Recommendations requested for an annual income strategy for my Sister-In-Law

^^^ With just a little effort, you can create monthly income from a fixed income ladder by just having the first rung in a money market fund and ing monthly transfers from the money market fund to her checking account. I did that with a Discover Bank high yield savings account. monthly automatic transfers to the checking account we used to pay bills was substantively the same as an annuity benefit payment. Then that account can be replenished annually when a rung of the ladder matures.

The problem that I have with the SPIA idea is she already has some and I presume SS as well but if she is all in with SPIAs and has a major home expense then she doesn't have any liquidity to pay the expense.
 
She can probably find a realtor for 5% commission - maybe even 4.5%. When I sold last I realized that 6% is no longer the "rule".
 
gauss said:
If she doesn't like managing money and she is not very good at picking advisors (present company excluded of course), then why not go the annuity route?

Sure you could do the MYGA, but why not a SPIA? If she doesn't want to leave a legacy to her kids, wouldn't that be the most efficient way to plan?

With the mortality credits involved, if she lives much longer than average then she wins. If she dies young, then it doesn't matter.

Sure folks like us here enjoy optimizing quantitative information and attempting to win the game, but I think this is not representative of the average senior.

Also re-reading you intro you state that she desires "consistent monthly income" form the funds. I don't think you will beat the SPIA with treasuries for this purpose and other investments would have to apply an asterisk/disclaimer to the word consistent.

Just be sure that she doesn't have more NPV in any one life insurance company than her state guarantee association will back.

Maybe buy $150k of SPIA and leave $50k liquid for any lumpy expenses and peace of mind. Just know that having the liquid funds available may make her susceptible to scammers so there is that risk too.

-gauss
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We did talk about a legacy for her two grown kids and she said the equity out of the house and a payout from one of her two annuities would be what she would leave. Both kids are married and doing very well, so it's not a huge deal for her.
 
HarveyS said:
She can probably find a realtor for 5% commission - maybe even 4.5%. When I sold last I realized that 6% is no longer the "rule".
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I suppose she could but finding a smaller place would be a problem, cost wise, as she is still mortgaged and the cost of smaller places isn't any bargain. This is the area where Apple is planning on building a campus and RE is high, especially for newer small places. We looked and were surprised what small homes cost. Plus, the availability was lacking.
 
Several things seem clear to me from the above discussion:

1. The rate of return she needs is too high to be covered by a "set it & forget it" type of investment. Anything yielding enough will probably require some sort of active management.

2. Given her age and health, the amount she will need is likely to increase - greatly. Even with good health insurance. This is based on experience.

3. Periods of inflation will kick up the needed rate of return too.

Conclusion: YOU seem to be the one in your family with the most money knowledge and YOU are the one who is least likely to cheat her. I think that YOU must take it upon yourself to help manage her money on an ONGOING basis. Decisions about which investments ( CEFs, etc., etc. ) would be based on what YOU can handle - not her.

Sorry,
Flute
 
Flute McG said:
Several things seem clear to me from the above discussion:

1. The rate of return she needs is too high to be covered by a "set it & forget it" type of investment. Anything yielding enough will probably require some sort of active management.

2. Given her age and health, the amount she will need is likely to increase - greatly. Even with good health insurance. This is based on experience.

3. Periods of inflation will kick up the needed rate of return too.

Conclusion: YOU seem to be the one in your family with the most money knowledge and YOU are the one who is least likely to cheat her. I think that YOU must take it upon yourself to help manage her money on an ONGOING basis. Decisions about which investments ( CEFs, etc., etc. ) would be based on what YOU can handle - not her.

Sorry,
Flute
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Yep Flute, that's why I am here looking for ideas. I will visit with her in the middle of May for a week and we will lay out some kind of plan that won't have much risk in it.
 
If she stays in that large house, likely 3 or 4 bedroom, she’ll spend most of her time and money cleaning and maintaining it for the rest of her life. This is not the retirement lifestyle I would wish on any family member. I would suggest a 1 or 2 bedroom condo in a continuing care community.
 
