90 yr old's savings.

[ToneGod]

We took over my mother in laws finances and will convert her 60k savings to brokerage acct. It stays level as the RMD goes in and she withdraws monthly.
Looking for suggestions.Two thoughts ... 50k in 10yr CD and 10k in 1.4% MM.
OR ... mix up a few gems like T, CNLPL or reits for some more yield. P.S she is healthy and still in her home. Thanks for any help.

 

[JoeWras]

I wish I had put my Dad (85) into Wellesley earlier.

My suggestion, put 1/2 in cash, MM, etc. Put the other in Wellesley. That gives you this exposure:

50% - FDIC secured cash
30% - Bonds
20% - Equities

For the cash, I wouldn't bother with 10yrs. Why not 3yrs? You can find 3% these days.

Wellesley yields 3.3% through some nice diversity in bonds and stocks. T is enticing for yield, but single risk. It isn't a sin to have 20% equity exposure for a 90 year old. Wellesley gives you some equity diversity with a tilt towards high yield.

 

[youbet]

Without knowing how the IRA that generates the RMD's is invested, making suggestions is difficult. It would also be helpful to know her spending requirements in general and whether emergency funds already exist. What other sources of income exist?

More clues please.

 

[ToneGod]

IRA is a 1/3/each AGDCX,MDIV, JIPCX. Thats all she has. Budget out of savings 500/ month.
ira is small under 100k plan on tweaking that too. Its quirky I think. Bank obviously doesn't care much. We'll change that too. Don't understand how you can say Wellesley will do 3.3 looking at past performance. It could do 5 but we don't really know do we? These are new times. At some point Ill start a new thread regarding her IRA, Thanks.

 

[JoeWras]

IRA is a 1/3/each AGDCX,MDIV, JIPCX. Thats all she has. Budget out of savings 500/ month.
ira is small under 100k plan on tweaking that too. Its quirky I think. Bank obviously doesn't care much. We'll change that too. Don't understand how you can say Wellesley will do 3.3 looking at past performance. It could do 5 but we don't really know do we? These are new times. At some point Ill start a new thread regarding her IRA, Thanks.

Yield does not equal total performance.

You mentioned T's yield so I responded to that. T has plenty of price downside risk.

 

[ToneGod]

So Wellesley is dividend yield?

 

[JoeWras]

So Wellesley is dividend yield?

Wellesley is a Vanguard managed balanced fund, with a 65% bond vs. 35% equity ratio.

The SEC quoted yield of 3.3% includes both elements.

Of course, this fund is not without risks and this year it has been flat.

I think I a lot depends on your MIL's health. It is not unusual these days to expect a 90 y.o. to have 10 years more life expectancy. I think you are right to be very conservative with a tilt to fixed instruments. I offer this idea up (and it is just one idea) to expose a portion of the portfolio to some risk and reward for the longevity element.

From Vanguard:

This 40 year-old, income-oriented balanced fund offers exposure to stocks and investment-grade bonds. Balanced funds typically offer a higher allocation to stocks; however, this fund is unique in allocating about one-third to stocks and two-thirds to bonds. The fund’s stock holdings are focused on companies that have historically paid a larger-than-average dividend or that have expectations of increasing dividends. This focus may provide a higher quarterly income distribution than non-income-focused balanced funds. Investors with a medium- or long-term time horizon who have a goal of steady income and who are willing to accept modest movement in share price may wish to consider this fund as a core holding in their portfolio.

 

[ToneGod]

Didn't realize the dividend. I thank you. It seems a good Idea. so For Bonds ... individual inv. grade corporates? or a fund.

 

[JoeWras]

Unless you can build a ladder, a fund works best. MIL doesn't appear to have enough for a decent ladder.

A fund is much more liquid.

Although a fund may show a drop in value, you still face the same price risk with individual funds if forced to sell, and in an illiquid way. The "steady price" of an individual fund if you hold to maturity is somewhat an illusion... if you have to sell (death, need the money, etc.)

 

[PatrickA5]

I'm not sure a 90 YO needs a brokerage account for $60K. I would probably just open a high yield bank account (Ally?) and put some money in a MM and the rest in a few CD's.

 

[Spock]

SSA life expectancy table for somebody 90 years old is 4.76years.
A 10 year CD sounds out of wack when 1 year of a nursing home will swallow the entire savings.

 

[pb4uski]

I would plunk it in Wellesley and arrange an automatic monthly redemption to her local bank account... KISS. Did that for a 90 yo friend a couple years ago and she is pretty happy with it.

 

[jazz4cash]

I don’t get the 10 yr CD at all. Rates are rising and 10 yr doesn’t pay enough vs shorter maturities. Would the interest alone be sufficient? A balanced fund and MM seems more practical.

 

[HI Bill]

$60K<1 year in a care facility. I'd just roll it into a money market account like VMFXX. Too short of a time horizon, most likely, to be concerned with anything other than keeping up with inflation, and no time to recover from any downs, even in bonds.

 

[VanWinkle]

I would plunk it in Wellesley and arrange an automatic monthly redemption to her local bank account... KISS. Did that for a 90 yo friend a couple years ago and she is pretty happy with it.

+1 on this. I just did this for 2 new retirees who wanted a conservative investment that they could realize monthly income. They have limited income(SS only) and keep a money market cushion for emergencies.

 

[walkinwood]

$60K<1 year in a care facility. I'd just roll it into a money market account like VMFXX. Too short of a time horizon, most likely, to be concerned with anything other than keeping up with inflation, and no time to recover from any downs, even in bonds.

Exactly!


What's the aim here? Does she need more of a return than she'd get in an FDIC insured savings account? or a 1 year CD?


Liquidity and absolute preservation of capital should be the aim since her cash flow meets her current needs. Move the funds if you can save on fees, but otherwise why take the risk?

 

[DrRoy]

Interest rates still seem to be rising so I would not lock in a 10 yr CD.

 

[imoldernu]

At age 90, I would be more inclined to spend more time making plans for leaving the home, and looking to the future. While some live to age 100 without medical or debilitating issues, it is extremely rare.

More practical is a plan to move in with family, or to some type of care facility.
This doesn't go over well with the person, but should be a back up... to avoid hard decisions that come on suddenly.

Most of the continuing care facilities that we discuss here, require upfront guarantees of assets far in excess of the $60K mentioned here. The subject need not be discussed, but the comfort of being able to cushion the blow of leaving home, might be incalculable.

 

[ToneGod]

Thanks everyone for your good advice. (-: