Seeking Advice to Help Recently Widowed BIL

[TheWizard]

Importantly, try to keep the BIL from deciding on his own to go with Edward Jones or a similar shark outfit...

[RetMD21]

Quote:

Originally Posted by TheWizard Importantly, try to keep the BIL from deciding on his own to go with Edward Jones or a similar shark outfit...

If OP is willing it wouldn't be a terrible idea to plan upfront to be involved with the FA appointments. When the time comes the FA's advice about the annuities could be compared to that of the salesperson. A 1035 exchange might be in order

[ivinsfan]

Has your BIL tried looking for any work at all? I'm sorry he was injured yet disabled is probably not the word to describe him. For example Home Depot is very proactive about hiring vet with physical issues.


If your BIL is going live 100% on assets for 7 years that really cuts into his nest egg at the fairly young age of 67.


A word about VA disability. Payouts start at around 150 bucks a month and can go higher. It's not a gravy train. At 60 your BIL is too young to be a Nam vet. Why does this matter? Because of Agent Orange many health issues are considered presumptive for Nam vets, the claims are rubber stamps. This isn't true for other service times.



On a practical note what does your BIL do for health care? Was he on your DS work policy, and ACA plan or the VA. Helping him figure out health costs would be more valuable then worrying about an FA at this point. For example if you are enrolled in the VA system you cannot claim an ACA subsidy. Health is a big expense for older Americans.


To be blunt if he doesn't take SS and lives on the nest egg for 7 years at say 35K he's taken almost a quarter million dollars from his nest egg and at 67 might be light on money.

[pacergal]

My condolences on the loss of your sister and BIL wife.

What you are doing is a tremendous help for him. I would encourage him to read some of the investment books often listed in this forum and over on Bogleheads. Let him start learning and exploring himself, along with your help.
A fee only FA is a good idea also.

However, as much as you want to get going, allow for time to grieve. Now is not the time to be making big financial decisions. There does not seem to be a big urgency per your intro, unless I missed something.

His VA disability will also come into play in his finances. How far along is he in this process?
Is he also collecting SSDA payments or applied?

Blessings to you as you assist your BIL in this.

[bmcgonig]

Sorry about your sister Mark.

I’m almost in 100% agreement with your suggestions. The “almost” part is where I would consider man even more conservative approach.

I would build a CD or MYGA or corporate bond ladder ( see Freedoms posts) for 7 years using the 280 from his cash and life insurance. This should cover his expenses until SS. In truth your suggestion of Wellseley should do the same or even better but there’s lots of short term risk there.

I would put around 150-200 into a deferred SPIA that pays out when he’s 67. That, according to immediateAnnuities.com should pay about 1000-1400/mo. So about 37-42k/yr when SS included. That should come very close to covering his expenses. There’s no inflation coverage in this but the rest of the investments should should cover that.

Invest the rest (136-186) in a combo of Wellesley and Wellington: 50/50 overall. Or something like that. That should cover his inflation that isn’t covered by the DPIA.

This approach has the benefit of a lot less handholding for you and less chance that he will interfere to his detriment in the future (oh look..I can make 18% on Celsius crypto exchange!) where of course you will again have to step in to help. Plus in the short-medium term you don’t have to really worry about his finances. You probably don’t really want to be in a situation where you have to explain to him that “he’s down another 10 to 15% but it will come back”. The risk is that inflation eats into the DPIA and his expenses.


Does he own his house?

[Huston55]

Quote:

Originally Posted by ivinsfan A word about VA disability. Payouts start at around 150 bucks a month and can go higher. It's not a gravy train. At 60 your BIL is too young to be a Nam vet. Why does this matter? Because of Agent Orange many health issues are considered presumptive for Nam vets, the claims are rubber stamps. This isn't true for other service times. On a practical note what does your BIL do for health care? Was he on your DS work policy, and ACA plan or the VA. Helping him figure out health costs would be more valuable then worrying about an FA at this point. For example if you are enrolled in the VA system you cannot claim an ACA subsidy. Health is a big expense for older Americans.

