What Fund to pick for Retired Mom?

[Stillwater007]

I was helping my mom with her taxes yesterday and I discovered that she has around 70k from a Life Insurance payout from my Father's passing about 4 years ago. She didn't know what to do with the money, so she has let it sit with the Insurance company who has been holding it with a .40% interest.
She also shared that she is doing fine with her Retirement and hasn't needed to tap into that money. Her home is paid off. Car paid off. And she's careful with her $.

So I shared she should carefully invest it in the Stock Market and she gasped! Yeah, this was my family growing up...keep all your savings in the bank because the Stock Market is like Vegas ( which it def can be).

Anyways, to my question, what would you recommend she invest in?

I would say she's def risk averse and she's the type to buy & hold and just not pay any attention to it.

I was thinking something like Wellesley MF with Vanguard(which is my Brokerage), it has a reasonable expense ratio for an active fund.

What are your recommendations?

 

[steelyman]

I recently shifted most of an inherited IRA to Vanguard Balanced Index (VBIAX). Like your mom, I don’t want to pay attention to it but take the RMDs. It follows a 60/40 allocation.

 

[latexman]

I recently shifted most of an inherited IRA to Vanguard Balanced Index (VBIAX). Like your mom, I don’t want to pay attention to it but take the RMDs. It follows a 60/40 allocation.

VBIAX grew at about 9.7% the last 4 years. Mom shoulda/woulda/coulda had about $100k now.

 

[disneysteve]

My mom is 90. I recently had her put money in Wellesley. It's only 38.78% stocks so you get that growth piece without a ton of market risk. Average annual return long term is in the 7-8% range. Sure beats the 0.4% money market. Plus the 30-day yield is 1.94% so if she does need some extra cash each month, you can set it to pay out regularly.

 

[enjoyinglife102]

After a lifetime of not investing in the stock market, and based on her reaction to your suggestion of doing so, I wouldn't start now. You say she's set financially so why introduce something that has the possibility of creating high levels of anxiety? The money is to be used (or at least not lost), not to generate returns. My parents never invested either and lived happily into their 80's without stock market worries.

 

[njhowie]

I've had mom in FGRIX and have been extremely happy with it. It's got the right combination of growth + income and has performed well over the years.

 

[VanWinkle]

My vote would be for Wellesley or a similar balanced fund with 30-40% equities and the rest in fixed income.

 

[youbet]

What are your recommendations?

How old is your mother? There is a real possibility that we may have negative real returns on low yielding savings accounts in future years. Your mother may have less purchasing power from the $70k a few years from now than today. If you think there is a real chance she'll be around for 15 - 20 - 25 years, I'd go with one of the balanced funds already mentioned.

 

[Stillwater007]

If my mom feels comfortable to invest it or part of it, it would have to go into a Taxable Brokerage Account, correct? She's already retired at 80yrs old and is healthy as an Ox.

 

[Stillwater007]

How old is your mother? There is a real possibility that we may have negative real returns on low yielding savings accounts in future years. Your mother may have less purchasing power from the $70k a few years from now than today. If you think there is a real chance she'll be around for 15 - 20 - 25 years, I'd go with one of the balanced funds already mentioned.

She's very healthy for her age (just turned 80) as her mom and Grandmother lived past 100. Always has a clean bill of health each year and is cognitively sound. While I don't have a Crystal Ball, she does seem to have a another good 15-20 years honestly.

 

[Ed B]

My mother's financial situation was similar to yours when I invested her $62k, 50% in Wellesley and the other half in VOOG. That was the Spring of 2018. I asked my mother what her goals were with the money. She didn't want or need to draw from it but wanted to leave something for inheritance. That is why I put half in VOOG. It has worked out for her but with a 42% increase over that time.

Wellesley does its job and is a good fund for situations like your mother and mine.

 

[youbet]

If my mom feels comfortable to invest it or part of it, it would have to go into a Taxable Brokerage Account, correct? She's already retired at 80yrs old and is healthy as an Ox.

Yes. I believe the money was tax free to her when your father passed. But, it can't be rolled into an IRA. It'll be in a brokerage account. If you elect the paperless option, there won't be any monthly statements coming in the mail for her to fret over.

 

[youbet]

She's very healthy for her age (just turned 80) as her mom and Grandmother lived past 100. Always has a clean bill of health each year and is cognitively sound. While I don't have a Crystal Ball, she does seem to have a another good 15-20 years honestly.

