What to do with your money if you don't need it?

[jcnyc]

So was talking to my dad the other day who is nearing retirement age. Guy has been working for a few decades and never really did anything for himself which undoubtedly stems from his immigrant mentality and coming to the country with $200 in his pocket 35 years ago.

Long story short, guy has worked hard and saved more than enough financially to retire. he also has a professor's pension, combined with SS will give him well over $100k a year which is over 2x more than their current expenses.

I know expenses change and unforeseen but they're considering moving to Central America (after I introduced them to scuba diving), or back to Canada because let's face it, the health insurance expenses in the US is horrid. I just don't see them being faced with any serious expense in the future that they can't pay for (could be wrong).

Question is, what would you do with $2m of liquid assets if you don't really need to use it? He doesn't know much about markets and investing. His financial advisor keeps telling me to shift to bonds and CDs as he approaches his retirement. I think is a bit ridiculous but they probably need to abide from some script. Personally, I think he should keep that money invested in the markets; I'd pick tech myself. But I wanted to get opinions from others more experienced than myself in the matter!

 

[gauss]

Personally I'd buy a low cost passive index fund with a beneficiary of a Donor Advised Fund. Note I do not have any kids.

-gauss

 

[SecondCor521]

My father is in a similar situation. He has three kids. I will likely be in a similar situation. I have three kids.

He and I, not surprisingly, look at this question similarly: The money is primarily there as a buffer for unexpected large expenses (such as assisted living for my Dad which may be in his near future) but secondarily in priority and much more likely it will be an inheritance for our children.

One should always invest money for the purpose and timeframe that it is intended for, taking risk tolerance and other aspects of one's situation into consideration. Since he and I both have high risk tolerances and large buffers, we both choose to invest the majority of our money (and all of the part of our money we consider extra) in stocks. We probably won't need it, and our kids probably won't need it for thirty years.

In our particular case, we both like long-term-buy-and-hold total-market-low-cost-index-mutual-funds. VTSAX for me, and I'm pretty sure my Dad is invested similarly.

I don't pick sectors personally, even though I was in tech myself for my career and even though I am optimistic about it as a sector.

 

[OldShooter]

... I wanted to get opinions from others ...

I would say that you are asking the wrong question.

The first question is: What is the purpose of the money? Probably a certain chunk is to backstop their retirement, the the balance will be their estate. If so, the answer is probably to invest the estate bucket according to the needs and risk tolerance of the beneficiaries and the insurance bucket very conservatively. Possibly, too, you will manage the "insurance" amount and reduce it as the future is experienced and becomes clearer. But maybe the purpose is something else altogether. Do they want do endow a professorship or donate a building to the school? Church, charity?

Re "tech" you might get lucky, you might not. Probably you will get a wild ride either way. Personally, I adhere to the Fama/French orthodoxy and am in total US and total international funds. I'm not betting on sectors; I am diversified across all countries and all sectors. Life is very simple.

 

[Sojourner]

I know expenses change and unforeseen but they're considering moving ... back to Canada because let's face it, the health insurance expenses in the US is horrid. I just don't see them being faced with any serious expense in the future that they can't pay for (could be wrong).

These two statements seem at odds. Why would he be considering moving to Canada for their less-expensive healthcare if he has far more than enough to cover any reasonable future expenses? I could be wrong, but it sounds like maybe he hasn't sat down and really analyzed his financial situation in a realistic way. Perhaps you could help him do that to ease his mind?

Question is, what would you do with $2m of liquid assets if you don't really need to use it? He doesn't know much about markets and investing. His financial advisor keeps telling me to shift to bonds and CDs as he approaches his retirement. I think is a bit ridiculous but they probably need to abide from some script. Personally, I think he should keep that money invested in the markets; I'd pick tech myself. But I wanted to get opinions from others more experienced than myself in the matter!

My dad is a lot like yours, I think. He has never invested his money in anything other than FDIC insured instruments such as CDs and MM accounts. I cringe at the thought of all the money he's left on the table due to this extreme conservatism, and frankly, naiveté when it comes to investing. But on the other hand, I know that he's not the kind of guy who would be off taking luxury cruises or eating at 5-star restaurants every week, or doing anything of the sort if he had double or even triple his current net worth. He's very down to earth, practical, and frugal, and that wouldn't change regardless of his level of wealth.

If your dad and mine are as similar as I'm thinking, then I'd say, why try to fix what isn't really broken? Odds are your dad is very comfortable with his finances the way they are now, so why introduce any unnecessary stress or anxiety at this point? You said yourself there is far more than enough to cover all his foreseeable needs (within reason), so why not just leave it at that?

