Managing parent's finances - how to invest?

[Live Free]

I am now managing my recently widowed parent's finances. By managing, I mean I have taken over paying all of the bills, checking on investments, monitoring bank accounts and credit cards, etc. Thankfully my parent doesn't have any cognitive issues (maybe some memory issues that I think are normal for late 80s) or significant health issues. In fact, she is doing great! I am her only child so she asked me to take over everything because she just doesn't want to deal with it anymore. She especially dislikes dealing with the automation of bill-paying and investment management. She still goes to her bank to get cash to pay for her groceries or whatever. No ATMs, ach payments, or anything like that. Old school banking.

Over this last year, I've helped her clean out her house, get it all painted and fixed up (took months of work!), sold it, and helped move her into a retirement community and she has adjusted really well and has made lots of friends and joins in lots of activities.

But now that the dust has settled from all of these major life events, it is time to focus on what to do with her money.

Assets:

- Government annuity and SS (after taxes and health insurance) of $110k/year that covers her monthly expenses with no problems and she has about $2500 a month left over.

- LTC insurance policy. She has lifetime coverage and it will pay $300/day after 90 days of self-pay should she need it.

- $40k in Ibonds that I need to check because she has had them a few years and I'm not sure of the rates on these or even how to cash them in to something else.

- $300k in checking/savings account (this is mostly from the house sale and what I want to invest).

- $355k in laddered CDs that I set up for her last year. Some 6 months, some 1 year, one is 2 years.

- $20k in a Vanguard IRA - she gets the RMD each year.


My mom wouldn't want any risky investments. I talked her into the laddered CDs (that money used to be in a savings account). Our goals for the money:


(1) Making sure money is available for any care she may need in the coming years. I think this will be minimal given the LTC policy, but maybe future physical therapy costs or something? I'm not sure how much to keep liquid for this.

(2) Making sure money is available for any traveling or fun stuff for her. She doesn't travel as much anymore due to just slowing down. While she is in good health now, she seems to have lost interest in doing any long trips. I take her on vacations with me and the grandkids but she wouldn't just go on her own.

(3) Have money to pass on to her heirs (me and the grandkids). This is her priority above everything. She tells me this all the time. We went to her attorney and updated her Will, beneficiaries, etc., so I think we are in good shape there.


I was thinking of taking $250k (?) from the checking/savings account and putting it into treasuries or more CDs or maybe a HYSA? I've never done treasuries before so would need to learn about them first.

Any suggestions welcome.

 

[pb4uski]

I have done similar for DM since DD died in 2005. Luckily, I have sisters to focus on health care, doctors, etc and I focus on bill paying, cash and investment management (including a commercial property that she owns).

http://eyebonds.info/ibonds/index.htmlis a handy site for looking at the growth of her i-bonds. Just remember that when she redeems these that there will be interest reported for the proceeds over the amount invested.

If she is charitably inclined, perhaps she can do some qualified charitable distributions from the Vanguard tIRA and avoid tax on all or part of the RMD. Also, I use my DM's RMD to pay estimated taxes... just do high withholding from the RMD for federal and state income taxes and it is as if it is paid over the year even if it is done in December.

Since he inflow exceeds her outflow, I would keep very little in checking and none in savings since the money can be moved back to her bank in one day with a few clicks of a mouse and brokerage money market is ~5% vs zilch at local banks.

I would move the house sale proceeds to brokerage and add to the CD ladder, but with money market funds at ~5% there is nothing wrong with staying in money market funds for now and having dry powder if CD rates increase and or the CD yield curve normalizes.

 

[Ian S]

I assume she has Medicare but is it conventional or Advantage? She might have pretty complete coverage that would include things like physical therapy.

 

[Dtail]

I would also add to some shorter term brokered CD's, or have it in a premium type money market fund with yields at 5%+.

 

[troutnut1]

I’ve been doing the same. Mom just turned 90. Does your mom’s state of residence have an income tax? If so, Treasuries and agency bonds, and some others may be free of state income tax which will help her keep more if the yields to cds are comparable. They are also much more liquid. I also predicted mom’s tax liabilities and set up income tax withholding from her pension funds. I made the mistake of closing mom’s old B of A account and putting everything at Fidelity. But old timers like mom want at least some in a local brick and mortar bank where they can visit and see their money. I re-opened the old B of A and transfer about $500 of pension money to it each month so she has mad money aside from her investments. I hate it but it keeps her happy and she can be charitable with friends and buy things without me knowing about it.

 

[Live Free]

Yes, she has Medicare and BC/BS as her supplemental.

 

[Dtail]

I’ve been doing the same. Mom just turned 90. Does your mom’s state of residence have an income tax? If so, Treasuries and agency bonds, and some others may be free of state income tax which will help her keep more if the yields to cds are comparable. They are also much more liquid. I also predicted mom’s tax liabilities and set up income tax withholding from her pension funds. I made the mistake of closing mom’s old B of A account and putting everything at Fidelity. But old timers like mom want at least some in a local brick and mortar bank where they can visit and see their money. I re-opened the old B of A and transfer about $500 of pension money to it each month so she has mad money aside from her investments. I hate it but it keeps her happy and she can be charitable with friends and buy things without me knowing about it.

Yup, my 90 y.o. mom likes her BOA checking account, but I manage it, so the balance is always below 5k.
Not sure if Treasuries and Agency Bonds are more liquid than a Brokered CD.

