what to invest for retired mom

[ER_Hopeful]

DM is about 68, has about 120k in savings (short term CD for now). She lives a simple life and has enough to cover her expenses so no need to touch those money in the near term.



She is looking for better investment than CD's, what are some good choices? thanks.



P.S. she lives in TX.

[DrRoy]

If you are only thinking short term, then CD's or a money market account is fine. If long term, then a portion in an equity index ETF or fund.

[jim584672]

Treasury Bills are higher than most CDs right now, and no state taxes.

[pb4uski]

You might want to look into agency bonds. These are bonds issued by a government sponsored enterprise and while they are not full faith and credit like US Treasury bills and notes, they are implicitly backed by the US government. Examples are the Federal Home Loan Bank and the Federal Farm Credit Bank. Most are rated AA+ by S&P and AAA by Moody's which is the same as the US government.

They typically pay a little more interest but are often callable.

[VanWinkle]

Look at a balanced fund with low expenses and low equity exposure. Wellesley Income may be a good fit and she could take the dividends and capital gains as income each year. Simple one fund solution with enough risk to beat CDs and bonds alone. Any low expense, low equity exposure fund could work.

VW

[ERD50]

" has enough to cover her expenses"....

for now? What about inflation? At 68, if in good health overall, she could be in the camp that makes it into her 90's. After 20~30 years, her income might not be enough.

Is it all SS or other inflation adjusted income? That would help a lot. Otherwise, for a 20~30 year time frame, historically the market has been the best place.

I understand not wanting to face market volatility, but inflation is the other side of that coin. Inflation will almost certainly cut her buying power almost in half over that time. At no time in history has the market dropped that much (start-to-finish) over a rolling 20~30 year period.

3% inflation math:

0.97^20 = 0.54 - cut almost in half in 20 years

0.97^30 = 0.40 - cut 60% in 30 years

-ERD50

[ER_Hopeful]

is there an equivalent of Wellesley or Wellington in Fidelity? She already has an account there, i think they charge transaction fees to buy Vanguard funds? But I can always open an acct for her at Vanguard if needed.


For Wellesley, if she does the buy and hold, what kind of income can she get from it? do i look at the Distribution tab in here https://www.morningstar.com/funds/xn...lx/performance


does it mean it paid out (2.54 + .2 + .2 + .19 ) per share in all of 2022 and that's what she would get ?

[Phroig]

SCHD. If you want a Fidelity balanced fund, both FPURX and FBALX are good options.

[OldShooter]

Unfortunately, saying "balanced fund" isn't really saying enough.

First question should be "What percentage is in equities?" This will vary from fund to fund and you will have to decide how aggressive your DM's portfolio should be.

The second question should be "What kind of equities?" A total market index is probably the best choice for the equity portion, though IIRC one or more of the VG balanced funds is a stock-picking fund that has done well. But here's an examply of why you need to watch: https://www.reuters.com/article/us-f...-idUSKBN1GH1SI

Finally, what are the fees? Morningstar studies consistently show that the best predictor of a fund's performance is low fees. I suggest that there shouldn't be any reason to pay more than 1/2% (50 basis points) and less is better. Some care is needed here, though. If the balanced fund holds other mutual funds, you DM will be paying both the balanced fund's fees and the fees charged by the underlying funds. So add them up before making a decision.

[Dash man]

I’d suggest the ETF SCHD. It’s a dividend fund that invests in stocks that grow their dividends and have a long history of doing so. They’re mostly value stocks, so they didn’t go down as much in 2022 as most funds.
Avoid mutual funds in a taxable account and use ETFs, so there are no capital gain surprises at the end of the year.
In her 60s, all bonds are too conservative.

[pb4uski]

Quote:

Originally Posted by ER_Hopeful is there an equivalent of Wellesley or Wellington in Fidelity? She already has an account there, i think they charge transaction fees to buy Vanguard funds? But I can always open an acct for her at Vanguard if needed. For Wellesley, if she does the buy and hold, what kind of income can she get from it? do i look at the Distribution tab in here https://www.morningstar.com/funds/xn...lx/performance does it mean it paid out (2.54 + .2 + .2 + .19 ) per share in all of 2022 and that's what she would get ?

