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$750k in checking accounts- 84yr old- help !
Old 01-08-2023, 12:13 PM   #1
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$750k in checking accounts- 84yr old- help !

After two years we've finally gotten our 84yr old aunt to discuss her finances with us so as to prepare for the future.

Here's what she has;

$750,000 in checking accounts
$334,000 in Columbia Large Cap Growth Fund- class A shares

$375,000 house paid in full.

$2,720 monthly SS survivors benefit

She's ready to discuss allocations and strategies going forward. She's asking for help.

This is most of what I know.

Thoughts and/or advice will be appreciated !
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Old 01-08-2023, 12:22 PM   #2
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Well, get her away from the snake selling her load funds.

Maybe consolidate at Schwab. $1M is enough to get her an individually-assigned rep. It may be at Fido, too. Interview reps to find one she "clicks" with. Maybe a middle-aged female with a very conservative investment outlook. https://brokercheck.finra.org/ is your friend.

Ditto find a specialist estate attorney that she clicks with.

The "allocations and strategies" discussion will start to emerge from the above work. No reason to rush it. The market will still be here in six months.
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Old 01-08-2023, 12:31 PM   #3
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At a minimum get that cash moved into a decent money market!
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Old 01-08-2023, 12:41 PM   #4
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Quote:
Originally Posted by Katoslake View Post
After two years we've finally gotten our 84yr old aunt to discuss her finances with us so as to prepare for the future.

Here's what she has;

$750,000 in checking accounts
$334,000 in Columbia Large Cap Growth Fund- class A shares

$375,000 house paid in full.

$2,720 monthly SS survivors benefit

She's ready to discuss allocations and strategies going forward. She's asking for help.

This is most of what I know.

Thoughts and/or advice will be appreciated !
Banks love older folks.

LEGAX Columbia Large Cap Growth Fund Class A - -32.18% in 2022. That got her attention I'm sure.

30% in the growth fund, and 70% in checking making nothing for some number of years.

I'd take her to Schwab and Fidelity to just talk with an advisor. See what they offer. My opinion is that 30-35% in equity is ok, it's just that all growth is wrong.

At a high level I'd shoot for 35% equity and insured high-yield accounts as well as CD's.

But I wouldn't get in the middle, unless qualified to advise. There should be an investment policy statement of some kind that guides her caretakers.
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Old 01-08-2023, 12:52 PM   #5
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If the growth fund is in an IRA, then, sure, she could move it somewhere else. But if it's in a taxable account, it may still be showing significant capital gains and I don't think auntie would be happy paying the capital gains taxes.
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Old 01-08-2023, 12:54 PM   #6
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Have her open an Ally bank savings account and earn 3.3 % on $200K of the cash. Can do it all via the computer. Although you may need to do it for her.

Open a brokerage account, honestly, since she seems pretty non-active investment wise, a Vanguard account is great. It pays a high interest rate in the settlement account (like MM) and she can buy cheap ETF's like VOO, VTI, and some treasury bond/bills (totally safe).

Could even just do Vanguard, and leave large chunk ($200K) in the settlement fund and skip Ally bank. Do it online, or just phone Vanguard
https://investor.vanguard.com/home

I'm meaning the cash in all the above, as it's earning 0% right now...

I had to help my FIL, as banks take advantage of old folks giving them low interest CD's or worse high expense investment funds.
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Old 01-08-2023, 01:02 PM   #7
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It's not that difficult these days. We are in the golden period. Money market funds with that much cash will pay 4.26% today. That's two to three times what a bond fund pays today. I would start by moving the bulk of the $750K to a Fidelity money market fund like FZDXX. Moving 725K into a money market will generate and immediate $2,662 per month and rising monthly as the Fed continues to hike rates. Her capital will be 100% protected. Then you can slowly ease into short duration treasuries, CDs, and high grade corporate notes that yield more than the money market funds. You can buy a basket of high grade corporate notes from JP Morgan, Citigroup, Bank of America, Bank of Montreal, CIBC, Royal Bank of Canada, Gold man Sachs, and TD Bank yield over 5%. You should be able to generate about $37,500 annually assuming you invest at an average coupon of 5% (which is very conservative) or an average of $3125 per month of additional income without risking capital. I'm assuming that her checking account pays little to no interest so the extra income will come as a shock to her. The corporate bonds I mentioned are from many of the same issuers that the self proclaimed fixed income expert from Fidelity bought for you but your aunt will be buying them with coupons 3 to 8 times higher.

Whatever you do, don't invest in those loser bond funds and ETFs. Stay away from Fidelity managed accounts. They are loaded with too much low coupon debt and offer no capital protection and will cut her income to a fraction of what even a money market fund pays out monthly.
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Old 01-08-2023, 01:17 PM   #8
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Not sure what you goal is here. . . I don't think she is going to outlive her funds. Are you trying to grow money? Make it easy to pass on to heirs? Does she have an estate plan?
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Old 01-08-2023, 01:22 PM   #9
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Lots of good advice to earn more interest above.