Quote:

Originally Posted by pacergal His VA disability will also come into play in his finances. How far along is he in this process? Is he also collecting SSDA payments or applied? Blessings to you as you assist your BIL in this.

BIL has formally submitted is intent to file for VA disability, which sets his effective pay date when he gets a disability ratting. I say "when" because, he's an Iraq combat vet and will qualify for presumptive conditions related to digestive & likely respiratory issues.

Regarding SSDI, I doubt he'll qualify. But, it's worth checking with the SS office. Thx for the suggestion.

[ivinsfan]

Quote:

Originally Posted by Huston55 BIL has formally submitted is intent to file for VA disability, which sets his effective pay date when he gets a disability ratting. I say "when" because, he's an Iraq combat vet and will qualify for presumptive conditions related to digestive & likely respiratory issues. Regarding SSDI, I doubt he'll qualify. But, it's worth checking with the SS office. Thx for the suggestion.

This is good for your BIL I think after Vietnam they are realizing that conditions military were subjected to in combat can take a long time to have a negative impact..this is a good change IMO.



It's a good thing when these subjects come up in thread not specific to VA. I'm pretty sure there are vets out there that don't realize some VA help and money could be available to them.

[N02L84ER]

If he qualifies for SS on his own record, then OpenSocialSecurity will probably suggest one of the 2 following options based on who has the greater benefit and the ages of the spouses.
He files for his own benefits at 62 and her survivor benefits at full retirement age. or

He files for survivor benefits now and his own benefits at age 70.

[Huston55]

Quote:

Originally Posted by ivinsfan Has your BIL tried looking for any work at all? I'm sorry he was injured yet disabled is probably not the word to describe him. For example Home Depot is very proactive about hiring vet with physical issues. If your BIL is going live 100% on assets for 7 years that really cuts into his nest egg at the fairly young age of 67. A word about VA disability. Payouts start at around 150 bucks a month and can go higher. It's not a gravy train. At 60 your BIL is too young to be a Nam vet. Why does this matter? Because of Agent Orange many health issues are considered presumptive for Nam vets, the claims are rubber stamps. This isn't true for other service times. On a practical note what does your BIL do for health care? Was he on your DS work policy, and ACA plan or the VA. Helping him figure out health costs would be more valuable then worrying about an FA at this point. For example if you are enrolled in the VA system you cannot claim an ACA subsidy. Health is a big expense for older Americans. To be blunt if he doesn't take SS and lives on the nest egg for 7 years at say 35K he's taken almost a quarter million dollars from his nest egg and at 67 might be light on money.

He has what I'd call "hobby" jobs; raising and selling livestock (lives on 19 acres), which generates a few hundred $$$ per month. Honestly, I think he'd prefer to just do that if he can.

I hear you on the "draw down" of assets while deferring SS. But, that's easily analyzed to help choose the best path (financially at least). I'm using FireCalc to do quick comparisons. I plan to present that info to him, give some advice, and let him (and hopefully an FA) finalize the decision. However, I do like the ideas you, bc & others have suggested for the near term (7yrs +/-) regarding products with virtually no risk (CD ladder, etc.)

Regarding health care, I had the "Don't dare go naked!" talk and believe I've convinced him to use Cobra in the short term while he determines what VA care he may get.

[Huston55]

Quote:

Originally Posted by N02L84ER If he qualifies for SS on his own record, then OpenSocialSecurity will probably suggest one of the 2 following options based on who has the greater benefit and the ages of the spouses. He files for his own benefits at 62 and her survivor benefits at full retirement age. or He files for survivor benefits now and his own benefits at age 70.

I have to admit not knowing the details of "file & suspend" since the law changed recently but, I thought that folks the age of my BIL couldn't do that (collect his SS early @ 62, then switch to his spouse's @ FRA or later). Can someone clarify this?