There's a significant probability your mother's $70k will lose ground to inflation in the future if left in low interest bearing situations. If she needed it for say, LTC, a decade or more from now, the odds are she'd be better of going into a conservative balanced fund now.

Of course "stuff happens" and there is some risk involved no matter what you do.

 

[38Chevy454]

I agree, can't go wrong with Vanguard Wellesley, or a similar balanced fund with around 40% equities/60% fixed income allocation. Since she does not need the money or have plans to spend it, she could go with vanguard Wellington or similar 60/40 blend fund. But being pretty risk averse, she may like the 40/60 better. Even if she has no plans for the money or desire to watch its value over time.

 

[Markola]

+1 on Wellesley. An even more conservative, no maintenance choice would be Vanguard Life Strategy Income, with a 20/80 allocation. The Life Strategy series are low cost, self balancing, globally-diversified funds index funds in various risk allocations.

https://investor.vanguard.com/mutual-funds/profile/overview/VASIX

 

[mpeirce]

+1 on Wellesley.

I agree with Wellesley too, but if she doesn’t trust the market, setting up a simple CD ladder might be an option that she could be comfortable with and still do better than a savings account.

 

[molly312]

I am very interested in these suggestions. Keep them coming, please. I have a lot of cash (many CD's matured), 74 y.o. widow, already have Roth & IRA somewhat invested but need to do something with extra
cash. I am skittish about current market.

 

[Montecfo]

+1 on Wellesley. An even more conservative, no maintenance choice would be Vanguard Life Strategy Income, with a 20/80 allocation. The Life Strategy series are low cost, self balancing, globally-diversified funds index funds in various risk allocations.

https://investor.vanguard.com/mutual-funds/profile/overview/VASIX

+2 or Wellington

 

[Stillwater007]

I have one other question...
Is it tax "efficient" having Wellesley in the Taxable Account? I know some Funds are discouraged going into a Taxable Account which is why I'm asking.

Thank you for all the advice everyone. It definitely helps!

 

[VanWinkle]

I have one other question...
Is it tax "efficient" having Wellesley in the Taxable Account? I know some Funds are discouraged going into a Taxable Account which is why I'm asking.

Thank you for all the advice everyone. It definitely helps!

There are more tax efficient ways to invest, but they require more attention and I don't think she wants to put any time into her investments. If her income is not too high, most of the capital gains and dividends(from the stock side) will be at 0-15% tax. Sometimes simple is better than super tax efficient given her circumstances.

It will actually be more tax efficient than if she had it in an IRA taking withdrawals as ordinary income.

Good luck to you and Mom,

VW

 

[Markola]

I have one other question...
Is it tax "efficient" having Wellesley in the Taxable Account? I know some Funds are discouraged going into a Taxable Account which is why I'm asking.

Thank you for all the advice everyone. It definitely helps!

You are correct that bonds are not tax-efficient compared to stocks, but it sounds like your mother is not interested in stocks. I’m not particularly tax-savvy, so others will need to comment on tax strategy, like buying tax free bonds or how CDs are taxed.

On the other hand, does your mother really have an income tax issue to worry about? For reference my own 81 y.o. mother and her unmarried partner have about $430,000 in Vanguard’s Personal Advisor Services program with a 60% bond allocation, also have SS and yet neither pay federal or state income taxes. They file separately.

 

[Markola]

And, OP, since you are Vanguard investor (me too, 100%!) you and your mother could call them for advice for what to do with this windfall lump sum.

 

[38Chevy454]

I have one other question...
Is it tax "efficient" having Wellesley in the Taxable Account? I know some Funds are discouraged going into a Taxable Account which is why I'm asking.

Thank you for all the advice everyone. It definitely helps!

Let's see here, pay 0-15% tax on (for example) average 5% gain in Wellesley, or pay tax on 0.4% gain on the savings account. Hmm, I'll choose door number one please.

 

[homestead]

I noticed recently that Morningstar downgraded Wellington and Wellesley from 5 star down to 4 Star.
Also if you have Wellesley in taxable account you may like Vanguard Tax-Managed Balanced Adm VTMFX better as doesn't typically put out capital gains and has higher returns than Wellesley.

 

[SnowballCamper]

I'd go for a municipal bond fund. She seems pretty risk averse (in volatility terms).

If she has a very simple tax return, this would keep it simple. Of course the other options could get more return.