 

[Texas Proud]

I also question the health care costs.... first, you did not say how old he is... but Medicare is not expensive and from what I have seen with my mom and oldest sister it is pretty good... and not 'expensive'....


I would also bet that he could get a decent plan... probably from where he is getting his pension at a reasonable price...

So there must be something else going on than moving for health care costs.... and BTW, since you say he has 2X income over expenses he can afford even the highest deductible and OOP expenses I have ever seen with ease....

 

[FANOFJESUS]

Enjoy life and when you go give it to the church. That is what I plan on doing. I have no children. My only other option was distant relatives. But for some reason they insult all the time and expect to be placed in the will every time I see them. The church option lets me sleep real good at night. As far as his investing something simple like the Vanguard income retirement fund might work. It is 30% stocks and 70% bonds I think most people need some stocks but in his case he does not need a lot.

 

[daylatedollarshort]

He should do what makes him happy. DH and I decided loss aversion was more important than growth to us, so we invest mainly for capital preservation. Once SS kicks in, we plan to live mainly off SS, pensions, a little side income and whatever we can squeeze out of real interest rates these days. We're okay leaving the money to our kids, so they can do what they love and not have to work in windowless basement cubicles, and charity.

I also don't see why he would move if he is on Medicare, since he can easily cover any out of pocket and supplemental insurance costs here in the U.S. I would let happiness and not money be the driver on that decision given his income, assets and spending.

 

[RetireAge50]

If you don't need it spend it on wants. How about private yacht tours to scuba diving places.

 

[Car-Guy]

Question is, what would you do with $2m of liquid assets if you don't really need to use it? He doesn't know much about markets and investing. His financial advisor keeps telling me to shift to bonds and CDs as he approaches his retirement. I think is a bit ridiculous but they probably need to abide from some script.

Sounds reasonable to me. Maybe because that's almost exactly what I've done. When I retired, I sat aside exactly $2m in ladder CD's and I expect I'll never need to touch it. That was 5+ years ago and it has grown slow but steadily since then.

The rest is invested/risked/spent in the markets and things like my cars and other hobbies and life in general. I enjoy a 6 figure WR with the "other money" and if I lost it all, I still have the 2m in ladder CD's to fall back on. So it doesn't sound ridiculous to me, if he really doesn't need to use it.

 

[DrRoy]

Decide on an asset allocation and put the equity portion into a passive index ETF.

 

[Blue Collar Guy]

Enjoy life and when you go give it to the church. My only other option was distant relatives. But for some reason they insult all the time and expect to be placed in the will every time I see them.

+1 on the Church. And Hhahaha on the relatives.

 

[Blue Collar Guy]

So was talking to my dad the other day who is nearing retirement age. Guy has been working for a few decades and never really did anything for himself which undoubtedly stems from his immigrant mentality and coming to the country with $200 in his pocket 35 years ago.

Long story short, guy has worked hard and saved more than enough financially to retire. he also has a professor's pension, combined with SS will give him well over $100k a year which is over 2x more than their current expenses.

I know expenses change and unforeseen but they're considering moving to Central America (after I introduced them to scuba diving), or back to Canada because let's face it, the health insurance expenses in the US is horrid. I just don't see them being faced with any serious expense in the future that they can't pay for (could be wrong).JC ya need to have a talk with your Dad & mom. Are they risk adverse? If they are Then bonds and CD's are the answer."
Question is, what would you do with $2m of liquid assets if you don't really need to use it? He doesn't know much about markets and investing. His financial advisor keeps telling me to shift to bonds and CDs as he approaches his retirement. I think is a bit ridiculous but they probably need to abide from some script. Personally, I think he should keep that money invested in the markets; I'd pick tech myself. But I wanted to get opinions from others more experienced than myself in the matter!

JC you need to have a sit down with your parents. If they are risk adverse then the answer is CD's and Bonds. If they have some tolerance to risk then AT LEAST 25 % in equities. 500k in Vanguards VTSAX and 75 % 1.5 million in intermediate bond fund VBILX. Shame after 35 years they feel the need to leave the country that made them millionaires.

 

[FANOFJESUS]

+1 on the Church. And Hhahaha on the relatives.

It's crazy but a true story. LOL

 

[Danmar]

Well you can only spend it or give it away, now or later. Does he have any charitable causes he feels are worthy? Why not give it to his kids now so he can see it do some good.

Are you sure he couldn't productively spend more. I found lots of "worthy" ways.

