Opinions on AA for elderly couple with 4 year max horizon

[RetMD21]

FA says the equities are there for "growth"

That's ridiculous. I think you are right, and your brother and the FA are wrong, but I don't know if you can win.

 

[RunningBum]

It goes against my gut instinct, but given that Firecalc shows there's little difference between 0/100 and 30/70, I'm not going to push the issue. My brother already suggested pulling withdrawals from the account with stocks so I'll make sure that happens, unless the market falls. I've also pointed out why the stocks should be in taxable and suggest he make that happen when he meets with the FA next year.

That's one of the frustrating things about the account being with an FA, we can't just login and make changes. I'm not sure why my brother can't just do it over the phone. Right now he's dealing with my dad's heart issues so I don't want to lay any more on him than I have to, another reason for the decision above.

Thanks for the opinions and insights. The Firecalc suggestion by ERD and 2Cor was particularly helpful.

It's a lot more fun to run my own numbers and see how much my accounts are growing then to do this and see things like "3.1% success rate" or whatever it was for 5 years.

 

[RunningBum]

Here's salt in the wound. The FA screwed up my brother's instructions for the end of the year, and didn't do a $5K IRA withdrawal he asked for, in person, and repeated it to make sure he understood. Not a huge deal but it was to try to optimize their taxes over their remaining years. The RMD was satisfied.

Also, there is one account my brother doesn't have access to. The FA told him he should have it, but my brother convinced him he didn't, so the FA checked said he'd get them access. A month later, still no access.

So my brother is angry and frustrated, and is ready to fire that FA even at the risk of upsetting our father. Obviously I'm in favor of that. The time is not yet right, as dad is undergoing a heart procedure this week. Once recovered, I think this will happen. He is talking about either moving it to another FA dad already has an account with who has been very responsive, or moving it to VG, which we both use. I'm making a case to self-manage but my brother is the one dealing with this, and maybe it'd be less hassle with our father to keep it with someone he knows.

The catch on VG is that I understand you have to use their POA form. Is that a pain to set up? Is it easier with a new account rather than adding POA to an existing account? Maybe Schwab would be better, since they have a local office.

 

[rothlev]

We are in our late 70's and DW has advanced COPD (4 years on O2 now). She is very fragile and not too far from more care than I can give. I'm the oldest at 78, but in very good health. We are 30% equities and the balance in CD's, preferred stocks (not a high percentage), and cash.

If DW has to go into a "facility", our cash and fixed income can last the cost a very long time. We don't want to risk being a high percentage of equities and having a melt down when we need the funds.

In your case, I would just be in cash with the four years funds or maybe 25% in equities.

#1. 25% max

 

[Bamaman]

Let me just say that in the end stages of life, it's so much easier if all financial assets are in cash equivalents. And the cash should be kept where it can be electronically moved elsewhere--like to the heirs when it's time.

My parents' business was very simple, and I was able to easily manage their accounts. It was my mother's lake house that even required the estate to be probated. Had she not had that house, it would have been a quick and easy cash disbursal after doctor/hospital bills and Federal income taxes were paid.

Our 100 year aunt had substantial equities at Merrill Lynch, and she was in a real estate partnership (10 story office building). We had some distasteful negotiations with the partners who were CPA/Attorneys on buying our inherited interests. The liquidation and probate process was long and expensive. And after it was all settled, Merrill Lynch actually charged us to process wire transfers to our personal accounts.

 

[Koolau]

Strictly cash would be my suggestion but YMMV. I had to move my mom's money to cash (including sale of her house) in order to pay her NH/medical/pharmacy bills. I took over management of her money about 4 years before she passed IIRC.

I would say she got "lucky" in that she passed peacefully the same month she essentially ran out of money. It's true that she might have made out better with equities, but she could also have gone broke.

God bless you RunningBum as well as your brother as you help your dear parents transition.

 

[RetMD21]

The catch on VG is that I understand you have to use their POA form. Is that a pain to set up? Is it easier with a new account rather than adding POA to an existing account? Maybe Schwab would be better, since they have a local office.

Vanguard's "limited agent" form is easy and doesn't require notarization. The "full agent" form is a pia with witnesses and notarization. The limited agent status allows you to transact and transfer to existing outside accounts and is working for me. You still have to get your dad to agree and sign and the in person Schwab office might be more appealing to him.

 

[SecondCor521]

The catch on VG is that I understand you have to use their POA form. Is that a pain to set up? Is it easier with a new account rather than adding POA to an existing account? Maybe Schwab would be better, since they have a local office.

I did it with my Dad's accounts and I don't recall it being difficult at all. I do know that prior to setting up POA on his Vanguard accounts, he had previously signed a lawyer-generated all purpose durable POA for me on his stuff.

Also, I'm a Vanguard client as well, so I see my stuff and his stuff when I log in. I've found it helpful to set up account groups so I can segregate stuff out for things like performance and portfolio analysis.

