advice for my MIL

[WM]

My Father-in-law passed away recently, and my MIL will be receiving $50K from a life-insurance payout that we need to figure out what to do with. She has not dealt much with the family finances, and knows nothing about investing, and is happy to get suggestions and advice. So what to tell her??

She has no other savings, but also no other debt, no mortgage. She doesn't expect to need the money until 3-4 years from now, when she will retire and possibly move to be nearer the grandkid. Or, she may not even need it then, depending on how her expenses settle out these next few years while she's working. From what we can see, it looks like she'll have nearly $1000 more in income each month than expenses, which she can use for larger expenses like the property taxes, large home repairs, etc., and save any that's left over. At retirement, she will be getting enough in SS and pensions to cover her currently modest expenses.

My idea is to put the $50K in a savings account or money market for a few months while her expenses settle out, just to make sure we know where she's at, and then put some or all of it into something like a Vanguard Target Retirement fund and leave it alone till she needs it.

Thoughts on this?

[d]

Quote:

put the $50K in a savings account or money market for a few months while her expenses settle out, just to make sure we know where she's at, and then put some or all of it into something like a Vanguard Target Retirement fund and leave it alone till she needs it.

i concur, but would specifically suggest vanguard mm prime so it's ready to use or move as the situation warrants. this seems like a very good case where you want to keep it simple.

[Brat]

Agree. She should park it where she can get at it easily if need be and where it will earn decent interest. Maybe put $40Tof it in a 6 mo CD if that would help her earn a smidgen more. I think she should park it there for a year or two. After that the family financial folks should lay out some options for her.

Widows are shark bait, please remind her of that. The advantage of a CD is that she will be less inclined to spend it.

[Moemg]

I totally agree with Brat's advice not only are we widow's shark bait but are minds are wacky for at least a year.I gave away a lot of things including money that year (well meaning people and not so well meaning people will ask you about his tools ,etc.Tell her to say I'm not ready to part with anything and then do not until a year has passed ).

[bbbamI]

The money market sounds fine to me. But, didn't you say that creditors might be a problem with FIL's past debt? Would her money be safe in a bank, or would she have to put it in a particular account to be protected?

[WM]

Thanks for the thoughts.

Didn't realize Vanguard had a mm, that is very appealing since it could let her keep everything in one place if she wants. The CD's might be appealing to her also, although she may be nervous about not having access to the money, even though I can't imagine she'd need it.

Yes, we are dealing with a lot of outstanding CC debt from my FIL, but MIL is not legally responsible for it, so that won't be a consideration as we decide what to do with her money. I'm sure the creditors will be harassing her, but his estate was insolvent so they really have no claim whatsoever, and she knows this. FIL never let her have control over the finances, so she feels absolutely no responsibility for his debts.

That's a good idea to remind her that she will probably be getting a lot of solicitations. That I can see, she is not of a mind to start giving anything away, and definitely feels concerned about hanging onto any money she can, since she is "starting over" financially. But reminders never hurt, and I can certainly believe that there will be moments of wackiness


Edit - forgot to ask, is it worth trying to do a Roth or traditional IRA for her? She is 62, and her income will be lower in a few years when she retires.

Second edit - when moving the money from the MM to the mutual fund, should we dump it all at once, or DCA?

[d]

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is it worth trying to do a Roth or traditional IRA for her? She is 62, and her income will be lower in a few years when she retires.

it would seem so

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when moving the money from the MM to the mutual fund, should we dump it all at once, or DCA?

i expect that would depend on what the market is doing at that time, and her comfort level.

[FinanceDude]

I'll agree on the waiting for awhile to get rid of things idea. My sister passed away on August 30th of last year, and I have yet to deal with about 75% of her stuff. The easy part is the momentos and pictures and things, but the hard stuff is the "non-heirlooms" she had.

As far as the creditors go, good luck.......... :P :P First of all, I would get your MIL an UNLISTED phone number ASAP. Regardless of her right not to pay, they will hound you incessantly and call at all hours between 8:00am and 9:00 pm 7 days a week........I should know, I have been enduring this myself for the last 5 months.

The CD and/or money market fund sound like a good idea.

[kcowan]

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Originally Posted by FinanceDude ...As far as the creditors go, good luck.......... :P :P First of all, I would get your MIL an UNLISTED phone number ASAP. Regardless of her right not to pay, they will hound you incessantly and call at all hours between 8:00am and 9:00 pm 7 days a week........I should know, I have been enduring this myself for the last 5 months.

Check with her telco. Ours offers a Do Not Disturb feature that allows you to enter the numbers you want to answer and everything else is directed to voicemail. This might be better than trying to remember to tell everyone about the new unlisted number. It would be worthwhile afterwards as well to avoid telemarketers.

[WM]

Quote:

Originally Posted by kcowan Check with her telco. Ours offers a Do Not Disturb feature that allows you to enter the numbers you want to answer and everything else is directed to voicemail. This might be better than trying to remember to tell everyone about the new unlisted number. It would be worthwhile afterwards as well to avoid telemarketers.

Interesting - haven't heard of this, but maybe it would be a good compromise. We talked about her options with the phone, and she didn't want to switch her number unless it got really bad. They have had creditors calling at various times over the years, apparently, so it's not completely new to her. The plan for now is to see how bad it gets - the CC companies just found out in the last week or so that they're not going to get paid.

If we do an IRA, is a traditional one better, or a Roth? Normally I'd say traditional, but then she'll be stuck with the required withdrawals whether or not she needs the extra money. She will be in the 25% tax bracket with or without the deduction.

[Brat]

You can't fund an IRA of either type unless you have income. It is my understanding that you can withdraw the principal of a Roth without penalty. The finance folks on the board are more reliable sources on withdrawal options.

One advantage of funds in an IRA is that it is protected from creditors.