[N02L84ER]

Survivor benefit rules are not the same as spousal benefit rules.

[ivinsfan]

Quote:

Originally Posted by N02L84ER Survivor benefit rules are not the same as spousal benefit rules.

That's right and one reason I have mentioned this several times ...I don't think FAs are really qualified to council someone on this subject. too many nuances involved. Even those of us who consider ourselves pretty savvy has found out we don't always know Jack about this.



Your BIL grieving working on VA matters not financially savvy is not liable to understand these rules unless you help him.. this might be one of the more important issues.

[ivinsfan]

Huston55 if he wants VA care as a combat vet it's possible he can join the system right now. Buttt..as I mentioned once he does that he gives up any chances of ACA tax credits so not a decision to be made lightly.



You said to dig deep so if he keeps his income lowish uses cash to live on for 2 to 5 years he possibly could get virtually free ACA coverage while letting SS grow.

[Huston55]

UPDATE:

BIL has reviewed 2021 expenses and determined that he needs ~$2,500/mo. My sense is that this is a decent estimate.

I’ve run Mike Piper’s Open SS tool and determined that Option 1 below is optimal by a small margin.

Option 1: BIL waits until age 62 to file his own SS; then takes spousal SS @ age 66 yrs & 2 mos.

Option 2: BIL takes surviving spousal SS now @ age 60. This option pays ~$2,000/mo.

BIL seems very anxious about spending $$$ while waiting until age 66 to claim SS and his state of mind is important, especially regarding behavior during the next downturn. Option 2 provides ~95% of the benefit of Option 1. We can easily generate the remaining $500/mo from low risk investments of the taxable $280k ($80k cash + $200k insurance). So, I will probably suggest to him that he take Option 1.

Still working on the VA front (disability claim & VA health care). Also talking to two FAs.

Thx again for all the feedback. It’s very helpful.

[pb4uski]

Quote:

Originally Posted by Huston55 ...1. Use the $80 cash in the short term (find decent MMF and/or CDs for much of it) 2. Put the $200k taxable (from life insurance) into 30/70 AA using low/no cost MFs or ETFs 3. Put the tax deferred accounts into a single fund for simplicity (Wellesley or Target fund like VTTVX

I like the idea of consolidating the tax-deferred accounts... hopefully into a single tIRA. Then build a CD or UST or TIPs ladder to provide for his gap from now until he is 66/2. So at $35k a year that would be $215k... about 1/3 of his stash but will provide longevity insurance should he get lucky and live long.

Bear tax efficiency in mind, putting fixed income in the tIRA and equities in taxable accounts where qualified dividends and LTCG will get preferential rates and likely not be subject to tax at all.

For the $80k of cash you could put a year of spending and an emergency fund provision in an online savings account and the rest in CDs.

You also might also consider some i-bonds in his taxable accounts since he is risk-averse.

[pb4uski]

Quote:

Originally Posted by Huston55 UPDATE: BIL has reviewed 2021 expenses and determined that he needs ~$2,500/mo. My sense is that this is a decent estimate. I’ve run Mike Piper’s Open SS tool and determined that Option 1 below is optimal by a small margin. Option 1: BIL waits until age 62 to file his own SS; then takes spousal SS @ age 66 yrs & 2 mos. Option 2: BIL takes surviving spousal SS now @ age 60. This option pays ~$2,000/mo. BIL seems very anxious about spending $$$ while waiting until age 66 to claim SS and his state of mind is important, especially regarding behavior during the next downturn. Option 2 provides ~95% of the benefit of Option 1. We can easily generate the remaining $500/mo from low risk investments of the taxable $280k ($80k cash + $200k insurance). So, I will probably suggest to him that he take Option 1. Still working on the VA front (disability claim & VA health care). Also talking to two FAs. Thx again for all the feedback. It’s very helpful.

Did you mean that you will suggest that he take Option 2?

