Stepson wanting advice on starting investing

[Badger]

My 58 year old stepson wants to talk to me about starting investing. He works for himself as a tile setter, income fluctuates so there is not a regular paycheck, savings is minimal, he has $1k to start, and knows absolutely nothing about investing except what he is told by his friends who probably know less than him. He lives with his girlfriend of 20+ years who works and owns the home where they are living. His daughter is grown with a family of her own.
An investing plan will need to be simple with an easy method for contributions. I would hope this would be a learning experience that prepares him for when he receives a sizable inheritance when we are gone. My initial thought is to set him up with a Vanguard program with something like one of their index funds or Wellington. We gift to both him and his sister $7k on their birthday and on Christmas each year that helps soften a tight budget.

What other information would you need to make some recommendations?


Cheers!

 

[pb4uski]

I agree. I would keep it simple and go with Wellington (65/35) or Wellesley (40/60) depending on his risk appetite.

Initial investment is $3k so if he only had $1k perhaps you can accelerate your $2k of you next $7k gift a bit to help him over the hump.

 

[Jenna]

Give him J Collins Book-The Simple Path to Wealth. He needs to understand his own ivestments and this is an easy read

 

[ivinsfan]

Does he have an IRA or a Roth..I'd start there. Or perhaps an emergency fund. In a separate location from his regular bank.


A lot of self employed living paycheck to paycheck people get smaller SS checks too.

Am I understanding you give him 14K a year and he needs it all to live on?


And he is 58? I can't see an investing discussion going well between the two of you.



Do you and his Mom need to set up a trust when you are gone so he has money to grow old with?

 

[mrfeh]

https://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit

 

[racy]

I got married because I needed 2 incomes to afford my lifestyle.
There are financial advantages of being married. https://tinyurl.com/yewvcszl

 

[EastWest Gal]

If he and his girlfriend have been living together for 20+ years, they should get married, and should have done so long ago. They do not to co-mingle finances, but tax advantages may be significant. I’m particularly thinking about Social Security, income tax, and the home. If she dies, he will be homeless.

 

[Badger]

Thank you all for your responses and suggestions. They are greatly appreciated.

I agree. I would keep it simple and go with Wellington (65/35) or Wellesley (40/60) depending on his risk appetite.


Initial investment is $3k so if he only had $1k perhaps you can accelerate your $2k of you next $7k gift a bit to help him over the hump.

When we talk next I will guiding him toward Vanguard Wellington and provide the difference to start his account. Another option would be a retirement fund based on his age.

Does he have an IRA or a Roth..I'd start there. Or perhaps an emergency fund. In a separate location from his regular bank.
I don't know. He is self employed and has no experience with setting up IRA or Roth.

A lot of self employed living paycheck to paycheck people get smaller SS checks too.

Am I understanding you give him 14K a year and he needs it all to live on?


Yes. Both he and his sister. We want to help (and enjoy being able to see while we are still alive) make life a little easier when he is having to drive his old work truck on balding tires etc.


And he is 58? I can't see an investing discussion going well between the two of you.

You may be right but he called me to ask my help. We will see.

Do you and his Mom need to set up a trust when you are gone so he has money to grow old with?

He along with his sister are the sole beneficiaries of our trust although it needs to be updated to see if we can set it up to distribute it over a period of years.

If he and his girlfriend have been living together for 20+ years, they should get married, and should have done so long ago. They do not to co-mingle finances, but tax advantages may be significant. I’m particularly thinking about Social Security, income tax, and the home. If she dies, he will be homeless.

After 20+ years I don't think that will happen. It may be more of her choice. I don't think there is enough income to make a tax difference. Fortunately for him becoming homeless will not be an issue. Maybe more of a problem for her if he dies.


He is also asking about a life insurance policy. I have a feeling he is seeing those insurance company commercials to pay for burial or the ones saying you can get your money back. I plan to convince him how bad those are for someone like him. He will have no need for that at his age. No one to leave anything to other than his girlfriend or daughter. It would be a waste of money he could use to learn about investing.



Cheers!

 

[ivinsfan]

Good luck OP yes if your SS is financially uneducated maybe it would be good to adjust the trust payouts to annual payments after you guys are gone. Guys like your SS are more likely to be the victims of grifters when receiving a large sum of money.



It's sounds even at 58 he isn't really self supporting and will need that trust to keep from eating dog food.



You won't always be around to steer him away from bad financial decisions. I know quite a few guys like out here in rural MN. Nice guys but clueless about retirement and saving money.

 

[Koolau]

If he is trustworthy to NOT get into an investment, help him set up a ROTH IRA and YOU fund it for a while. Tell him the MINUTE he gets into it, you are done funding it and HIM. Time for tough love (past time IMHO - but then again, I can barely run my own life so YMMV.)

 

[pb4uski]

I agree. I would keep it simple and go with Wellington (65/35) or Wellesley (40/60) depending on his risk appetite.

Initial investment is $3k so if he only had $1k perhaps you can accelerate your $2k of you next $7k gift a bit to help him over the hump.

Or actually now that I think of it, DS is only a bit older than him and is in Vanguard Target Retirement 2050 Fund which as 90/10.... so a target date fund with an AA appropriate for him is another possibility.