Yes, that is a good way to look at it from an income perspective. Except the numbers would be 0.2200+0.1930+0.1927+0.1698 or 0.7755 and in relation to the $29.95 value at 12/31/2021 a 2.6% yield. By comparison, today a 2-year CD yields 4.75%.

If you are focused solely on income, Wellesley or Wellington are probably poor choices in that while they are both fine funds they are not a suitable substitute for CDs. They have a lot more risk than CDs and their income distributions are a lot less than CDs today.

Type	$/Share	Payable date	Record date	Reinvest date	Reinvest price
Dividend	$0.220000	12/20/2022	12/16/2022	12/19/2022	$24.60
LT Cap Gain	$1.101248	12/20/2022	12/16/2022	12/19/2022	$24.60
Dividend	$0.193000	09/19/2022	09/15/2022	09/16/2022	$25.31
Dividend	$0.192700	06/21/2022	06/16/2022	06/17/2022	$25.22
Dividend	$0.169800	03/23/2022	03/21/2022	03/22/2022	$27.62

Is her account at Vanguard an IRA or a taxable account?

If the CD money that you are looking to invest in the OP is taxable account money (not in an IRA) AND her Vanguard account is a taxable account then you could transfer the CD money there and start investing. It would probably be easier if her Vanguard account is a brokerage account rather than a mutual fund account.. she would have more investment choices available to her.

[ER_Hopeful]

Quote:

Originally Posted by pb4uski Yes, that is a good way to look at it from an income perspective. Except the numbers would be 0.2200+0.1930+0.1927+0.1698 or 0.7755 and in relation to the $29.95 value at 12/31/2021 a 2.6% yield. By comparison, today a 2-year CD yields 4.75%. If you are focused solely on income, Wellesley or Wellington are probably poor choices in that while they are both fine funds they are not a suitable substitute for CDs. They have a lot more risk than CDs and their income distributions are a lot less than CDs today. Type $/Share Payable date Record date Reinvest date Reinvest price Dividend $0.220000 12/20/2022 12/16/2022 12/19/2022 $24.60 LT Cap Gain $1.101248 12/20/2022 12/16/2022 12/19/2022 $24.60 Dividend $0.193000 09/19/2022 09/15/2022 09/16/2022 $25.31 Dividend $0.192700 06/21/2022 06/16/2022 06/17/2022 $25.22 Dividend $0.169800 03/23/2022 03/21/2022 03/22/2022 $27.62 Is her account at Vanguard an IRA or a taxable account? If the CD money that you are looking to invest in the OP is taxable account money (not in an IRA) AND her Vanguard account is a taxable account then you could transfer the CD money there and start investing. It would probably be easier if her Vanguard account is a brokerage account rather than a mutual fund account.. she would have more investment choices available to her.

can you explain why you excluded the 1.1012 LTCG from the calculation? does the fund not give those out ?


She has an IRA in Fidelity but I can open a Vanguard taxable acct for her anytime.

[pb4uski]

Quote:

Originally Posted by ER_Hopeful can you explain why you excluded the 1.1012 LTCG from the calculation? does the fund not give those out ? She has an IRA in Fidelity but I can open a Vanguard taxable acct for her anytime.

I didn't include them because they are not income and can vary widely from year to year... but if you prefer to include them by all means go ahead.

Since that money is currently in CDs, to compare it with Wellesley is a bit of an apples to oranges comparison, but I suspect that you already know that.

So the $120k is in short term CDs in an IRA at Fidelity? If so, I'm pretty sure that you can buy Wellesley or Wellington in her Fidelity IRA.. essentially swap the short term CDs for Wellesley or Wellington. Just keep in mind that Wellesley and Wellington are much riskier and volatile than CDs and in the short term you could lose money in Wellesley or Wellington but you can't lose money in a CD as long as you hold to maturity.

You would NOT want to transfer IRA money at Fidelity to a new taxable account at Vanguard. If the IRA is a traditional IRA the transfer would be a taxable event and if it is a Roth IRA you would lose the tax-free attributes.

