Retirement Income?

Modhatter, welcome back.  We were afraid we scared you off!!

My sister's son has the same condition as your son.  You are rightfully concerned about compliance with physician's advise and his welfare.  I hope you are helping him qualify for Medicaid and SSI.  You will need to walk a fine line on financial support which is why a special needs trust is necessary.  While it is legally possible (I think) for a medicaid/SSI recipient to own the home s/he lives in, your son will need supervision so it isn't wise.  Touch base with your state(s) association for disabled persons for established programs that may be available to you.  Some of these programs have a 'refund' provision should he pre-decease you, or permit you to direct the residue in the account to the charitable org of your choice when both of you have passed.  Dig down into the details.

IMHO a revocable living trust will be the best vehicle to manage your assetts long term.   You really need a lawyer who understands what you need to do, ideally one with a disabled child who has experiance in estate planning.

As Art and Brewer12345 put forth their opinions remember you don't have to put all your resources in one pot.  I like to have 2 or 3 years income in a liquid, safe, spot and the rest spread around.  I like some in an international fund.  Then I choose 2 top balanced funds.  There are tools out there to make sure that they don't overlap much.  A good place to start winnowing the field is at, ask questions in their discussion board.  At some point a life-cycle fund at Vanguard may make the most sense.

One financial planner website with an 'attitude' can be found at

For analyst type discussion you might like

And even more extreme

You might even consider  which might be available at a discount to Vanguard customers.

You thought you retired, right??
Thank you Brat, for the above inforation. I will check in on those links as well. As far as Medicade or SSI, it is my understanding that in order to qualify they will liquidate all his assets as well. My son also has his own assets from his father's death (I am female by the way) He has almost $500,000 himself, and I have only up to this point been putting it in CD's for the most part.

I have always been more afraid of losing his money than my own, so I was ultra-conservative with it. Of course, seeing what the stock market did during the 90;s, I wish I weren't so conservative. So my decisions what to do, involve what to do with his money also. He leaves those decisions up to me.

I agree, I need to get a Trust set up right away. He would not be very good at handling money himself. That is one of the reasons I want to get out of the real estate. He couldn't manage them, and the real estate taxes would never get paid and he could lose everything. He would also make a perfect "victim" (some family members included)

I am a researcher by nature, and I am in the process of trying to educate myself more before I make a move. It seem that if I want to get into the stock market, it might be more prudent to wait until the next major "correction occurs". However, in order to do that effectively, I would still need a pre-plan to some extent. Also in terms of purchasing Bonds, with the interest rates at such a low, and yields so low, and the probobility that rates will be going up, Bonds don't appear to be a timely move either, except as Art suggested with I-Bonds.

Is interest from I Bonds taxed at the regular rate like CD's? If they are, then I question the advantage of purchasing them at 4.8% over purchasing a 5 yr. CD at 5.25% (now avail. with $99,000) I realize if the CPI during that time goes up, your bond yield will also. What is the likelyhood of it going up enough in that time frame to equal the CD interest rate? What is the time frame associated with the I Bonds? (my book doesn't state) And last, how do CD rates generally corresspond to Bond rates in the market? Do they move in a "like" pattern. One is tied to CPI (speaking of I Bonds) and the other is tied to Greenspan's setting of minimum loan rate. Can you have run away inflation and still maintain a low interest rate? Or do they go hand and hand? I know I need a good course in economics at this point.

Is there a good current book out there that touches on all the pro's and con's of each type of investment. With my son's money added to the pool, don't you think there is room (if not now, then down the road a bit when conditions change in the market) to enter the stock market for growth? My lack of knowledge has always been one of the issues preventing me from entering it in the first place. How important is my knowledge, versus picking a good "paid" financial advisor, or following reccomendations one of the financial gurus on line with their newsletters. etc. That last comment will probobly get a responce. Hope you will chime in again with the additional information provided here.

But before I call it quits here, as far a establishing an income for us to live on, and just for the momment excluding annuities ( I need more time to research that) is there any other income producing means besides CD's that are taxed at the 15% level instead of your regular earned income level that makes sence for me. Does that only apply to stock dividends? I was reading an article in Forbes I think about Canadian Oil Trusts, that looked very interesting. Does anyone have any knowledge about these?
Art has provided some good advice.

I would go about things a little bit differently. I do not know whether I would end up differently.

I recommend that you first establish a baseline. Actually, two baselines.

The first would be annuities. My personal preference is to use Vanguard's site for "what-if" questions. BTW, if you enter a large enough dollar amount, you will get a message to call them. You might find it better to use $100000 instead of $1000000, at least at first. Vanguard allows you to look at annuities that adjust to match inflation.

The url is too long. I have broken it into two parts. Copy and paste them and then connect them together.

Consider ibonds in taxable accounts and TIPS in tax sheltered accounts. Remember that you can withdraw principal. The equations for a mortgage work here. The actual payments include inflation adjustments.

Finally, be cautious regarding stock performance in the short and intermediate-terms. Holding stocks for twenty years is not long enough for you to be assured of superior performance. There is a good chance of loss if you hold for ten years.

Have fun.

John Russell
Modhatter, since you are a researcher by nature, I would encourage you to park the money somewhere like a 1 year CD or high yield savings account and "follow your nature". There are frmly held opinions in many camps, and ultimately you will have to make up your own mind and live with the results. Take your time.

