Investment Advice for Elderly Friend

[km4hr]

Thanks again for all the good information. I knew I'd get some "been there and done that" advice instead of the "broken record" that you hear from the financial pro's who often just repeat what they were trained to say; things like, "asset allocation", "diversity", etc, etc.

Some of you recommended my friend just stay with the plan that was already in place. That is, continue purchasing US bonds. That's not a bad idea. They do have a Treasury Direct account. But just so you'll know, that plan was the husbands plan, not my friend's. She had virtually no input into the family investments and didn't want any. It's not her thing. Her heirs aren't much better informed about investments either. That's how I got into the picture I think. If she had some idea what to do she wouldn't be asking me. I don't think she cares so much the type of investment I recommend as long as it's "safe". She doesn't know anything about the nature of bonds versus stocks, for example. The Bernie Madoff investment story is the what she knows about. And that's what she fears.

As far as risk is concerned she doesn't have a realistic concept of what risk means. She thinks of risk as "losing it all" I believe. As far as fluctuation in market value is concerned, she wouldn't relate to that. To her, the "market" is a high-class word for the grocery store.

Thanks again for the interesting discussion. I've been keeping up with all of it.

 

[Kroeran]

Has someone already mentioned the death tax? I think the main focus should be on positioning the estate for transfer to heirs, after making sure she has bought every possible type of insurance for long term care etc.

The other risk to consider is inevitable dementia. Who has financial power of attorney? It should be the kids together. The other issue is how will this play out in terms of family unity after her death and making sure it is handled fairly.

if she is pointed to a financial advisor, please let it be a fee only advisor, and not one of these shoe salesmen graduates who took a 3 month financial course. Make sure the kids go along with her.

hows this for an idea. Cut away 100K and put it under joint management of the kids. See how they do. Give them a chance to screw up with small dollars and know what that feels like. Tell them the pot they manage will be added to subject to performance.

Gosh, if she is 80, the kids must be in their 50s.

 

[haha]

One possibility is to buy CDs via a broker like Schwab.....

Another possibility (and IMO the best) is to kick the ball on over to her kids or heirs.

Ha

 

[freebird5825]

Another possibility (and IMO the best) is to kick the ball on over to her kids or heirs.

Ha

There's a lot of wisdom in this. Home cooking is often best, so if the roast burns, there is no chef to blame.
Tread carefully.

The lack of interest and experience with investing from both the 80 yo lady (and kids) is disturbing. I saw this myself with a family. With the exception of 1 heir who specifically asked me what to do, the rest of the beneficiaries did exactly what the father had done. They all signed right up to continue paying management fees and most likely continued portfolio churning on a per transaction commission basis.
I offered options and did a lot of teaching and hand holding, but never exact investment directions.
That 1 heir who solicited my advice is very happy I helped out. YMMV.

 

[Kroeran]

The lack of interest and experience with investing from both the 80 yo lady (and kids) is disturbing..

I think the natural order of things is that maybe 3% of the population have the mental hardware and emotional discipline for serious investing, and the rest are sheep led to the financial slaughter.

old money is a rare thing indeed.

 

[bd68]

Agree with some of the others. I would stick with treasuries and CD's (which I view as essentially equivalent to treasuries from a "risk" perspective). It is unlikely someone of her age and investment experience will truly understand and accept valuation changes in even a bond fund (If my parents are any example...I explained it dozens of times but I still hear about it when the statements come!) Sure, in the treasuries she has the risk of buying power erosion from inflation but that is unlikely to upset her as much as a decline in value on her statement.

I think your advice regarding a Vanguard consult would be perfectly suitable for someone much younger with a lifetime of savings ahead of them instead of behind them.

bd68

 

[FinanceDude]

The lack of interest and experience with investing from both the 80 yo lady (and kids) is disturbing.

Not that uncommon, most folks spend 6 times as much time planning their annual family vacations as thinking about retirement.........

I offered options and did a lot of teaching and hand holding, but never exact investment directions.
That 1 heir who solicited my advice is very happy I helped out. YMMV.

I have seen more than one sibling get sued by another based on 'teaching and free advice", best to tread very carefully.......

There's a reason I have E&O insurance that I spend $1800 a year on......

 

[FinanceDude]

I think the natural order of things is that maybe 3% of the population have the mental hardware and emotional discipline for serious investing, and the rest are sheep led to the financial slaughter.

No, actually 99% of folks out there have the MENTAL hardware, only 3-10% have the EMOTIONAL discipline........