A humbling plea for advice

[modhatter]

Sorry if this is long, but hard to write your life’s story in one or two paragraphs. So, if you could render some opinions, I’d like to hear what you might think a New Portfolio for someone like me at this juncture in my life would look like. I am 67 yrs. old (and not in good health) My investment will all be in a taxable accounts, as I started an IRA late in life and my money comes from Real Estate investments sold. As mentioned before my only other source of income is from social security. So I need income. I especially need income for my son when I am gone as he has some disabilities and doesn’t work, but not eligible for disability cause of income from me. (plus a little of his own about $250,000 from his father’s death) He is 29 yrs. old for the record.

My introduction into the stock market in Dec 07, has left me a little shell shocked and immobilized and afraid to lose more, so I am having a difficult time deciding what to do. I have to make this money last for a very long time, and still be guaranteed income for him, which is not an easy feat. I am shying away from advisors at this point, and would like to come up with something myself, and then leave instructions for my son to see a “fee based” advisor that would help him do whatever rebalancing is needed each year.

I invested $500.000 with an advisor just before the market crash, of which $250,000 was lost in bankruptcies. The remaining money (now around $300,000) is in very high risk preferred stock and a couple of bonds. A good number of these securities are still down 50 -60%. They are generating about $30,000 (before advisor fee- so net about $27,000 a year in income if there are no more bankruptcies)

I invested myself another $170,000 in income producing stocks, some preferred stock, MLP’s, utility stocks, with a smattering here and there of some other decent large cap dividend stocks. That is generating about $9,000 a year. I am down about $4,500 on that mix of stocks to date. Besides this, I have about $900,000 in cash left. I want to keep about $300,000 liquid in CD ladder and money market, so that leaves me $500,00 left to invest.

I would still need more income for my son to live on after I’m gone, maybe $10,000 more, as the money with the advisor is shaky. On the other hand, they may recover over time. Who knows? So I figure I have my high risk, high income pool so I must be careful with the remaining, and yet have some additional income and growth potential.

That Is why I gravitated to dividend stocks myself for safety with the possibility of some growth. The CD and Money Mkt funds right now are so pitiful, that the amount of income from them at this juncture is negligible.

I still have a small house in Phoenix, Az. that needs to get sold, but the market there is the #1 hardest hit market in the country. (up to 60% losses) So that house will probably only to sell for $150,000. About what I paid for it 12 years ago and I have put considerable money into remodeling as well.

So there you have my life story laid out bare before you. (a little humiliating) But I have been reading this board for a couple of years now, and I know there are some intelligent investors on here. Sooooo…….. What would you do in my shoes? (Besides telling me to fire the advisor. I know one of you will say that)

 

[LOL!]

If I were in your shoes, I would go read and ask for advice on the Bogleheads forum.
Here are the links:
Bogleheads :: View Forum - Investing - Help with Personal Investments
and be sure to read this before asking for advice there:
Bogleheads :: View topic - Asking Portfolio Questions

 

[crazy connie]

You say your son is disabled, sorry for him and you. If possible please expand on that if you would please. To me and perhaps others who might offer guidance I would say it depends on his abilities as to our suggestions. If he is capable of making good decisions then I might suggest a trust with the funds. If he is incapable mentally then a paid off home in a trust with an annuity might be appropriate.

 

[F-One]

We have a disabled adult son also. I think settling the current and future issues in regards to your son will help alot in determining the options for your assets.

I strongly suggest you find a lawyer in your area with expertise in Social Security Disability/Medicare/Medicaid law who knows the options to get your son eligible to receive SSDI either now or later. I know there is a Supplemental Needs Trust option that can be set up to assist your son but should allow him to qualify for SSDI/Medicaid.

 

[W2R]

For investment advice I would echo the suggestion of getting help at the Bogleheads' Forum, given by "LOL!" above.

Also, like many of us you need to read and educate yourself on investing. The Bogleheads book list is a great place to start.

It would be nice if one could just go to an advisor, or to a message board, and get the best financial advice. But really, nobody in the world cares as much about your money as you do and the same is true for all of us. It is unfortunate but true that even people like me who originally had zero interest in investing and thought we couldn't ever figure it out, have had to educate ourselves and learn as much as we can in order to protect our assets.

Here is a plan of action:

(1) It doesn't take long to read a book, so read one from the Bogleheads book list that appeals to you. I would suggest that you start with The Bogleheads' Guide to Investing by Taylor Larimore, Mel Lindauer, and Michael LeBoeuf.

(2) Then read a couple of other books on the list that interest you. I would suggest The Four Pillars of Investing by William Bernstein and All About Asset Allocation by Rick Ferri.

