Advice to my brother?

[mystang52]

It seems that OP's brother and sister in law are in the dark about investing, but all in all they haven't done too poorly, so kudos to them for that. But being less than knowledgeable/confident in handling their retirement nest egg, simple is probably better. There were many great suggestions already, so I'd only add that their money should be in a total of 2 locations: liquid savings and one balanced fund (or that managed payout fund).

 

[Dtail]

I don't think you can use FZDXX as a core fund.... just SPAXX or an FDIC insured account.

That is correct.

 

[eroscott]

+1
A balanced fund is the simplest way to go.
I just looked. Fidelity's FBALX has been running neck-to-neck with Vanguard Wellington. Can't be simpler than that.

If he is at Vanguard - Wellsley, if at Fidelity - consider their Balanced fund. I have both. Their returns are comparable.

Wellington seems to be closer in rough AA stock/bond balance. Vanguard have much cheaper annual expenses too.

Others I've "deep dived" into. Adjusted investment to $400K for this example:

Really tho look which ones drop the most during bad times. I use these types of charts to help others and self with "calmer" investments.
Fidelity Balanced -- FBALX drops the most.
Vanguard Wellesley -- VWIAX dropped the least.

 

[PoorOldCountryBoy]

First off, let me state that I make a point of never giving financial advice. I simply don't know enough about investing, and I feel that there are those out there who are in a much better position to advise. This case is different, the person asking my advice is my older brother, whom I love dearly, and who I am afraid may be an easy target. Plus, he specifically asked me, so so I am not giving unsolicited advice. My brother recently retired at 65 from a blue collar job. His wife is also retired. They have no children. Their condo mortgage is paid off. Both know nothing about investing. They will soon be joining me in Florida where they own a paid off condo. With his pension, and their combined Social Security, they can easily cover their monthly cost of living such as food, homeowner fees, entertainment, cable, etc. What they cannot cover with this income is annual costs such as car insurance, life insurance, medical costs over medicaid, and any surpirse major expenses such as the need for a new car, etc. They have about $410,000 in an IRA with Fidelity (my sister in law's 401k). This money is currently parked in a no risk money market account until they can figure an investment strategy. My question is, how should they invest this $400,000+ in order to be able to meet the above mentioned annual costs (which should come to about $8,000 a year, not counting medical or the eventual need for a new car, etc) with the least risk and least maintenance possible. My advice would be to invest a portion in some stock funds, and perhaps a simple fixed annuity. My brother is being bombarded with calls from Edward R. Jones reps, people offering free steak dinners along with a "financial review", and similar offers. I don't want him to make a mistake or be taken advantage of He is an honest, straightforward man, who has always lived simply and frugally. I did suggest a fee only financial advisor and he was lukewarm on the idea. May I ask for suggestions as to how you would advise him to invest this money?

Personalities question - being his brother, do you think he'd be vulnerable to vanity scams in the future? Either the slick sales person, or the flashy new Florida friends who all make 10% annually with Bernie Madoff? If so an annuity, or trust, or trusted financial advisor can protect the money away from bad situations. Or is he mercurial and likely to quickly change his mind if his ego is bruised/pride hurt?

It might sound a bit of a stretch but lets just say the only thing King Lear has at the end is his personality and his vanity...I see it all the time with as folks get older dealing with loss every day, you never know what could trigger it. Of course the financial vultures know this too.

 

[Brat]

If the brother can handle the hoops that Vanguard sets up for access then go that route with either Wellesley or Wellington. If he wants to be able to visit a brokerage and have online access then choose Fidelity and invest in their Balanced fund. In the past Fidelity customers could buy Wellesley and Wellington for a fee but recently I received a notice that implies that option is no longer available (I kept my Wellesley when I moved from Vanguard).

Either brokerage can set up automatic withdrawal.

 

[Spock]

For all those championing Wellesley
maybe you are already aware
but I found it surprising that 18-19% of the bonds in Wellesley are rated down around BBB to BBish.