Investing for My Parents

[Alcofribas]

I have financial POA for my father (94) and mother (85) and I'm trying to decide how to invest the bulk of their savings. I'm leaning toward the following options: 1. 100% VWIAX 2. 100% VTINX 3. a combination of VWINX and VTINX or 4. active management by Fidelity with a conservative or moderately conservative allocation. The expense for Fidelity management is just under 1%. Expenses for VWIAX and VTINX are less than half of that.

Any advice on these options or any others would be welcome. Investing my own savings is one thing but investing for my parents gives me extra anxiety. I don't want to screw this up.

 

[Sunset]

What are they in now ?

Depends on how much are we talking about: $200K is different than $2M.

At that age, I'd probably put 80% in TIPs or Treasuries a 5 year ladder, and the remaining in SCHD and VTI.

 

[OldShooter]

Always a useful question: What problem are you trying to solve?

How much money are you running? What life expectancies do you want to plan for? Is the primary objective to generate income to support them? How much is needed per year? Is there plenty of money and you are trying to invest for their heirs and beneficiaries? Do you need to hire someone to take this task out of your hands? ... and many other questions and possibilities.

Once the problem is well defined, then its time to discuss investment options. At this point, too, developing at least a brief IPS might be a good idea and a means of communication with Dad and Mom.

(WADR, IMO a recommendation to put 80% in TIPS would be equally silly if their total investable assets are $20K, are $20M, or if the amount is unknown.)

 

[FREE866]

Comes down to who is the money for?



And what is the beneficiaries investment time horizon?


If its a 10+ year time horizon I certainly wouldn't be conservative with the money so I like the idea of the bulk in VTI, but I tend to be more aggressive than the majority on this board. Definitely not in favor of paying someone 1% to manage it, but that really depends on your temperament.

 

[DrRoy]

VTI and a better performing income fund.

 

[VanWinkle]

I would agree with the VWIAX and a cash component large enough to handle 2 years of need. Wellesley is conservative and inexpensive. Fidelity has no magic to do better.

my 2 cent worth,

VW

 

[target2019]

I have financial POA for my father (94) and mother (85) and I'm trying to decide how to invest the bulk of their savings. I'm leaning toward the following options: 1. 100% VWIAX 2. 100% VTINX 3. a combination of VWINX and VTINX or 4. active management by Fidelity with a conservative or moderately conservative allocation. The expense for Fidelity management is just under 1%. Expenses for VWIAX and VTINX are less than half of that.

Any advice on these options or any others would be welcome. Investing my own savings is one thing but investing for my parents gives me extra anxiety. I don't want to screw this up.

Do no harm.

You haven't said anything about how they are invested now, what are there financial needs, and so on.

 

[Alcofribas]

Always a useful question: What problem are you trying to solve?

How much money are you running? What life expectancies do you want to plan for? Is the primary objective to generate income to support them? How much is needed per year? Is there plenty of money and you are trying to invest for their heirs and beneficiaries? Do you need to hire someone to take this task out of your hands? ... and many other questions and possibilities.

Once the problem is well defined, then its time to discuss investment options. At this point, too, developing at least a brief IPS might be a good idea and a means of communication with Dad and Mom.

(WADR, IMO a recommendation to put 80% in TIPS would be equally silly if their total investable assets are $20K, are $20M, or if the amount is unknown.)

They have about $400K now not including the value of their home, which is paid off. Current allocation:

$91K I bonds
$88 K AGG
$63K ITOT
$43K AAPL
$33K VWO
$24K VEA
$27K USAGX
$40K cash

Too aggressive for me, but according to a Fidelity analysis there is a high probability that they will have sufficient funds based on current expenses if one or both survive another 12 years if I do nothing. What most concerns me is having adequate funds to cover a potential need for assisted living or nursing home care/major medical expenses (they do have Medicare supplemental insurance).

 

[Alcofribas]

Comes down to who is the money for?



And what is the beneficiaries investment time horizon?


If its a 10+ year time horizon I certainly wouldn't be conservative with the money so I like the idea of the bulk in VTI, but I tend to be more aggressive than the majority on this board. Definitely not in favor of paying someone 1% to manage it, but that really depends on your temperament.

That's what I've been thinking. Fidelity active management is more expensive but there is no reason to believe that it is any better than VTI or the actively managed VWI. Thanks!

 

[Sunset]

They have about $400K now not including the value of their home, which is paid off. Current allocation:

$91K I bonds
$88 K AGG
$63K ITOT
$43K AAPL
$33K VWO
$24K VEA
$27K USAGX
$40K cash

Too aggressive for me, but according to a Fidelity analysis there is a high probability that they will have sufficient funds based on current expenses if one or both survive another 12 years if I do nothing. What most concerns me is having adequate funds to cover a potential need for assisted living or nursing home care/major medical expenses (they do have Medicare supplemental insurance).

You haven't mentioned, how much they spend from their savings per year.

However, even without that number, $400K is not a huge amount considering assisted living costs or nursing home which is more costly.

For us, when we searched assisted living, the costs were going to be ~$120K per year for 1 person, so not cheap. Key is to get into a place that will keep the person there once the $$ runs out.

You could possibly fine tune the holdings, by looking at the I-bonds and see if any have a fixed rate of 0%, because the ones now being sold have a fixed rate of 1.3% , basically sell and buy (use gift box for more than $10K pp) to upgrade. Of course the income tax issue may cause this to be a too expensive maneuver.

At this age, I would not be looking for lots of growth, which is why I would favor I-bonds for keeping purchasing power for a good portion of their money as they already have done.

 

[HarveyS]

Whatever you do, I suggest you document it very well and discuss the decisions with your siblings (assuming you have some) or other heirs prior to implementing. They don't necessarily need to agree, but they should know.

 

[Alcofribas]

You haven't mentioned, how much they spend from their savings per year.

However, even without that number, $400K is not a huge amount considering assisted living costs or nursing home which is more costly.

For us, when we searched assisted living, the costs were going to be ~$120K per year for 1 person, so not cheap. Key is to get into a place that will keep the person there once the $$ runs out.

You could possibly fine tune the holdings, by looking at the I-bonds and see if any have a fixed rate of 0%, because the ones now being sold have a fixed rate of 1.3% , basically sell and buy (use gift box for more than $10K pp) to upgrade. Of course the income tax issue may cause this to be a too expensive maneuver.

At this age, I would not be looking for lots of growth, which is why I would favor I-bonds for keeping purchasing power for a good portion of their money as they already have done.

They are currently spending about $1500/month over what they get from SS. The I Bonds are from the very early 2000's and so have a higher fixed rate than the latest issues. I'm thinking that selling their home if necessary would nearly double their savings.

 

[Montecfo]

Simplify and keep funds relatively liquid. Great time for a conservative bond ladder and or bond funds. Rates are so good historically now I would definitely limit the funds that you allocate to equities. And I would not do individual stocks.

Having said that, if you have equities with a really low basis definitely work the tax part into your analysis.