Retired father-n-law….

[ATXFIRE2034]

This is a bit off topic and I wasn’t sure where to post. My father-n-law is retired and lives off very little each year. I know he needs some help managing his money and I will be helping him with that. He will start receiving SS next year at 66. I know he has $50k in a checking account and $200k in a savings account. He lives off less than $20k per year. I was thinking something simple like keep 1 year of living expenses in checking and 2 years in savings, then invest the remaining $200k in VBIAX or something similar in a brokerage account. Any other ideas?

 

[homestead]

That sounds good. If he is not needing any of the savings for expenses I would look at putting the savings in VTMFX in after-tax account which would put out about 3k/yr in dividends.

 

[pb4uski]

That all sounds good... but what if the market has a swan dive and his $190k in VBIAX becomes $160k? The next Thanksgiving dinner might be uncomfortable.

Is this something that he wants to do? Is he asking for help? If all his savings are bank accounts is he ready for mutual funds? Or is it more something that you are suggesting that he do?

Just remember, no good deed goes unpunished.

 

[NgineER]

What is his projected SS? More than $20k?

Invest $50k per year in a low cost broad based fund.

 

[ATXFIRE2034]

That all sounds good... but what if the market has a swan dive and his $190k in VBIAX becomes $160k? The next Thanksgiving dinner might be uncomfortable.

Is this something that he wants to do? Is he asking for help? If all his savings are bank accounts is he ready for mutual funds? Or is it more something that you are suggesting that he do?

Just remember, no good deed goes unpunished.

He has specifically told my wife he wants help and she has suggested that I could be a good resource for that. He would need to be educated on risks and guidance on withdrawal strategy, taxes, etc. He has also acknowledged that all the money sitting in the bank isn’t doing him any favors.

 

[ATXFIRE2034]

What is his projected SS? More than $20k?

Invest $50k per year in a low cost broad based fund.

I need to dig into it with him and get specifics but great point!

 

[pb4uski]

He has specifically told my wife he wants help and she has suggested that I could be a good resource for that. He would need to be educated on risks and guidance on withdrawal strategy, taxes, etc. He has also acknowledged that all the money sitting in the bank isn’t doing him any favors.

One way to keep it simple would be to put $20k in checking/savings at the bank that he uses and put the rest in Vanguard Wellington, Wellesley or STAR balanced funds... then have a $5k/quarter automatic redemption from the mutual fund to his checking account to replenish the account as he spends from it... or something along those lines.

Once he starts SS you can reduce the automatic redemption by the amount of quarterly SS.

 

[Koolau]

Good ideas so far. Just be certain FIL is truly on-board with "the plan."

 

[OldShooter]

One way to keep it simple would be to put $20k in checking/savings at the bank that he uses and put the rest in Vanguard Wellington, Wellesley or STAR balanced funds... then have a $5k/quarter automatic redemption from the mutual fund to his checking account to replenish the account as he spends from it... or something along those lines. ...

Very sensible IMO, but you are the board's king of basis point chasing; why would you propose tying up $20K? Maybe tie up $5K and do monthly draws from a balanced fund?

 

[pb4uski]

I dunno... the OP was proposing to keep $20k (1 years spending) in checking, $40k in savings and the rest in VBIAX so I just went with the $20k in checking and the rest in a balanced fund.

But now that I think about it I keep much less than a year of spending in savings.... I could see $5k in checking as a short-term emergenc fund and then $1,700 monthly redemptions from the balanced fund tansferred into checking... and then just monitor the checking account balance and do special one-time redemptions if needed to cover off unusual expenses (major car repairs, major purchases, etc.).

(Since $20k a year of withdwawals from a ~$250k nestegg isn't sustainable, you would want to reduce it by the amount of SS once DFIL starts collecting SS. You may also want to visit opensocialsecurity.com to look at various claiming strategies.)

What I described in the second paragraph above is pretty much what we do... I have a monthly "paycheck" transfer from our retirement online savings account to the checking account that we pay our bills with but we have some lumpy expenses in November (property taxes, car and home insurance, etc) so I do a special withdrawal to cover those. When we bought our camper a few months ago I did a special withdrawal to cover that.

 

[harllee]

How is FIL's health? If FIL is likely to live a long life he might want to defer his SS until age 70 and live off the nest egg until then. His SS will grow 8% per year. Depending on his SS amount, by deferring it until age 70 he might be able to live on his SS payment alone.

 

[ATXFIRE2034]

How is FIL's health? If FIL is likely to live a long life he might want to defer his SS until age 70 and live off the nest egg until then. His SS will grow 8% per year. Depending on his SS amount, by deferring it until age 70 he might be able to live on his SS payment alone.

His health isn’t great. I am guessing 10-15 years at most.

 

[harllee]

His health isn’t great. I am guessing 10-15 years at most.

If FIL is retired maybe he should go ahead and take his SS now if his life expectancy is that low.

 

[Koolau]

If FIL is retired maybe he should go ahead and take his SS now if his life expectancy is that low.

As a single, there are relatively few advantages to waiting to collect SS. Probably best to start ASAP but YMMV.