please help me help my folks

[gravesend]

sometime between 10 am and 2 pm yesterday, my parents' home was broken into. these guys were pros. the metal window bars in the back of the house was pulled out of the wall. the safe in the house was broken into as well. there's been 3 breakins in 6 years.

so the plan had been to move (waiting to close on a condo) and live off the rental income of the current home. however, after yesterday, my parents really don't want to deal with it anymore.

currently, the house is worth about 700k w/ no mortgage and earning about 25k post expenses. (it's been their PR for the last 15 years and they qualify for the 500k exclusion) what we'd like to do is sell the house and use it to fund the rest of their lives. what are some ways we can invest the money to give a "safe" return without having to tap into the principal? the target income would need to be at least 25k a year.

 

[retire@40]

...the house is worth about 700k w/ no mortgage and earning about 25k post expenses.  (it's been their PR for the last 15 years and they qualify for the 500k exclusion) what we'd like to do is sell the house and use it to fund the rest of their lives.  what are some ways we can invest the money to give a "safe" return without having to tap into the principal?  the target income would need to be at least 25k a year.

If they can net at least $625K after selling the house, then they can put it in 4% CDs giving them the $25K they need.

 

[gravesend]

4% CDs? Wouldn't those terms be really lengthy?

They would like to have more flexibility than that.

 

[brewer12345]

Heck, you can get 3.25% on a savings account and 5% on a 3 year CD that you can withdraw early at a 6 month interest penalty.

 

[KB]

My Credit union is offering 4% on an 11 month CD and 6% on a 5 year. Hope you can get some similar rates.

Oh, Corus Bank has 4.11 on a 1 year, it's an internet bank with good ratings.

 

[Marshac]

sometime between 10 am and 2 pm yesterday, my parents' home was broken into.  these guys were pros.  the metal window bars in the back of the house was pulled out of the wall.  the safe in the house was broken into as well.  there's been 3 breakins in 6 years.

Ok, I admit it, I have watched the show 'it takes a thief'.... One thing that's clear tough, burglars go for 'soft' targets... homes with secluded back yards, etc. If your parents home is visible, and they are tearing off bars from the window to get in, then something is wrong with the picture.... who else knows that your parents have a safe?

I have some family in Florida who live in an 'exclusive' neighborhood (Justin Timberlake lives next door, as does Shaq, and Ken Griffy Jr is across the lake), and one night my brilliant cousin had a party.....  for whatever reason, he felt like showing off to some people he didn't know at this party, and showed them the safe housed within a hidden room, accessed through the master bedroom clothes closet. Guess what happened about 2 weeks later... you guessed it, someone broke in (despite the guard house at the entrance, CCTV and alarm system) and went right for the safe.... basically my cousin gave these folks a reason to risk the high security because they knew there was a large payoff.

 

[MJ]

My Credit union is offering 4% on an 11 month CD and 6% on a 5 year. Hope you can get some similar rates.

Oh, Corus Bank has 4.11 on a 1 year, it's an internet bank with good ratings.

KB,
What is the name of the CU offering 6% on 5 years and how can I join?

 

[cute fuzzy bunny]

Wellesley income fund would pay them the 23k, so would target retirement income. Pretty safe. Some chance of principal volatility vs a money market or cd, but a good chance of maintaining pace with inflation as well. GNMA fund paying a little more with a little more principal risk, but I own some and dont think about it when i'm worrying about investments.

You could also buy the vanguard tips fund and take the dividends and capital gains payout instead of reinvesting...by a quick eyeball that would pay between 4 and 4.5% split between dividends and gains...but check that yourself first as I'm only 2 sips into my first cup of coffee.

If they're in a high tax situation, you could roll your own "tax managed wellesley fund" by combining 60-65% state muni bond fund with 35-40% "vanguard equity income fund", which is similar to the stock component of wellesley and wellington and is managed by the same companies.

Remember that there are two kinds of 'safe' here, one that keeps the principal intact and one that makes sure they stay even with inflation.

My pick would be to go with either the wellesley or target retirement income, depending on whether you like managed funds or indexes, respectively. Both are cheap to own in 'admiral' shares.

 

[cute fuzzy bunny]

Oh yeah, and one other thing, as implied above, nobody goes through that sort of break-in unless they pretty much know whats inside, which means someone told them. Anything like this always comes back to a landscaper, handyman, appliance delivery guy, neighbor, etc...not that they did the break-in themselves, but they told someone or told someone that told someone...

 

[gravesend]

Oh yeah, and one other thing, as implied above, nobody goes through that sort of break-in unless they pretty much know whats inside, which means someone told them.  Anything like this always comes back to a landscaper, handyman, appliance delivery guy, neighbor, etc...not that they did the break-in themselves, but they told someone or told someone that told someone...

Thanks for your advice above. We (the kids) have been quite stressed lately dealing with the new construction condo and thinking about funding their retirement etc. i need all the help i can get.

as for the break-ins, our theory is inline with yours and Marshac. But 3 in 6 years is just ridiculous.

 

[unclemick]

For break ins - we use automatic self targeting weapons - they are called dogs.

 

[cute fuzzy bunny]

Yep, we have 'em too. They bark their butts off if they think they heard an anchovy fart in alaska.

 

[KB]

Golden 1 Credit Union - http://www.golden1.com/

They list the criteria to join on their website.  If you're not in California you might look for other Credit Unions in your state.  They might have similar rates.

 

[retire@40]

4% CDs?  Wouldn't those terms be really lengthy?
They would like to have more flexibility than that.

I thought you said you didn't want to touch principal and you wanted to live on $25K a year?  If so, who cares that they are tied up for 5 years?  Have the interest direct deposited to a checking account and you're all set.  In case of an emergency, you could always take money out of a CD and forfeit a few months worth of interest.

 

[HFWR]

Glad we've moved from canine BMs to fish flatuance!

Certainly cap gains and divvies are more tax friendly than interest, so I'd second the target-retirement type fund, or a slightly more complex slice and dice of funds and bonds/CDs.

 

[cute fuzzy bunny]

I thought you said you didn't want to touch principal and you wanted to live on $25K a year? If so, who cares that they are tied up for 5 years? Have the interest direct deposited to a checking account and you're all set. In case of an emergency, you could always take money out of a CD and forfeit a few months worth of interest.

I think the point was that you cant really get a cd longer than 6-7 years. You can but I dont think you'd want to. Theres no assurance you'll get the same rates in 7 years that you'd get today.

 

[charlie]

Penfed is paying 5% APY on 3 year CD's. Best deal I have
heard of yet.

Cheers,

Charlie