My parents need investment advice

[mayday]

My parents have asked me to ask this MB about sugestions with their portfolio of $450,000.00 They are 78 years young. Everything is paid for and they have very little expenses. any thoughts would be greatly appreciated.

 

[rokid]

Mayday,

How much annual income (in constant 2007 dollars) do they need to generate from the $450,000? How long do they need to generate it?

 

[SkyPilot]

The fact is, they should probably secure the services of a professional financial manager at this point. At this age, there are more questions to answer, such as estate and tax planning, extended care issues, etc... and a variety of personal factors that just cannot be adequately addressed in a message board forum.

What we can offer are some very good opinions and keen insights. Ultimately, your parents need a reliable, competent individual with whom they can meet face to face. In this way, one can understand their particular needs in detail.


Best of luck

 

[Frixxxx]

The fact is, they should probably secure the services of a professional financial manager at this point.......
Best of luck

I agree. There are so many different ways to use that money for their wishes. For a small fee, an investment consultant can show what they want to do with their money and if it is beneficial...trusts, annuities, working income, all have tax and fees associated with them.

 

[mayday]

Mayday,

How much annual income (in constant 2007 dollars) do they need to generate from the $450,000? How long do they need to generate it?

I know annual income should be 3% to 4% of the 450K Also they need to generate at least 6% to keep the principle and to keep up with inflation. They need a balance of both stocks and fixed income investments.

 

[mayday]

The fact is, they should probably secure the services of a professional financial manager at this point. At this age, there are more questions to answer, such as estate and tax planning, extended care issues, etc... and a variety of personal factors that just cannot be adequately addressed in a message board forum.

What we can offer are some very good opinions and keen insights. Ultimately, your parents need a reliable, competent individual with whom they can meet face to face. In this way, one can understand their particular needs in detail.


Best of luck

This is very sound advice. Getting all your ducks in a row. You best believe this will be my first suggestion to them. Yet I still respect the very good opinions and keen insights of those on this board.

 

[mayday]

For safety I was thinking Treasury inflation-protected securities. The principal to these bonds are tied to the consumer price index. With inflation on the rise at least these bonds would keep up with a falling dollar.

 

[Birchtree]

My friend, inflation is not on the rise. We are in the midst of an incredible bull market and even someone 78 years young should have the opportunity to participate. The value of a stock portfolio is in both the dividend income and the capital gains appreciation - do they own equities? If they do you might consider the merits of a step up in basis when the stocks are possibly inherited. The inheritor is not responsible for any accrued gains. I would concentrate on finding them a nice protected environment to live their golden years away from a nursing home - assisted living is ideal. You pay up front to go in but then you are covered for any eventuality. They have so much flexibility available to them. But I would not fear equities - fixed income would be a waste.

 

[mayday]

My friend, inflation is not on the rise. We are in the midst of an incredible bull market and even someone 78 years young should have the opportunity to participate. The value of a stock portfolio is in both the dividend income and the capital gains appreciation - do they own equities? If they do you might consider the merits of a step up in basis when the stocks are possibly inherited. The inheritor is not responsible for any accrued gains. I would concentrate on finding them a nice protected environment to live their golden years away from a nursing home - assisted living is ideal. You pay up front to go in but then you are covered for any eventuality. They have so much flexibility available to them. But I would not fear equities - fixed income would be a waste.

Birchtree The fixed income bonds are only part of a conservative portfolio. Protecting their principle is very important. Gains to stay at or exceed inflation secondary yet necessary. The stock fund part of their portfolio I could use a little help. I was thinking more in the lines of a 10% to 20% stock allocation and 10% cash the rest bonds.

 

[Removed1]

My parents have asked me to ask this MB about sugestions with their portfolio of $450,000.00 They are 78 years young. Everything is paid for and they have very little expenses. any thoughts would be greatly appreciated.

Hello Mayday,
As my husband and I are few years from retirement,we want to retire early so we invest little more conservative,buy good stocks with hi divident 8-12% a year,buy some mutual funds,some cash in internet banking which yield 4-6% for emergency use and the rest in stocks.GL

 

[Spaf]

Mayday,

You / your folks need some professional services! I agree with Skypilot!
I don't think we have any financial advisors on the message board.
Two items you might try.
Visit a CPA with your folks.
Then visit a financial advisor at a reputable bank, maybe several.

Regards
Spaf

 

[mayday]

Mayday,

You / your folks need some professional services! I agree with Skypilot!
I don't think we have any financial advisors on the message board.
Two items you might try.
Visit a CPA with your folks.
Then visit a financial advisor at a reputable bank, maybe several.

Regards
Spaf

Spaf Thanks for the feed-back. zimmy, SkyPilot, Frixxx, and Birchtree. Three of you say seek a professional so thats just what I'll tell them. They have a CPA and I believe the reason why they asked me to do this is that the fund manager they are dealing with lost a lot of thier money. I think my parents need to be in less risky investments and their fund manager should have know this.

 

[rokid]

Spaf Thanks for the feed-back. zimmy, SkyPilot, Frixxx, and Birchtree. Three of you say seek a professional so thats just what I'll tell them. They have a CPA and I believe the reason why they asked me to do this is that the fund manager they are dealing with lost a lot of thier money. I think my parents need to be in less risky investments and their fund manager should have know this.