Al18 said:
If she stays in that large house, likely 3 or 4 bedroom, she’ll spend most of her time and money cleaning and maintaining it for the rest of her life. This is not the retirement lifestyle I would wish on any family member. I would suggest a 1 or 2 bedroom condo in a continuing care community.
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Yes, that's a good thought and it's probably a stretch as to if she could afford that CRCC in NC where most have six and seven figure entrance fees, years long waiting lists, and then cost thousands per month. But she is happy in the house and has a good friend network, so she is hell bent on staying.
 
aja8888 said:
I suppose she could but finding a smaller place would be a problem, cost wise, as she is still mortgaged and the cost of smaller places isn't any bargain. This is the area where Apple is planning on building a campus and RE is high, especially for newer small places. We looked and were surprised what small homes cost. Plus, the availability was lacking.
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It's a tough decision ....but if she could find a smaller one story lower maintenance type home it would work out for her. The main issue isn't really the cost of the house, she already has a monthly loan payment, it's the much higher monthly bills needed to run a larger home. IE, electricity, water, maintenance, insurance, property taxes.
 
ivinsfan said:
It's a tough decision ....but if she could find a smaller one story lower maintenance type home it would work out for her. The main issue isn't really the cost of the house, she already has a monthly loan payment, it's the much higher monthly bills needed to run a larger home. IE, electricity, water, maintenance, insurance, property taxes.
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Yes, I suspect out discussion in May will focus on the increasing cost of all house related stuff. She did mention her property tax is going up significantly due to reassessments.
 
aja8888 said:
Yes, I suspect out discussion in May will focus on the increasing cost of all house related stuff. She did mention her property tax is going up significantly due to reassessments.
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From personal experience with my broke friend selling a house you feel attached to is pretty difficult. If you can even plant the seed for her to start thinking about downsizing you will be making progress.
 
We all face unpleasant (fact of life) decisions as we age. She has "too much" house and, even though she REALLY wants to stay in it, the easy, simple, logical, practical, financially-liberating thing to do is downsize. Even an apartment (with rent) would likely w*rk for her.

Otherwise she (or you - or both of you) will be playing the game of shove this pile of money into that hole and then plug this leak over here, and fix that broken water pipe and decide what HVAC company to hire and on and and on. That's no way to live out your final days.

And, too, how much longer will she be able to keep her $1000/month j*b?

Nope! Sell the house, find a nice, small manageable place with NO maintenance. Stay conservative in the investments (I like the MYGA or TIPs route, myself). Set it up to be "self managing" since you may not always be around to help her.

It's tough to get old. It's tougher to get old without enough money. BUT she has a real asset in the big old house! Use THAT asset to make life easy - not difficult and complicated and frightening.

If I were involved, I'd push that and push it until she either dug in her heals (at which point, I'd bow out) or she'd see the light and sell the big, old house. At that point, this all becomes a nearly trivial exercise of laddering a couple of things and creating a more or less set and forget portfolio with very save investments that will see her to the end.

One hard decision - and then "easy street." What's it gonna be??

Sorry, it's easy for me to pontificate, but I think it's that simple. Good luck and God bless you, aja8888 for your kindness to her. Now you gotta be tough as well!
 
Koolau said:
We all face unpleasant (fact of life) decisions as we age. She has "too much" house and, even though she REALLY wants to stay in it, the easy, simple, logical, practical, financially-liberating thing to do is downsize. Even an apartment (with rent) would likely w*rk for her.

Otherwise she (or you - or both of you) will be playing the game of shove this pile of money into that hole and then plug this leak over here, and fix that broken water pipe and decide what HVAC company to hire and on and and on. That's no way to live out your final days.

And, too, how much longer will she be able to keep her $1000/month j*b?

Nope! Sell the house, find a nice, small manageable place with NO maintenance. Stay conservative in the investments (I like the MYGA or TIPs route, myself). Set it up to be "self managing" since you may not always be around to help her.

It's tough to get old. It's tougher to get old without enough money. BUT she has a real asset in the big old house! Use THAT asset to make life easy - not difficult and complicated and frightening.

If I were involved, I'd push that and push it until she either dug in her heals (at which point, I'd bow out) or she'd see the light and sell the big, old house. At that point, this all becomes a nearly trivial exercise of laddering a couple of things and creating a more or less set and forget portfolio with very save investments that will see her to the end.

One hard decision - and then "easy street." What's it gonna be??

Sorry, it's easy for me to pontificate, but I think it's that simple. Good luck and God bless you, aja8888 for your kindness to her. Now you gotta be tough as well!
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Koolau, didn't anyone ever bother to tell you that you can't just tell a woman to sell her house? :facepalm:
 
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pb4uski said:
I don't agree. She could put the $200k into a portfolio of investment grade preferred stocks issued by name brands and get close. A few of my favorites are Allstate ALL-B (8.2% yield, Baa1), Citigroup C-N (9.88%, Baa3) and US Bancorp USB-A (7.43% yield, Baa2).

