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Investments for 86 year old
Old 01-30-2014, 05:16 PM   #1
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Investments for 86 year old

My MIL is 86. Soon, she will be going into a retirement (not nursing or assisted living) home, and has enough money to last about 10 years.

All of her money is currently in MM or short term CDs. She is looking for advice on how to change her AA for the next ten years, at which point the money will be gone.

Off the top of my head, I'm thinking of short term CDs for now and perhaps some 5 year ones in a ladder, in a year or two if interest rates start to move up. But that's a very basic idea, I suspect you folks can come up with something better....

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Old 01-30-2014, 05:27 PM   #2
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I would think at this point if that is the amount of money she has she should invest 1/2 in a lifetime immediate annuity. At her age she should get 14% or more of the amount invested per year. If she had 300K and was needing 30 K per year investment of 150K should get her at least $21,000 per year. I would then place 50K in short term bonds or a CD ladder for the next 5 years and leave the remaining 100K in a 25/75 Stock/bond investment. Numbers could be adjusted for actual portfolio but that is what I would reccomend

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Old 01-30-2014, 05:40 PM   #3
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Running Man has great ideas........I'd implement his plan although you mlght want to change some of his percentges as little, based on her health and yearly financial needs.
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Old 01-30-2014, 05:54 PM   #4
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She needs about 25k/year from her investments, plus her SS and pension, to cover the cost of the retirement home. If she buys a big enough annuity to cover her known costs, that will leave only a small cushion for unknowns. If she skips the annuity or annuitizes only part, then she has a bigger cushion but there is a predictable date for running out of money somewhere around the ten year mark.
She is healthy for her age and longevity runs in her family.

Of course, the RH costs may rise quicker than expected and that could kill the annuity plan. By the time we figure that out, it would be too late.

As much as I prefer to avoid an annuity, that might be the better move for her. We do not expect or desire any kind of inheritance from her.

Further suggestions?
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Old 01-30-2014, 05:59 PM   #5
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Without knowing the amount she has saved, it is difficult for us to know what rate of return you need to achieve. If 3% is good enough then maybe CDs are fine. If you need more, perhaps some exposure to equities? It can't hurt to look at annuities, but there is a good chance there will be money left over that will end up with the insurance company if you go this route.

If you invested in equities, and they lost money, could you loan her some money while waiting for the equities to bounce back?
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Old 01-30-2014, 06:00 PM   #6
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Hi Jim,
I gather from your question that the amount of money she has is not large, so I'm in the immediate annuity camp, too. This way she'll never run out of money. Here's a primer on immediate annuities: Immediate Annuity Basics - What to Know Before You Buy

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