 |
|
08-14-2007, 05:24 PM
|
#21
|
Moderator Emeritus
Join Date: Feb 2005
Location: San Diego
Posts: 5,248
|
Put it in TIPS and tell her to enjoy the income (I think - do TIPS throw off income?). Wellesly is always an option, too.
What's the house worth? With a paid off house the need for capital growth is greatly lessened. Always have the reverse mortgage in case of emergency, or selling the house if long term care is needed.
EDIT: oops, TIPS are like zero coupon bonds, my bad.
|
|
|
 |
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
08-15-2007, 10:23 AM
|
#22
|
Full time employment: Posting here.
Join Date: Oct 2003
Posts: 961
|
Quote:
Originally Posted by laurencewill
Put it in TIPS and tell her to enjoy the income (I think - do TIPS throw off income?). Wellesly is always an option, too.
What's the house worth? With a paid off house the need for capital growth is greatly lessened. Always have the reverse mortgage in case of emergency, or selling the house if long term care is needed.
EDIT: oops, TIPS are like zero coupon bonds, my bad.
|
fyi - TIPS both distribute coupon payments and have a zero coupon component. TIPS pay interest every six months based on the inflation adjusted value of the underlying bond, which is adjusted up [inflation] or down [deflation] depending on the changes in the CPI. The good thing about the zero coupon nature of the changes to the bond's value is that the inflation adjustments compound on top of each other [i.e. compound interest]. The bad thing is that if you hold individual TIPS in a taxable account, you've got to pay taxes on the increases in the bond's value even though you don't receive the increases until you sell the bond or the bond matures. TIPS mutual funds pay out both the coupons and increase in value of the underlying TIPS.
|
|
|
08-15-2007, 10:35 AM
|
#23
|
Full time employment: Posting here.
Join Date: Oct 2003
Posts: 961
|
Quote:
Originally Posted by WM
Thank you all again for the thoughtful replies.
Let me see if I can provide a clearer picture:
- mortgage is paid off (same house for 30+ years) and no other debts, aside from a modest car lease, which she's very happy with and I'm not going to touch.
- assets are 22K in a rollover IRA (partial payout from FIL's pension) in Vanguard's bond index, plus the 60K that we need to decide what to do with. She will also be able to add to this pot between 5-10K per year while she's working (at least 3 more years). Probably 10K will sit in a MM for emergencies.
- when she's 66, she can retire from her job and collect a pension. In combination with FIL's pension and SS, we expect this will be enough to cover her expenses and there may even be some left over. She lives very modestly and is all about LBYM.
Initially, I was thinking that if she doesn't need any of the invested money for at least 10 years, and in the meantime she can add to it, then it will accumulate to a decent amount by the time she'd start to tap it. But that didn't take into account a serious drop or slump in the market, not to mention that I don't personally have a grasp of what it means that the problem this go-around is too much debt - how does that affect stocks vs bonds? (I know, that's a whole other thing.)
Passing the decision to someone else would be my brother-in-law, who is a good guy but would have signed her up for a variable annuity per the advice of his in-laws and his financial advisor. After that near-miss, I'm ok with giving her advice even if it turns out to be less than optimal.
|
WM,
Here's a good primer on asset allocation close to retirement from Rick Ferri. See also, Paul's Investing Essentials Blog, especially max equity exposure table:
Quote:
Max Equity Exposure....... Max loss
20%.......................................5%
30%.....................................10%
40%.....................................15%
50%.....................................20%
60%.....................................25%
70%.....................................30%
80%.................................... 35%
90%.................................... 40%
100%........................... ...... 50%
|
I wouldn't concern yourself with how the subprime blowup is going to affect stocks and bonds because (1) you're not likely to understand much of it, (2) you're probably even less likely to know what do with MIL's portfolio if you did understand it, and (3) the market has likely already incorporated the subprime fiasco into the prices of stocks and bonds.
I would try to explain to your MIL that the main goal now is to try not to screw up too badly, or get too complicated - the simplest solution is probably going to be the best solution. For example, 100% stocks is probably not the best choice, as is 100% in a savings account. Keep your investing costs low - meaning brokage fees, taxes, and expense ratios. To quote Warren Buffet:
Quote:
It's better to be approximately right than exactly wrong
|
-Alec
|
|
|
08-15-2007, 10:44 AM
|
#24
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
|
Quote:
Originally Posted by ats5g
the market has likely already incorporated the subprime fiasco into the prices of stocks and bonds.
|
If this is true, how does one explain these giant air pockets being hit every day by stocks thought to have no connection whatsoever to the trouble in the sub-prime markets?
Best to remember what Will said:
There are more things in heaven and earth, Horatio,
Than are dreamt of in your philosophy.
Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
|
|
|
08-16-2007, 07:10 AM
|
#25
|
Thinks s/he gets paid by the post
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,401
|
There are a lot of morons professed as investors reacting to news.
|
|
|
08-16-2007, 09:10 AM
|
#26
|
Full time employment: Posting here.
Join Date: Jan 2007
Posts: 582
|
Quote:
Originally Posted by ats5g
Here's a good primer on asset allocation close to retirement from Rick Ferri. See also, Paul's Investing Essentials Blog, especially max equity exposure table:
I wouldn't concern yourself with how the subprime blowup is going to affect stocks and bonds because (1) you're not likely to understand much of it, (2) you're probably even less likely to know what do with MIL's portfolio if you did understand it, and (3) the market has likely already incorporated the subprime fiasco into the prices of stocks and bonds.
I would try to explain to your MIL that the main goal now is to try not to screw up too badly, or get too complicated - the simplest solution is probably going to be the best solution. For example, 100% stocks is probably not the best choice, as is 100% in a savings account. Keep your investing costs low - meaning brokage fees, taxes, and expense ratios. To quote Warren Buffet:
|
Ok, this all seems very reasonable
She definitely likes simple, so I think she'll be ok with reducing the equity exposure and I'll look into some more bond funds, maybe ones that stick with govt bonds.
|
|
|
 |
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
Search this Thread |
|
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|