Other names in my portfolio include MetLife, JP Morgan Chase, Schwab, Wells Fargo, Bank of America, Goldn Sachs, The Hartford, State Street and others. I have over 50 different preferreds, most of which are investment grade and they yield 6.8% so 6% is very possible. Also, many of these are qualified income so would likely be tax-free for the OP's SIL.
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This is what I would do. The tickers for those first three in Fidelity are ALLPRB, CPRN and USBPRA. I might add WFCPRL and BCRPRL which are Wells Fargo and Bank of America preffereds. The only CEF's I'd consider adding if it were me would be UTG and UTF. Your looking at 7% and 7.5% dividends instead of your more typical double digit CEF dividends but in exchange you have long history of stable pricing with less worry of NAV decay and they pay monthly.


I'd be tempted to see how Dick would allocate that money. You're sister would likely lose some principal over time but I'd bet Dick would likely get her 12%. She could sock away 3% of that to make up for any potential future principal losses and still be way ahead of what most of us here are suggesting. The way I'd explain it to my sister is she could get a safe $600 - $800 month with all her principle back at the end with safer investments or $2,000 a month and possibly 25% or so less principle for her estate. It presents an interesting dilemma.
 
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aja8888 said:
I'm going back there in the middle of May and we will revisit the house downsizing again.
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Are there any nice communities near family she might live in that have one story smaller homes? Perhaps showing her a few such places will make her realize what she is giving up to hold onto the old home. That worked with my dad. He saw this 2 bedroom 2 bathroom condo on one level with a one car garage, and he wanted it with no delays.
 
Chuckanut said:
Are there any nice communities near family she might live in that have one story smaller homes? Perhaps showing her a few such places will make her realize what she is giving up to hold onto the old home. That worked with my dad. He saw this 2 bedroom 2 bathroom condo on one level with a one car garage, and he wanted it with no delays.
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Chuck I spent a week there in the Cary, NC area and looked at several, most of which were "pending" sale as soon as we got to the house. The area is HOT from a real estate situation with Apple building a campus soon. A "typical" 1,500 - 1.800 sq. ft. one level newer home lists for $400 - $500 K. And those were pretty basic places. We will probably look again this May when I am there for a week.

When I was there last time, I was considering moving there but I could buy the same house here in Texas for 1/2 the price and by the same builder (Lennar).
 
We can make wise judgements all day about what SIL should do, but I doubt much of that is news to aja8888. In the end, it's SILs money and she sets the limits on how it's to be invested. As well as her plan for staying or moving.

ETA: My personal experience with this - before she passed on, DMIL had a significant amount of $$ from the sale of a very nice house (she downsized and moved close to DW and I). She was risk-averse to the point of not even considering money-market funds. Everything was in banks - enough banks to keep below FDIC limits. Her money, her choice.
 
By selling her home and buying something else with the cash she gets out of it, she is already ahead by the $1K (mortgage payment) per month. Reduced utilities and maintenance would make it a no brainer. The only downside MAY be with the property tax. Depending on her state, her new home may cost more in property tax. That is one area that you will need to dig into.
 
Make a spreadsheet listing all assets and house expenses. Include all house maintenance costs, including a new roof, new bathroom faucets, toilets, windows, painting, etc. Match up her income with expenses and let her tell you she can’t afford the house. I doubt any amount of fiddling with the $200K in her brokerage account will get you there.

My guess, but if her income isn’t at least $60K per year, she doesn’t have enough to live and maintain the house. If she doesn’t want to move into a CC room, maybe she can move in with one of her single friends, assuming they live in a 1 story house.
 
Al18 said:
Make a spreadsheet listing all assets and house expenses. Include all house maintenance costs, including a new roof, new bathroom faucets, toilets, windows, painting, etc. Match up her income with expenses and let her tell you she can’t afford the house. I doubt any amount of fiddling with the $200K in her brokerage account will get you there.

My guess, but if her income isn’t at least $60K per year, she doesn’t have enough to live and maintain the house. If she doesn’t want to move into a CC room, maybe she can move in with one of her single friends, assuming they live in a 1 story house.
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The two single friends she has are worse off than she is. One is not quite "single" yet as her husband in late stage Alzheimer's and has cancer, the other went thru a bad divorce and is living pretty low. Both are her long time friends but things went the wrong way for them.

I'm convinced there are a lot of older people living on the edge these days.

And yes, we will make a spreadsheet and see where she is headed,

But selling the house will be a hard sell.
 
Out of curiosity, I ran the numbers on Immediate Annuity for $150,000. Obviously, there is inflation risk. When I had investigated in the past, getting a COLA severely reduced the initial payouts, i.e. there is no free lunch there.

Oh, the RE commission on the house is negotiable. I wouldn't go for more than 3% in particular with the change in commissions for the buyer's broker (and you would probably have to negotiate any commission for her). If the area is very "hot" her house might appeal to a big family - but, you can't force her to sell.

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