[Huston55]

Quote:

Originally Posted by Huston55 UPDATE: BIL has reviewed 2021 expenses and determined that he needs ~$2,500/mo. My sense is that this is a decent estimate. I’ve run Mike Piper’s Open SS tool and determined that Option 1 below is optimal by a small margin. Option 1: BIL waits until age 62 to file his own SS; then takes spousal SS @ age 66 yrs & 2 mos. Option 2: BIL takes surviving spousal SS now @ age 60. This option pays ~$2,000/mo. BIL seems very anxious about spending $$$ while waiting until age 66 to claim SS and his state of mind is important, especially regarding behavior during the next downturn. Option 2 provides ~95% of the benefit of Option 1. We can easily generate the remaining $500/mo from low risk investments of the taxable $280k ($80k cash + $200k insurance). So, I will probably suggest to him that he take Option 1 2. Still working on the VA front (disability claim & VA health care). Also talking to two FAs. Thx again for all the feedback. It’s very helpful.

Quote:

Originally Posted by pb4uski Did you mean that you will suggest that he take Option 2?

Thx PB. Yes, I did mean I will likely suggest he take Option 2.

[Huston55]

Quote:

Originally Posted by pb4uski I like the idea of consolidating the tax-deferred accounts... hopefully into a single tIRA. Then build a CD or UST or TIPs ladder to provide for his gap from now until he is 66/2. So at $35k a year that would be $215k... about 1/3 of his stash but will provide longevity insurance should he get lucky and live long. Bear tax efficiency in mind, putting fixed income in the tIRA and equities in taxable accounts where qualified dividends and LTCG will get preferential rates and likely not be subject to tax at all. For the $80k of cash you could put a year of spending and an emergency fund provision in an online savings account and the rest in CDs. You also might also consider some i-bonds in his taxable accounts since he is risk-averse.

I should have included in the OP that my BIL is in a "no state income tax" state. And, as you can see from his expenses, he will almost certainly remain in the 12% tax bracket. So, a single fund in his taxable account wouldn't cause a big tax hit, and might be worth a small tax bite for simplicity. However, if his FA (when we have that set) recommends a 30/70-ish AA in two low cost index funds/ETFs, and the FA will be there to help rebalance and guide distributions for income, I'm all for that.

[ivinsfan]

Really, with any VA disability payments option 2 would be just fine. There's a lot to said for getting BIL to a place where he doesn't feel inclined to "mess" with his investment.


It's good you came here with an open mind because now the BIL waiting until he turned FRA seems to be completely off the table.



Do you happen to know how much money your BIL allocated for heath care in that 2500 a month? In my mind that could be the wildcard. If you can find a VSO to help navigate the VA system that might be helpful. In our state a lot of counties have a VSO or you might check his local VFW , DAV , and the like.

[oldtimer]

Quote:

Originally Posted by Huston55 UPDATE: BIL has reviewed 2021 expenses and determined that he needs ~$2,500/mo. My sense is that this is a decent estimate. I’ve run Mike Piper’s Open SS tool and determined that Option 1 below is optimal by a small margin. Option 1: BIL waits until age 62 to file his own SS; then takes spousal SS @ age 66 yrs & 2 mos. Option 2: BIL takes surviving spousal SS now @ age 60. This option pays ~$2,000/mo. BIL seems very anxious about spending $$$ while waiting until age 66 to claim SS and his state of mind is important, especially regarding behavior during the next downturn. Option 2 provides ~95% of the benefit of Option 1. We can easily generate the remaining $500/mo from low risk investments of the taxable $280k ($80k cash + $200k insurance). So, I will probably suggest to him that he take Option 1. Still working on the VA front (disability claim & VA health care). Also talking to two FAs. Thx again for all the feedback. It’s very helpful.

Quote:

Originally Posted by pb4uski Did you mean that you will suggest that he take Option 2?

Quote:

Originally Posted by Huston55 Thx PB. Yes, I did mean I will likely suggest he take Option 2.

Did you mean survivor SS benefits, not spousal SS benefits?