Allocations for 80 yr old

[PlayinwithFIRE]

Hi all,

I'm about to learn how my mom is setup in her various accounts. She and my late father have worked with an investment advisor
for many years and "trusts" him..so I'm not expecting to be able to do anything drastic like shifting to self managed VG or Fid. Things I am wondering about though:

1) What is the current allocation settings for the managed funds?
2) How much is this service costing?
3) What has been the performance over the years?
4) What is an appropriate allocation for an 80 yr old? I know she complains about RMDs..so I assume some large % is held in IRAs. She has various other sources of income (SS+work+other) which amount to ~50K/year and she doesn't actually need more to live on..so RMDs usually get handed out as gifts to various people. Should she be converting to Roth?
5) What is the plan going forward for her? I understand she has some form of Long Term Health Care..but know little about this. Are there pertinent questions to be asked about this ?
6) She lives independently, but there are some concerns about 5-10 yr time frame on health/dementia etc based on family history. How is a dPOA setup to avoid such things as someone taking advantage and getting her to sign away everything ? What triggers POA activation ? I feel like there are some sharks circling.

Any other advice/things to inquire about would be greatly appreciated !

PWF

 

[pacergal]

She is still getting income from working at 80? Good for her.
Those are some good questions to ask her advisor.

Things I would consider:
POA
Healthcare POA
does she have Advanced Directives
Are you cosigner on her accounts or trustee?

 

[Gotadimple]

If she is complaining about RMDs you can suggest that she gift to charities in varying amounts equal to the required distribution amount. That reduces the tax liability for taking the RMD. Two points:
1. She is not restricted to just the RMD amount for the year - but it is capped.

Give more, tax-free: Eligible IRA owners can donate up to $105,000 to charity in 2024 | Internal Revenue Service

IR-2024-289, Nov. 14, 2024 — The Internal Revenue Service reminds individual retirement arrangement (IRA) owners age 70½ and older that they can make up to $105,000 in tax-free charitable donations during 2024 through qualified charitable distributions. That’s up from $100,000 in past years.

www.irs.gov

2. If you know where her T-IRA is find out if they offer checks for the T-IRA. Then she can write checks to charities from the account. She'll need to keep track how much she distributes to file federal income tax.

 

[Gotadimple]

Re: Long-term Care - who is the insurer? what are the limits? is there an inflation clause that increases the benefit amount? Her FA may not know these answers, so find out who the insurance agency is and sit down for a separate discussion. Ask the FA for trusted information available on the internet so you can become educated. This is why you need to know who holds her POA for healthcare and financial info as they will need to file claims with the insurance carrier to reimburse these costs.

 

[Mark1]

...."trusts" him..so I'm not expecting to be able to do anything drastic like shifting to self managed VG or Fid.....

Try not to take it personal if your DM seems to trust the advisor more than you, and prefers his advice over yours, although it seems like you already encountered and accepted this reality.

What is an appropriate allocation for an 80 yr old?

Appropriate? Somewhere between 0 and 100% equities, or likely right around where the advisor has her.
No sense in stressing out DM. After all, it is her money.

 

[OldShooter]

The FA will probably refuse to talk to you unless he has specific permission from DM. I suggest that you have her contact the FA to get the broker's forms and understand the requirements.

One question not on your list is whether he has a fiduciary relationship with her. If his answer is at all fuzzy, I would ask for a letter signed by his compliance officer and confirming the status. I would also brokercheck the guy. BrokerCheck - Find a broker, investment or financial advisor

Re performance over the years this is an internal rate of return number that they probably do not have. You will have to put all her deposits and withdrawals into a spreadsheet. I think XRR is the Excel function you'll need.

There is no "appropriate allocation" that is based on her age. It depends on her needs for cash, her tolerance for volatility, and her goals for the money that will become her estate. I don't have @Mark1's faith in the FA, though. If he is paying attention at all, he is probably using one of the brain dead "age in bonds" type rules.

If it were me and the FA has her in mutual funds, I would calculate a dollar weighted average expense ratio for the portfolio and challenge him if it is high, like 50bps or more. 25 would be better. I would also make sure she does not have load funds or funds where she is paying him 12b-1 fees.

 

[Dtail]

For my mom who is 91, I have 11% in the market, but there is a floor, so effectively only 4% is at risk.
Unfortunately, my father got into this annuity type product.

 

[PlayinwithFIRE]

Thanks everyone for input- I am scheduled to have a call with Mom and FA on
Wed this week. First introduction.

I'm not jumping in to change everything, I would just like some piece of mind that they've done right by her over the years and have a start point to keep an eye on it.

I kind of know what she has in total with them, just no idea of basis or anything else.

pwf

 

[Koolau]

Hi all,

I'm about to learn how my mom is setup in her various accounts. She and my late father have worked with an investment advisor
for many years and "trusts" him..so I'm not expecting to be able to do anything drastic like shifting to self managed VG or Fid. Things I am wondering about though:

1) What is the current allocation settings for the managed funds?
2) How much is this service costing?
3) What has been the performance over the years?
4) What is an appropriate allocation for an 80 yr old? I know she complains about RMDs..so I assume some large % is held in IRAs. She has various other sources of income (SS+work+other) which amount to ~50K/year and she doesn't actually need more to live on..so RMDs usually get handed out as gifts to various people. Should she be converting to Roth?
5) What is the plan going forward for her? I understand she has some form of Long Term Health Care..but know little about this. Are there pertinent questions to be asked about this ?
6) She lives independently, but there are some concerns about 5-10 yr time frame on health/dementia etc based on family history. How is a dPOA setup to avoid such things as someone taking advantage and getting her to sign away everything ? What triggers POA activation ? I feel like there are some sharks circling.

Any other advice/things to inquire about would be greatly appreciated !

PWF

What kind of an "investment advisor" is s/he? An independent like a CFP or just a "sales person" at (for instance) Edward Jones or equivalent? Does the investor make an hourly rate, assets under management or from sales?

Those would be my questions (with hourly rate advisor the only one I would choose - having wasted too much money on sales people in my past.)

 

[PlayinwithFIRE]

I thought some may be interested in what I learned.

She is working with a CFP that does trading thru another brokerage house. I was told this is a standard brokerage house for CFP's (LPL financial I think)

Fees are asset based amounting to roughly 0.5% (.25 fund related, .25 service fee)

Mostly mutual funds with a 65/35 split on moderate /dividend/income.

Couldn't tell me if there were load funds or 12b-1 fees.

I can ultimately get viewer access to see current balance, etc. They can digitize important docs..Will , POA etc and keep them in their portal.

Gave me some fuzzy answer about fiduciary, saying the CFP office is a fiduciary but the account types/ way of working with mom are not bound by that. Not sure if i misinterpreted but this requires further, deeper clarification as far as I'm concerned.


thank you all for you help !

PWF

 

[Sojourner]

She is working with a CFP that does trading thru another brokerage house. I was told this is a standard brokerage house for CFP's (LPL financial I think)

Trading? This is a "red flag" word, IMHO. A good financial advisor should not be engaged in "trading" in any meaningful way, other than occasionally purchasing or redeeming ETF or mutual fund shares. Really, there should have been (and should currently be) basically a "set it and forget it" asset allocation that just needed periodic rebalancing.

Fees are asset based amounting to roughly 0.5% (.25 fund related, .25 service fee)

Definitely on the high side, but not eye-popping.

Mostly mutual funds with a 65/35 split on moderate /dividend/income.

So what is the fixed-income to equity ratio?

Couldn't tell me if there were load funds or 12b-1 fees.

Huge red flag here.

I can ultimately get viewer access to see current balance, etc. They can digitize important docs..Will , POA etc and keep them in their portal.

Keep pushing aggressively for this. A properly prepared and executed will and POA are critical.

Gave me some fuzzy answer about fiduciary, saying the CFP office is a fiduciary but the account types/ way of working with mom are not bound by that. Not sure if i misinterpreted but this requires further, deeper clarification as far as I'm concerned.

Another huge red flag.

 

[OldShooter]

Good work!

• "She is working with a CFP that does trading thru another brokerage house. I was told this is a standard brokerage house for CFP's (LPL financial I think)"

All OK. LPL is a biggie in the financial advisory business -- sort of a full service back office. I am on the investment committee of a nonprofit. Our FA is with LPL. The account statements DM gets are almost certainly generated by LPL. https://www.lpl.com/

• "Fees are asset based amounting to roughly 0.5% (.25 fund related, .25 service fee)"

Pretty good rate assuming it is AUM, actually. Our nonprofit's FA is running about $5M for us and charging 58bps.