 

[LateToFIRE]

Not exactly investing advice, more planning for the future advice: It's great that your mom is doing well presently, but if you haven't, you might want to start thinking about the day that she becomes even more reliant on you to manage her affairs: I mean stuff like a POA, healthcare proxy, etc. that legally allow you to step in should she be unable to make decisions for herself. You'd be surprised by the challenges you may encounter down the road, especially if she becomes cognitively impaired. For an elderly woman, something as innocuous as a UTI could trigger a temporary episode of dementia - I would not have believed it if had not seen it happen. Also, with elderly parents, you need to think about best way to shelter her from fraud - clearly with you checking her accounts frequently that risk is reduced. But, just know there is a multi-billion dollar industry out there for the sole purpose of separating the elderly from their funds - much of it operating right on the edge of legality.

 

[Route246]

Any cash would probably be best parked in secondary market short-term 0-coupon treasuries as they are yielding nicely (low-5s) for the time being. As long as you hold them to maturity the return is known and guaranteed. Get it in quickly if you're not yielding much on the cash. I learned how to that here by searching these forums. There are a lot of experienced people here.

 

[markelp]

I mean stuff like a POA, healthcare proxy, etc. that legally allow you to step in should she be unable to make decisions for herself. You'd be surprised by the challenges you may encounter down the road, especially if she becomes cognitively impaired.

This is important, perhaps even more than adjusting asset allocation at this stage. Ensure there is an estate plan in place. Not only a Will, but a Power of Attorney (POA) and health directives. Also, make sure the beneficiaries on her various accounts are set to her wishes.

Our Mom declined rapidly after a relatively simple broken arm. We got these in place while she was in the hospital. She doing well living in an independent but monitored apartment facility. She does have some significant and increasing memory issues.

Having the paperwork signed and available to send to financial institutions/health providers has made the process so much easier. We were able to sell her house, start payments from her annuities and communicate with her doctors because the documents were in place.

 

[LateToFIRE]

This is important, perhaps even more than adjusting asset allocation at this stage. Ensure there is an estate plan in place. Not only a Will, but a Power of Attorney (POA) and health directives. Also, make sure the beneficiaries on her various accounts are set to her wishes.

Our Mom declined rapidly after a relatively simple broken arm. We got these in place while she was in the hospital. She doing well living in an independent but monitored apartment facility. She does have some significant and increasing memory issues.

Having the paperwork signed and available to send to financial institutions/health providers has made the process so much easier. We were able to sell her house, start payments from her annuities and communicate with her doctors because the documents were in place.

You reminded me of a point I meant to make - all these docs need to be done BEFORE there is any hint of cognitive impairment because otherwise NOT LEGALLY BINDING and voidable.

 

[markelp]

You reminded me of a point I meant to make - all these docs need to be done BEFORE there is any hint of cognitive impairment because otherwise NOT LEGALLY BINDING and voidable.

Yes. In our case we helped find her an attorney to complete the Estate Plan but he worked for her (not the family). She reviewed and signed the contract with him. They had a variety of private discussions to make sure her wishes were known and she was competent. Then she paid the attorney directly with a check she filled out and signed.

In addition, the notary made sure she was aware of what she was signing and doing it under her own free will.

 

[MarieIG]

Now would be a perfect time for your DM to invest (via you) in short term treasuries. The rates are high, and they are easy enough to purchase though a brokerage (i.e. Vanguard, Fidelity, etc.)

My impression is that a number of forum members made their initial treasury purchases corresponding with the latest round of interest rate increases. We have a thread dedicated to treasury purchases, and if you so choose, after you choose a brokerage, someone would no doubt "walk you through it."

 

[Live Free]

Thank you for all the input. Very valuable advice and I appreciate your feedback.

We did do all the health directives, POA, etc. My Mom met independently with her attorney she has used for many years and got everything set up to her wishes. I am her Executor and will make sure I follow her wishes to the letter. I am fortunate that she has written out who gets what of her jewelry and more valuable possessions. So no fighting with her sisters or other family members - it's all written out. Honestly, that is a gift to me and it has motivated me to start getting my own stuff purged and either given away now or have it written down on who gets what. I'm certain my own kids will thank me as it is a job. While we did get rid of a ton of stuff from the house sale, there are still lots of "treasures" Mom didn't want to part with. But it's a lot less.

I also have already provided the POA's and Health Directives to her retirement community, doctors offices, LTC insurance, and bank. I requested and received documentation from most of them (except her bank) that they have copies of these documents on file. So hopefully there will be no road blocks in making sure she gets all necessary care when/if needed.

 

[Kings over Queens]

Going through this now with my in-laws.

For us, simple baby steps. Opened discover bank and marcus online savings and moved some (most) of the money there, leaving some in her BoA checking and savings. I've started entering her checking info into Quickbooks and will give her monthly financial reports to she has peace of mind and will start spending some of her damn money.

We've broached the assisted living discussion and that wasn't received well, so we're pushing for some in house help for my father in law so she can go and get a manicure or have lunch without worrying. She's going to worry, but at least it's a step in the right direction.

Not fun, but I'm glad to be able to do it for them.

 

[DrRoy]

At least get the cash out of the bank account and into a money market fund. Near 5%.

 

[Badger]

At her age even if in good health I like the idea of laddered CDs but only 2 years or less as you have already done. If she needs your help this is the easiest investment for her to understand and be comfortable with. Also anything and everything that can be linked with beneficiaries would be helpful and to avoid probate on those items.
But it seems like you have already done this. I would consider the same choices for the most recent money,

Cheers!