It appears that she has sufficient money for the rest of her life, so future earning are a secondary issue to me. The main issue to me is that it is her money, so your focus should be more aligned with making your aunt comfortable with the investment strategy and not stressed out and worrying about her money for the rest of her life. We have left lots of DM's money in a lousy, local saving account checking account, since she is more comfortable with that approach. There is no way my DM will run out of money, but there is no way anyone will ever convince her of that.
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Old 01-08-2023, 01:26 PM   #10
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Not sure what you goal is here. . . I don't think she is going to outlive her funds. Are you trying to grow money? Make it easy to pass on to heirs? Does she have an estate plan?
That was kind of my point in my first post above. Get the basics in place, which will involve plans and strategies, then move to sort out the money. Eat the elephant a bite at a time rather than jumping to implementing detailed investment recommendations. IMO she will be more comfortable with a deliberate, thoughtful process. This is very new stuff for her.
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Old 01-08-2023, 01:39 PM   #11
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At the very least, I would suggest she move most of the $750K checking money into a good yielding money market or CD ladder. At least get some yield without more risk. May have to use a few different institutions to keep it all insured, but sounds like it's probably not now anyhow. How much of her living expenses are covered by her SS? If mostly covered, could get a little more aggressive, depending on her goals.
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Old 01-08-2023, 02:03 PM   #12
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Hmmmm, insured deposit limit is $250k per deposit account at an insured depository institution. So, if $750k is at one insured bank or insured credit union, she exceeds the limit by $500k! This uninsured amount is at risk if the institution fails. You can structure deposit accounts (with joint or trust owners) to stretch the limits at one bank or credit union, but I think the simplest thing here would be or move some of her funds to other financial accounts. If she’s set on banks or credit union, she can divide her $750k to two banks or credit unions and add one joint account owner to one or two accounts and she’d be within the insured limits.

Navy Federal Credit Union will be offering 15 month CDs at 5% interest starting tomorrow —might be worth exploring. Or if you want more of a challenge, she can buy treasuries at Treasury Direct or FIDO.
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Old 01-08-2023, 02:52 PM   #13
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Not sure what you goal is here. . . I don't think she is going to outlive her funds. Are you trying to grow money? Make it easy to pass on to heirs? Does she have an estate plan?
She has no estate planning in place best we can tell.

She doesn't want to worry about money, or even discuss it really.
Would like to minimize taxes for her heirs.
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Old 01-08-2023, 03:00 PM   #14
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That was kind of my point in my first post above. Get the basics in place, which will involve plans and strategies, then move to sort out the money. Eat the elephant a bite at a time rather than jumping to implementing detailed investment recommendations. IMO she will be more comfortable with a deliberate, thoughtful process. This is very new stuff for her.
Very new is correct !

I'd like to add for context that she;

-Doesn't have a cell phone and doesn't want one
-Doesn't have internet service, hence no email
-Only writes checks, no credit cards
-Is walker dependent and will likely be in a wheelchair in the not too distant future
-Doesn't have a microwave and is afraid to try one
-Thinks she's getting preferential treatment because she has the lowest deductible allowed by her property insurance company -$250

We will be the closest family members to try and facilitate care.
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Old 01-08-2023, 03:03 PM   #15
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She has no estate planning in place best we can tell.

She doesn't want to worry about money, or even discuss it really.
Would like to minimize taxes for her heirs.
I wouldn't worry about taxes for the heirs, as depending upon the State but nearly all would have zero tax on the inheritance from her.

This desire to avoid taxes lead me FIL to be talked into odd annuities and insurance products so he could brag he wasn't paying taxes. Instead his heirs paid taxes on delayed earnings due to the insurance salesman "forgetting" to mention that issue.

They even sold my FIL a 10 year delayed annuity at age 84

Don't fall for insurance products at this age.
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Old 01-08-2023, 03:15 PM   #16
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-Is walker dependent and will likely be in a wheelchair in the not too distant future

We will be the closest family members to try and facilitate care.
Moving her money to more appropriate, conservative investments should be a no-brainer (as long as she agrees) by working with a major brokerage house such as Schwab or Fido. Your most important duty at this stage is to ensure things are set up so that as she ages and becomes more disabled, she has funds at hand for top notch care in circumstances she likes and approves of. This may mean paying for in-home staff or moving her to a facility where high quality care in very pleasant surroundings is provided.

Estate planning to provide maximum inheritances to beneficiaries should be done only after your Aunt's comfort and care are generously accounted for. Sometimes FA's and estate planners lose track of this.
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Old 01-08-2023, 03:25 PM   #17
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I wouldn't worry about taxes for the heirs, as depending upon the State but nearly all would have zero tax on the inheritance from her.
Depends on if it's in a tIRA or in taxable.
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Old 01-08-2023, 04:10 PM   #18
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Originally Posted by Katoslake View Post
Very new is correct !

I'd like to add for context that she;

-Doesn't have a cell phone and doesn't want one
-Doesn't have internet service, hence no email
-Only writes checks, no credit cards
-Is walker dependent and will likely be in a wheelchair in the not too distant future
-Doesn't have a microwave and is afraid to try one
-Thinks she's getting preferential treatment because she has the lowest deductible allowed by her property insurance company -$250

We will be the closest family members to try and facilitate care.
Your added context matches my mothers situation very much. My mother does have and uses a microwave. I echo others comments about making sure her needs are met for her health and safety. Does she live at home or with someone? My mother has been besieged by scam callers, mail contest offers and other "charities".
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Old 01-08-2023, 04:11 PM   #19
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Banks love older folks.
IF they have lots of money.

That does seem almost criminal not to alert her to the FDIC limits at the very least.
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Old 01-08-2023, 04:54 PM   #20
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Originally Posted by Katoslake View Post
Very new is correct !

I'd like to add for context that she;

-Doesn't have a cell phone and doesn't want one
-Doesn't have internet service, hence no email
-Only writes checks, no credit cards
-Is walker dependent and will likely be in a wheelchair in the not too distant future
-Doesn't have a microwave and is afraid to try one
-Thinks she's getting preferential treatment because she has the lowest deductible allowed by her property insurance company -$250

We will be the closest family members to try and facilitate care.
The first three habits most likely saved her from online scammers, crooked financial advisors that would have wiped her account, and annuity sales frauds. The problem is that scammers get more and more aggressive with seniors to the point they send bogus bills and letters by regular mail and harassing phone calls. At least that's the case with my parents past their mid 80's.
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