• "Couldn't tell me if there were load funds or 12b-1 fees."

Bad. He may have her in a standard LPL "sleeve" instead of managing the money himself but he should not be so ignorant. Most, maybe all, load funds with have the letter "A" at the end of the ticker. With a list of funds and a little Morningstar time you can answer these questions. If he is charging a fee, he should not be putting her in load funds.

• "Gave me some fuzzy answer about fiduciary, saying the CFP office is a fiduciary but the account types/ way of working with mom are not bound by that. Not sure if i misinterpreted but this requires further, deeper clarification as far as I'm concerned."

This IMO is the biggest negative from your meeting. LPL is a registered investment advisor (RIA), so by virtue of that, he is probably a fiduciary "Investment Advisory Representative" (IAR). He should not be fuzzy about this. If you continue to get fuzz, ask to talk to his Compliance Officer and see what you get. Yes, he has one.

Did you brokercheck him? Anything interesting there?

 

[Koolau]

I hate the thought of going through this for myself, let alone doing it for a loved one. I feel more responsibility for another person I'm trying to help than when I do it for myself.

Good luck and keep pressing!

 

[1242Vintage]

I’ve been going through this for my Mom this last year. Moved her to long term care … Alzheimer’s. Here are early lessons I learned …

If applicable, get a HIPPA form signed off. This will let you participate and be informed about any medical discussions and allow you to make and attend medical appointments if needed.

Many investment houses and banks and even utilities have their own version of a Power of Attorney. Don’t be surprised by this. Just wade on through and keep good records. And in our case the Alzheimer’s diagnosis triggered the need for the POA.

I just wrapped up consolidating all her various investment and bank accounts under one firm. Her assets are under management by a very trusted colleague from my MBA school days. Coming up will be an effort to review investments and performance.

Plz keep a keen eye out for online fraud! Mom got scammed out of a significant sum a few years ago. I should have been more aware and engaged in her finances back then!

Your parent is fortunate to have you assisting and looking out for them.

 

[Koolau]

I’ve been going through this for my Mom this last year. Moved her to long term care … Alzheimer’s. Here are early lessons I learned …

If applicable, get a HIPPA form signed off. This will let you participate and be informed about any medical discussions and allow you to make and attend medical appointments if needed.

Many investment houses and banks and even utilities have their own version of a Power of Attorney. Don’t be surprised by this. Just wade on through and keep good records. And in our case the Alzheimer’s diagnosis triggered the need for the POA.

I just wrapped up consolidating all her various investment and bank accounts under one firm. Her assets are under management by a very trusted colleague from my MBA school days. Coming up will be an effort to review investments and performance.

Plz keep a keen eye out for online fraud! Mom got scammed out of a significant sum a few years ago. I should have been more aware and engaged in her finances back then!

Your parent is fortunate to have you assisting and looking out for them.

I agree about watching for leaches scamming loved ones with dementia. An insurance guy scammed my mom. I finally figured it out and got my mom's money back but it was a hassle and just about as devious a person I ever had to deal with - and no online involved.

 

[Dtail]

I’ve been going through this for my Mom this last year. Moved her to long term care … Alzheimer’s. Here are early lessons I learned …

If applicable, get a HIPPA form signed off. This will let you participate and be informed about any medical discussions and allow you to make and attend medical appointments if needed.

Many investment houses and banks and even utilities have their own version of a Power of Attorney. Don’t be surprised by this. Just wade on through and keep good records. And in our case the Alzheimer’s diagnosis triggered the need for the POA.

I just wrapped up consolidating all her various investment and bank accounts under one firm. Her assets are under management by a very trusted colleague from my MBA school days. Coming up will be an effort to review investments and performance.

Plz keep a keen eye out for online fraud! Mom got scammed out of a significant sum a few years ago. I should have been more aware and engaged in her finances back then!

Your parent is fortunate to have you assisting and looking out for them.

+1
I consolidated all investment assets of my mom under Fidelity and Ally. I control all the Fidelity assets through a POA, plus I am effectively "my mom" under Ally.