Mayday,

1. An independent, fee-only advisor may be worth the money. However, I'd want to know as much as possible about the alternatives before I talked to him.

2. Vanguard will create a financial plan for you. Although I'm sure that the recommendation will include Vanguard products, they have some of the lowest fees in the industry and a broad range of products including annuities. Incidentally, an annuity might be perfect for you parents if they're not concerned about leaving a legacy. However, I understand you shouldn't invest more than $100K in any one annuity. I believe it has something to do with state backed annuity insurance.
https://personal.vanguard.com/VGApp/hnw/accounttypes/advice/ATSAdviceCompFinPlanContent.jsp

3. Go to the Bogleheads site and register for free. The posters there are very knowledgeable and very helpful. Some are financial planners and others have written investment books. Post a headline like "Taylor, Mel, Laura, others my parents desperately need financial advice...". You'll get all kinds of advice.
http://www.diehards.org/forum/index.php

4. Check out the Firecalc site. Their Monte Carlo calculator will give you an idea of the percentage mix of fixed income and equity investments that will achieve your parents' lifetime income goals.
http://www.firecalc.com/firecalc.php

5. A "quick and dirty" recommendation:

50-60% fixed income including TIPs and a total bond market product, e.g. VBMFX
40-50% equities (global), e.g. 30% VGTSX (total international) and 70% VTSMX (total U.S.)

You need fixed income for lowering risk and equities to out perform inflation.

6. If you go to the Vanguard site, you might also want to check out their LifeCycle funds. They're similar to the TSP "L" funds.
https://personal.vanguard.com/VGApp/hnw/funds/vanguard/bytype

Good luck.

P.S. I don't work for Vanguard. I just think they're a really good company that has the investor's interest at heart.

 

[Show-me]

The fact is, they should probably secure the services of a professional financial manager at this point. At this age, there are more questions to answer, such as estate and tax planning, extended care issues, etc... and a variety of personal factors that just cannot be adequately addressed in a message board forum.

What we can offer are some very good opinions and keen insights. Ultimately, your parents need a reliable, competent individual with whom they can meet face to face. In this way, one can understand their particular needs in detail.


Best of luck

Ditto! Preferably someone who is not angeling to invest their money for them. Someone independent. Pay the fee to get impartial advise.

Good luck to your folks!!!

 

[rokid]

Mayday,

Here's one more resource for your parents:

http://www.firecalc.com/calc-research.php

 

[Birchtree]

Here's another one: The market doesn't know how old you are - it's the cycle, not your age that matters most.

http://www.cornerstoneri.com/comments/retireassetallocation1.htm

 

[rokid]

OK. Let's pretend that we can't predict what will happen with the markets. What should Mayday's parent do? 100% S&P500 index fund?

 

[Birchtree]

I think I'd initiate positions in every stock in the OEX - the S&P 100. That would provide more versatility to sell when necessary and also to collect those lush dividends for dividend reinvestments. Ride the coming wave. The up cycle is going much higher.

 

[rokid]

I think I'd initiate positions in every stock in the OEX - the S&P 100. That would provide more versatility to sell when necessary and also to collect those lush dividends for dividend reinvestments. Ride the coming wave. The up cycle is going much higher.

Yeah, I agree. No middle ground. Caviar or cat food! :laugh:

 

[mayday]

Mayday,

1. An independent, fee-only advisor may be worth the money. However, I'd want to know as much as possible about the alternatives before I talked to him.

2. Vanguard will create a financial plan for you. Although I'm sure that the recommendation will include Vanguard products, they have some of the lowest fees in the industry and a broad range of products including annuities. Incidentally, an annuity might be perfect for you parents if they're not concerned about leaving a legacy. However, I understand you shouldn't invest more than $100K in any one annuity. I believe it has something to do with state backed annuity insurance.
https://personal.vanguard.com/VGApp/hnw/accounttypes/advice/ATSAdviceCompFinPlanContent.jsp

3. Go to the Bogleheads site and register for free. The posters there are very knowledgeable and very helpful. Some are financial planners and others have written investment books. Post a headline like "Taylor, Mel, Laura, others my parents desperately need financial advice...". You'll get all kinds of advice.
http://www.diehards.org/forum/index.php

4. Check out the Firecalc site. Their Monte Carlo calculator will give you an idea of the percentage mix of fixed income and equity investments that will achieve your parents' lifetime income goals.
http://www.firecalc.com/firecalc.php

5. A "quick and dirty" recommendation:

50-60% fixed income including TIPs and a total bond market product, e.g. VBMFX
40-50% equities (global), e.g. 30% VGTSX (total international) and 70% VTSMX (total U.S.)

You need fixed income for lowering risk and equities to out perform inflation.

6. If you go to the Vanguard site, you might also want to check out their LifeCycle funds. They're similar to the TSP "L" funds.
https://personal.vanguard.com/VGApp/hnw/funds/vanguard/bytype

Good luck.

P.S. I don't work for Vanguard. I just think they're a really good company that has the investor's interest at heart.

Rokid I can't tell you enough how much I appreciate your response to my parents predicament. I'll sit down at the computer with them {They have no computer of their own} and go to the sites you suggested. We will also look for an independent investment advisor to help once we have done a little research. They have been getting by pretty well {no cat food yet}. This is the first time I have been privy to thier financial situation and it does'nt look to bad. I'll keep you posted as to the outcome of thier portfolio.