Personally, I would leave it in equities if he doesn't need it but others would go the fixed income route no doubt. Depends on your risk appetite.

 

[ShokWaveRider]

I am keeping mind for a rainy "Healthcare" year. Looks like I may need it soon too.

 

[kgtest]

My father is in a similar situation. He has three kids. I will likely be in a similar situation. I have three kids.

He and I, not surprisingly, look at this question similarly: The money is primarily there as a buffer for unexpected large expenses (such as assisted living for my Dad which may be in his near future) but secondarily in priority and much more likely it will be an inheritance for our children.

One should always invest money for the purpose and timeframe that it is intended for, taking risk tolerance and other aspects of one's situation into consideration. Since he and I both have high risk tolerances and large buffers, we both choose to invest the majority of our money (and all of the part of our money we consider extra) in stocks. We probably won't need it, and our kids probably won't need it for thirty years.

In our particular case, we both like long-term-buy-and-hold total-market-low-cost-index-mutual-funds. VTSAX for me, and I'm pretty sure my Dad is invested similarly.

I don't pick sectors personally, even though I was in tech myself for my career and even though I am optimistic about it as a sector.

Sounds like we drink from the same hose. Low cost passive index funds, as boring a strategy as any, but the rewards are so great. It surely is true the more money you make, the less you work for it.

 

[jcnyc]

These two statements seem at odds. Why would he be considering moving to Canada for their less-expensive healthcare if he has far more than enough to cover any reasonable future expenses? I could be wrong, but it sounds like maybe he hasn't sat down and really analyzed his financial situation in a realistic way. Perhaps you could help him do that to ease his mind?

We're dual Can-US citizens and I assumed canada would have free healthcare for him if not drastically reduced vs the USA. I'm not too familiar with retirement healthcare in teh US at all but he told me in passing he'd have to pay something like 2k a month for him and my mom for basic coverage. Perhaps he is ill informed but I certainly am even less so!

 

[jcnyc]

Well you can only spend it or give it away, now or later. Does he have any charitable causes he feels are worthy? Why not give it to his kids now so he can see it do some good.

Are you sure he couldn't productively spend more. I found lots of "worthy" ways.

Personally, I would leave it in equities if he doesn't need it but others would go the fixed income route no doubt. Depends on your risk appetite.

I don't think he has any charities or outstanding passions he's committed to leaving his money towards. If anything, I suppose it will be left to myself and my sister but neither of us need it (although it would certainly expedite my FIRE haha).

I suppose for me, it's a matter of, might as well just grow it as big as possible in the next few decades and I know CDs and MM are not the way to get there. Currently, they have most of their cash portion in a savings account earning 1% or so which just makes me cringe.

 

[AginMS]

I have a feeling what he may save in Canadian vs US health care costs he'll more than pay for in higher taxes. Be sure he considers that before making the move.

 

[savory]

Assuming most would go to inheritance,. I would invest in a conservative lazy 60/40 or 50/50 portfolio based mostly upon the age of the children. Your folks have time to recover from market downturns and there seems to be no reason not to build in growth. I think the idea of selecting sectors would not be wise nor putting too much in CD type investments.

Perhaps putting a couple years or slightly more in living expenses in CDs would be wise as a backup.

I'm surprised to read the questioning, in this forum, about your Canadian health care opportunity. Most posts here speak about frugality at all costs. The Canadian option is one I would strongly consider since health care is a reasonable percentage of their expenses. Having said that, it is still low enough that the change in lifestyle, needs to be balanced.

 

[Ready]

Enjoy life and when you go give it to the church.

Not everyone belongs to a church. And not everyone buys into organized religion. I find this comment very odd.

 

[Texas Proud]

Not everyone belongs to a church. And not everyone buys into organized religion. I find this comment very odd.

Why Over 90% have some kind of religious background.... and you probably do too...

It is not a stretch to think that a good number leave some money to their church... so why is it 'odd'? Or should I quote 'very odd'?

 

[Blue Collar Guy]

Not everyone belongs to a church. And not everyone buys into organized religion. I find this comment very odd.

I dont this comment is "very odd". The OP asked for opinions. It was an opinion, one that the poster is going to do. Hey, we can even start a poll on it, odd, very odd or not odd. I saw polls on handkerchiefs and pens.

 

[FANOFJESUS]

Not everyone belongs to a church. And not everyone buys into organized religion. I find this comment very odd.

God has been great to me. I don't find it odd at all. In fact I am very happy about leaving the church in my will. They can do a lot of good works with the money.