[VanWinkle]

Quote:

Originally Posted by OldShooter Unfortunately, saying "balanced fund" isn't really saying enough. First question should be "What percentage is in equities?" This will vary from fund to fund and you will have to decide how aggressive your DM's portfolio should be. The second question should be "What kind of equities?" A total market index is probably the best choice for the equity portion, though IIRC one or more of the VG balanced funds is a stock-picking fund that has done well. But here's an examply of why you need to watch: https://www.reuters.com/article/us-f...-idUSKBN1GH1SI Finally, what are the fees? Morningstar studies consistently show that the best predictor of a fund's performance is low fees. I suggest that there shouldn't be any reason to pay more than 1/2% (50 basis points) and less is better. Some care is needed here, though. If the balanced fund holds other mutual funds, you DM will be paying both the balanced fund's fees and the fees charged by the underlying funds. So add them up before making a decision.

I said a low cost balanced fund with a low equity exposure to reduce risk.

VW

[Time2]

I was ask to help my 75 year old financially ignorant* sister in law move her 401k and stock from her previous employer and move and invest it else where. If it was my money I would have put it in a VTI or VOO and forgot about it, but I was not about to do that for her and then have the market drop and take the wrath. So I called her son, he got it taken care, well his mother drove 300 miles on the last day before there were some type of problem to get a the check. Then as the money was sitting in a IRA bank account he ask me what to do with it. I ask him, will your mother ever spend it, he said no, and that is what I thought also. So, I said, then you are investing it for yourself, (he's an only child), he said yes, that's probably true. I left it at that, and suspect almost a year later it is still in a bank account.


* Here is financial ignorant on my wife's side of the family, they are immigrants from the middle 70s, my wife is the only one that speaks English very well. The others are quite difficult to communicate with still. My wife always the facilitator, that knows everybody and is not afraid to ask for a favor. Went to the meat dept manager of a supermarket that is part of a large super market chain. And said, hire my sister for the seafood dept, she doesn't speak English, but she will work hard for you, if she doesn't work out in a week, let her go and that's that! Her sister had worked for a brother in his seafood store, but he didn't pay well or treat her well, but she got a lot of experience also grew up with fish. The first thing they did was hand her a large grouper and said clean and filet it. Perfect, right down her alley, she did great and spent the next 20 or 25 years at the store. I might add she only got to second grade in her country. She always put money into the 401k and she bought stock and was given some by the company. When I was ask to move the money, I found she had almost $600k with the company, yet she knew nothing about it.

The rest of the family has done as well or even much better, and I lucked out with my wife, as the good saver and I knew to invest in mutual funds a number of years after we got married.

[RenoJay]

I’d probably stick with a 1-2 year CD for now. I doubt she’d do much better with stocks and the CD protects principle and kicks off monthly income.

[FREE866]

If shes in good health and 68 there is a strong possibility of a 15-20 year time horizon. If she also doesn't need the money and you will eventually get it the time frame is even longer. Based on that , I'd go with a total market index fund like VTI.

[pb4uski]

Quote:

Originally Posted by OldShooter Unfortunately, saying "balanced fund" isn't really saying enough. First question should be "What percentage is in equities?" This will vary from fund to fund and you will have to decide how aggressive your DM's portfolio should be. The second question should be "What kind of equities?" A total market index is probably the best choice for the equity portion, though IIRC one or more of the VG balanced funds is a stock-picking fund that has done well. But here's an examply of why you need to watch: https://www.reuters.com/article/us-f...-idUSKBN1GH1SI Finally, what are the fees? Morningstar studies consistently show that the best predictor of a fund's performance is low fees. I suggest that there shouldn't be any reason to pay more than 1/2% (50 basis points) and less is better. Some care is needed here, though. If the balanced fund holds other mutual funds, you DM will be paying both the balanced fund's fees and the fees charged by the underlying funds. So add them up before making a decision.

Quote:

Originally Posted by VanWinkle I said a low cost balanced fund with a low equity exposure to reduce risk. VW

Yes, indeed you did.

Quote:

Originally Posted by VanWinkle Look at a balanced fund with low expenses and low equity exposure. Wellesley Income may be a good fit and she could take the dividends and capital gains as income each year. Simple one fund solution with enough risk to beat CDs and bonds alone. Any low expense, low equity exposure fund could work. VW