I bonds cannot be cashed in for 1 year and then you have to hold for 5 years or pay a 3 month interest penalty. IIRC, all taxes are deferred until the bond is cashed in, and then you pay federal taxes only.

II suppose it is possible to have inflation higher than interest rates, but I don't think it has ever lasted very long. In the short maturities, it happened when Greenspan took the rate to 1%, but that only lasted for a short while. In the long term maturities, it depends on what you mean: rates will always be above what you think inflation will be, but you might buy a 10 year bond at 5% and find that 5 years later inflation is running at 10%. That is the crux of the risk you take with longer maturities.

There are lots of books out there. What level of sophistication would you like? Most of my experience is with finance textbooks, etc., but others can offer suggestions of less hefty stuff.

Personally, I think you are best off doing your own research, getting educated and making your own decisions. Nobody cares as much about your money as you do, and this stuff just isn't that hard.

Hold off on annuities. Once you buy, ou are locked in for a long period of time (possibly for life). Even if they are the right choice for you (which I doubt), you need to do more research before making that kind of decision.

I think a great book for you to read would be "The Intelligent Asset Allocator" by Bernstein.

I agree with Brewer that you should hold off on the Single Premium Immediate Annuity (SPIA) until you are 100% sure you want to do it because 1) it is irrevocable (there are "commutable" SPIAs but they don't pay as well- so why bother) and 2) the older you are when you buy, the better (unless mortality rates continue to drop significantly- which I wouldn't worry about) and 3) if interest rates rise, so will SPIA payouts.

Again, it doesn't have to be all or nothing- a SPIA combined with an index fund port can be a thing of beauty.

I see nothing wrong with parking your money in CDs until you figure this out.

Reading between the lines, I can tell that you are not thinking about the two insurance suggestions I made, so let me conclude for now by saying that: 1) as a woman, the life insurance will be lower for you than the rates I quoted, which was for a preferred plus MALE. At the risk of being called names, let me just say after twenty four years of experience, that stuff does happen, people do become rated or uninsurable without warning- and so, if you have any interest in buying life insurance so you have guaranteed cash for your son at your death, do it NOW.

Second, Long Term Care costs (for yourself) are something you NEVER want to pay for. Your son is uninsurable, his lifetime medical expenses may be large (which is why I suggest life insurance on yourself for his future needs). Presumably, you are insurable for LTC Insurance. I strongly suggest you get a good policy on yourself (Genworth [GE] or John Hancock) NOW.

A truckload of asset allocators won't be able to help you if you start to spend massive amounts of money for this in twenty years, or earlier. End of sermon.

Thank you all, for all your contributions, and Art, I didn't dismiss the insurance suggestion. It is just something I never considered and I am going to keep the suggestion as a possible course, once I exhaust all possible avenues and come up with a plan to follow. It was just something I never consedered. I will buy the book that you suggested also.
Again thank you.
brewer12345 said:
I bonds cannot be cashed in for 1 year and then you have to hold for 5 years or pay a 3 month interest penalty.  IIRC, all taxes are deferred until the bond is cashed in, and then you pay federal taxes only.
Yep, that's the rules.

TIPS are taxed annually whether you cash them or not, hence the "phantom income" issue for putting them in a tax-deferred account.  So most people choose I bonds over TIPS, although there may be reasons to prefer TIPS too.

The Treasury Direct website says that I bonds earn interest for 30 years.  There are a bunch of other trivia & restrictions laid out there.

While you can easily do better today with long-term CDs, their interest-rate risk means that you could end up locked in long & wrong.  I bonds give you a bit more flexibility & earnings in a time of rising interest rates, long-term CDs during falling interest rates.  The trick is to forecast the movement of interest rates five years in advance, which is why most people end up practicing asset allocation by buying some of each.

Art said:
I think a great book for you to read would be "The Intelligent Asset Allocator" by Bernstein.
I've read it and it's a good book, but it will test your commitment to being a researcher.  The less-technical version of IAA is Bernstein's "Four Pillars", and it also has more specific examples.  If you haven't read Four Pillars then I recommend starting there.  If you've read it then you're ready for a pot of coffee and a LIBRARY COPY of IAA, but you probably already know enough to resume living your life and get on with an asset-allocation plan.

As for growth-equity investing, all you have to do is predict the stock market's long-term direction.  For three-quarters of the last century it's been "up" but that's just history and no predictor of future performance.  Stocks have always won over inflation in the 20-year long term but again that's history.  It's also difficult to survive two decades if you have an expensive short-term crisis.  Until we can sell tomorrow's newspaper today, what most investors end up doing is creating an asset-allocation plan with the help of guys like Bernstein & Armstrong and the advice from boards like this.  You don't "need" advisors or newsletters (although they need you!) if you can do your own research and sleep at night.

Your situation may indeed merit a low-cost annuity but the upfront costs & long-term commitments make them very susceptible to abuse.  The best questions to ask anyone on annuities, advisors & newsletters are:  "If these ideas are so great then why do they have to sell them to you for a living?  Why aren't they investing all their time & money in them for themselves from the fantails of their yachts?"

In general you will keep more of your money, and perhaps even make more profit, by going with the investments from the provider who immediately lays out the up-front costs.  (I'm talking about websites like Vanguard or Fidelity.)  If the investment being sold recommended is "complicated" or "too variable to quote a price without more information" then it's probably going to be difficult to compare oranges to oranges, and it's probably going to be more expensive.  
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