ETA: Just read the reply above. It has been a few years and I'm not sure what access I have. I know I can buy and sell, and see his RMDs, and change his dividend reinvestment options, because I've done all of those things.

 

[RunningBum]

Thanks to both of you (RetMD and SecondCor) for sharing your experiences.

 

[Badger]

My parents have only enough money to last about 4 years. Neither is likely to outlive that money, though it is possible. What would you say their AA should be? Children are not concerned about getting any inheritance and would help with shortfall if they do live longer than 4 years. Dad is one year into a terminal cancer diagnosis of two years of life, plus his heart may not make it that long. Mom is in memory care, not very mobile due to arthritis and not likely to survive an illness, but if she doesn't catch anything who knows?

Current allocation is about 33% in equities. My thought is that should be 0%, or very close to it. They don't have time to weather any kind of prolonged downturn. Am I being overly cautious? IMO avoiding a downturn that cuts their funds to 2 or 3 years is more important than trying to hope the market can stretch their money to 5 or 6 years. And growing our inheritance is not a priority.

My brother is POA and their investments are with an FA they have been with for 25 years. Both are local to my parents. I am not looking to take over either POA or control of investments. It just won't happen, and would cause a lot of family strife where there is little of that today. The FA isn't gouging them with fees, though some of the non-equity funds have higher expense ratios than I like. My brother has asked for advice on an ongoing basis, and my Dad knows this and is grateful, but they are not moving away from the FA. I thought I had my brother convinced to reduce equities but when he and Dad met with the FA yesterday, no changes were made. FA says the equities are there for "growth". He is well aware of their health changes and expenses.

So I'm only looking for advice on their AA. It would be helpful to give some justification for your opinion. I know there are other aspects people might want to chime in on, like Medicaid options (not good at all in their town) and losing the FA (not going to happen), so I ask that we stick with the AA question. Thanks.

From what you have posted it appears that the FA is a crook (is that too insensitive?). Since you don't have POA AND your father is not willing to lose the FA then I don't see where there is much that you can do. Does your brother have control of the investments as POA or is he just acting in an advisor capacity at the moment?
I have been through dealing with a brother who had POA for my parents and my wife's brother who had POA for her parents. With all 4 parents there were major problems dealing with the brothers that created hard feelings due to mishandling and downright embezzlement. We no longer have contact with either. I'm sorry that people have to go through these kind of issues at a time that should be reserved for spending family time with their parents.


Cheers!

 

[iloveyoga]

I have also helped our parents with this. Very sadly, Mom is the only one left. She never did like stocks and does not need to worry about growing her money, so when Dad passed we sold all remaining stocks and everything is now in bank accounts, IRA money market, and some old guaranteed annuity accounts.

 

[RunningBum]

From what you have posted it appears that the FA is a crook (is that too insensitive?). Since you don't have POA AND your father is not willing to lose the FA then I don't see where there is much that you can do. Does your brother have control of the investments as POA or is he just acting in an advisor capacity at the moment?
I have been through dealing with a brother who had POA for my parents and my wife's brother who had POA for her parents. With all 4 parents there were major problems dealing with the brothers that created hard feelings due to mishandling and downright embezzlement. We no longer have contact with either. I'm sorry that people have to go through these kind of issues at a time that should be reserved for spending family time with their parents.

Definitely not a crook. Negligent is the word I'd use, I guess, on a few things. It worked well for them when my parents were on a set schedule of unchanging monthly payments, but now they are in liquidation mode with the higher health care expenses and it's not going well. Even though the FA charges a fee I can't say with any certainty I'd have managed their money better. I'm pretty sure I could've but there's no way to prove it.

I think if we point out to my dad the things the FA has done wrong, there's a good chance we could talk him into leaving the FA. And then he would spend the rest of his life harping on how the FA screwed him, and kicking himself for going with him in the first place. It wouldn't be healthy for him, or my brother and I would quickly tire of it. What I think my brother is hoping that he can justify moving based on the problems with accessing the money and not getting into the other issues. And that should be good enough, because my brother has his own family to deal with and taking on our parents' finances should not be so time and effort consuming.

I really only started this thread to vent some, and get more views on the right AA for their situation. I got a lot of good feedback on that. Then more good feedback on what POA at Vanguard would take. We would not move the account without our father's agreement. It's true that I have no power to do anything. My brother and asked for my help on all of this, and my father appreciates it, but it was never said or expected that they would do everything I suggested.

 

[RetMD21]

Vanguard has made it easy to sign in and complete parts of the agent authorizations for your own accounts, but I gave up trying to find an actual blank form. If MIL could use a computer well enough to do the online form she would probably not need any help. My flagship rep attached a blank form to a secure email to me. Vanguard is not alone among financial institutions in not wanting to deal with a POA that you bring them. I understand that they are responsible for following PA law including the (IMO silly) notarization and witness requirement for broad powers.