assess them. I'm not sure there is any advantage to paying more fees to own actively managed mutual funds...

I agree with you and the consensus first thing is to fire the FA, way to much stock exposure for somebody with modest assets at 86 years old.

That being said POGAX isn't a bad fund at all. Morningstar has at 4 stars and its beat the S&P over 3,5,10, and 15 years and expense are less than 1% and its risk is comparable to the S&P 500. JAMCX isn't nearly as good.

My mom short exposure with a FA resulted in her also owning the bond fund PHYIX, it was a small amount of money so I've held on to it because I didn't have the basis information for tax purposes. I guess Putnam must be handing out free toaster to FA who put their clients in it.

Unless the brokerage charges big fees for selling the mutual fund I'd keep the funds there and be aggressively selling both JAMCX, and POGAX, but not so much that you owe a lot of taxes.

Here is a bit of good news. We moved my mom to a nursing home a couple of years ago and to a memory care unit this year. We are also paying about $8K a month. We got a letter from the nursing home saying that about 40% of the cost of nursing is treated as a medical expense. It is hard to qualify for an itemized medical deduction since Medicare takes care of a lot. But for a full year that's roughly 40K in deductions which will allow you to sell a lot of his stock funds with no capital gains tax.

 

[Spock]

the conversation reminds me of when my uncles managed Grandma's assets when grandma went into a nursing home in her 80's. Grandma had a then sizeable sum from selling the family farm... something just under 400K.
Apparently my uncle wanted to make sure there was money left after paying for the nursing home so he "invested it"... in pay phones with a 14-20% annual return... you can google the scam for yourself. This is back when there were commercials for cellphones showing somebody sneezing a payphone before hanging up and the next user "getting an earful". The live savings were never seen again.


So my equity allocation for an 86YO would be 0%. The needs for the funds are immediate and its just a matter of time before they are spent and medicaid takes over.

 

[Huston55]

I agree with you and the consensus first thing is to fire the FA, way to much stock exposure for somebody with modest assets at 86 years old.

That being said POGAX isn't a bad fund at all. Morningstar has at 4 stars and its beat the S&P over 3,5,10, and 15 years and expense are less than 1% and its risk is comparable to the S&P 500. JAMCX isn't nearly as good.

My mom short exposure with a FA resulted in her also owning the bond fund PHYIX, it was a small amount of money so I've held on to it because I didn't have the basis information for tax purposes. I guess Putnam must be handing out free toaster to FA who put their clients in it.

Unless the brokerage charges big fees for selling the mutual fund I'd keep the funds there and be aggressively selling both JAMCX, and POGAX, but not so much that you owe a lot of taxes.

+1 on the overall advice.

POGAX is the best of the lot but, not sure its Net return would have beat a simple S&P500 index fund, net of the 5.75% sales load and ~1.0% ER. A quick calc shows it very close, in which case the passive index fund is better; but, that’s hindsight.

Here is a bit of good news. We moved my mom to a nursing home a couple of years ago and to a memory care unit this year. We are also paying about $8K a month. We got a letter from the nursing home saying that about 40% of the cost of nursing is treated as a medical expense. It is hard to qualify for an itemized medical deduction since Medicare takes care of a lot. But for a full year that's roughly 40K in deductions which will allow you to sell a lot of his stock funds with no capital gains tax.

This is an important bit of info for all of us to remember.

 

[Hermit]

Any FA selling or even pushing front load or expensive funds should be terminated...

I agree with you and the consensus first thing is to fire the FA, way to much stock exposure for somebody with modest assets at 86 years old...

I vote for the terminated over firing.

 

[gerntz]

Here is a bit of good news. We moved my mom to a nursing home a couple of years ago and to a memory care unit this year. We are also paying about $8K a month. We got a letter from the nursing home saying that about 40% of the cost of nursing is treated as a medical expense. It is hard to qualify for an itemized medical deduction since Medicare takes care of a lot. But for a full year that's roughly 40K in deductions which will allow you to sell a lot of his stock funds with no capital gains tax.

I presume you know medical expenses need to exceed 7.5% of AGI in 2018 before you can claim any below that & that it increases to 10% in 2019.

 

[Huston55]

Here is a bit of good news. We moved my mom to a nursing home a couple of years ago and to a memory care unit this year. We are also paying about $8K a month. We got a letter from the nursing home saying that about 40% of the cost of nursing is treated as a medical expense. It is hard to qualify for an itemized medical deduction since Medicare takes care of a lot. But for a full year that's roughly 40K in deductions which will allow you to sell a lot of his stock funds with no capital gains tax.

I presume you know medical expenses need to exceed 7.5% of AGI in 2018 before you can claim any below that & that it increases to 10% in 2019.

Still a significant deduction. If, for example, his DM had $40k income ($1M x 4%), she’d still get $34,400 in deductions ]($8k x 12 x .40)-$4k]. And, at 50% gain, she could cover ~$70,000 in stock fund sales.

 

[Running_Man]

A 15-17 % initial annual withdrawal on a 280K portfolio will provide 8 years of withdrawals if you earn 7% annually over inflation each year. Any decline would reduce the time by several years even if it averages 7% over the 8 year period.

Zero return over inflation will last 6-7 years. KG Test's portfolio recommendation is extremely risky for a 86 year old with a withdrawal rate that high. A single 20% decline in the portfolio in years one or two drops the portfolio to lasting only 5 years IF the portfolio earned 7 percent over inflation the following years.