(3) Then try to figure out a tentative asset allocation and a financial plan on your own, as an exercise or "homework". Go to the Bogleheads Forum as "LOL!" suggested and bounce it off of the experts there. Discuss it. See what YOU think of their advice, based on what you have learned from the books. It will probably be terrific advice, but remember, you need to evaluate everything you read or hear yourself. We all do.

 

[modhatter]

My son suffers from a form possibly Schizoaffective Disorder, or bipolar 1. (the doctors think) He has only had two dilusional episodes in the past four years, lasting about 10 days each. Most of the time he appears normal, but has bad memory problems, and has never been able to hold a job, bucause of his inability to follow directions. He suffers from social anxiety and spends most hours in his room playing games or sleeping, has no friends or a girlfriend. I have tried everything to change this to no avail. We have an appointment to see a new doctor this week. So his functioning level is mixed and hard to describe. He can live on his own (bit in sqialler), drive, go shopping, cook some, but won't get his mail, pay his bills, make doctors appointments etc., or maintain a job. He has no head for finances, can't balance a checkbook, but can write a check. So where does that put him? He obviously will need someone to handle finances for him.

When I know I am getting close to leaving this world, I will most likely be forced to hire someone to handle his finances and appoint a trustee. But until such time, I don't want to pay for such until it is needed when I go. I have taken care of all the priliminary paperwork and set up a Living Trust and have all my assets in them that which gets passed on to him when I'm gone.

And to Want to Retire: I have read many books. Too many perhaps, as each one seems to have a somewhat different philosopy, though I didn't read the first one you mentioned. I just wanted some suggestions at some Vanguard funds to look at with my objective in mind. I am not going to run out and buy everyone suggested. I will look at it a scrutinize it. When I look on there site, there are a multiple of them and reading about each one of them will take a very long time, and since quite a few of you are in Vanguard funds, thought you might be able to make a few suggestions.

I will look at the site you mentioned to me. Appreciate the link.

BUT, I think I need to get into the stock market now, or at least by Sept or Oct if we experience any sort of dip, and would like to have a plan of what to buy. I was going to open an account at Vanguard. My other two accounts I now have are are Fidelity and Ameritrade. I may wind up moving my Ameritrade account over to Fidelity, cause I don't relish having three different accounts.

I am inclined because of my situation with my son to lean toward funds that have some management and balancing on their own, just to be on the safe side. That's one reason for appeal of Wellsley and Wellington, but I know there are others. Of course looking back, I wish I had
the courage to invest what I had when everything was in the toilet, but as mentioned, I had already sistained such losses, I was scared to death.

So to answer your question, I will have to appoint a trustee, to handle investments when the time comes, and to make sure his bills get paid, in particular his health insurance premiums and taxes.

 

[Martha]

You can set up trusts now, with you as trustee and someone else or some institution as successor trustee. If your son turns out to be eligible for SSI (which would give him medicaid), then you could set up a trust as a special needs trust. However, you may have too many assets for that kind of trust to work. Talk to a lawyer about that. You never know when your life may end so it makes sense to set up the estate planing and trusts now and look at what options there are for a trustee to pay his expenses and manage the money.

As far as investment funds, do what works for you now. Funds rather than individual stocks and bonds make sense. The trustee who would manage the assets after death or if you become incompetent would take care of choosing what is appropriate at that time or continuing what you have.

I am sorry about your son. It is tough to know that you have to plan for his care after you are gone.

 

[LOL!]

You can purchase Vanguard ETFs in your brokerage accounts. Both Fidelity and TDAmeritrade charge $10 per trade. Some of the recommended ones will be VTI, VEU, VBR, VSS (all stock funds) and BND (bond fund ETF).

You can purchase Fidelity Spartan Index funds for no commission as well.

So those are the suggestions, but by themselves, I don't think that's very useful advice.

 

[W2R]

And to Want to Retire: I have read many books. Too many perhaps, as each one seems to have a somewhat different philosopy, though I didn't read the first one you mentioned. I just wanted some suggestions at some Vanguard funds to look at with my objective in mind. I am not going to run out and buy everyone suggested. I will look at it a scrutinize it. When I look on there site, there are a multiple of them and reading about each one of them will take a very long time, and since quite a few of you are in Vanguard funds, thought you might be able to make a few suggestions.

I am so glad to hear that you have read many books! I didn't mean to be insulting - - I couldn't tell how much you know, or don't know, and thought that would be a good starting point.

As for funds I am 61 and about to retire in November, and I have VTSAX, VFWIX, VWIAX, VBMFX, VFSTX, VMMXX, and a teeny bit of VWNDX and VEIEX, plus 100% G Fund in my TSP (=401K). All but the last one are Vanguard funds. But like "LOL!", I am not sure that the list of funds will do you much good.