Help with friend's investments

[protagonist]

I have a friend who is a public school teacher in MA, and who has no interest or motivation in finance.

She is 48 y o, single, rents her apartment (I think her rent is about $900/month) , and until about 2 years ago had a hodgepodge of investments in expensive mutual funds held by a broker . I forget the value of her total portfolio, but it is on the order of $50,000. She has no debts of which I am aware. Since she moved to the US from Canada only 12 years ago, her pension is limited (she only has about 12 years US work experience).

Two years ago I helped her by selling the assets she held with the broker, moving them to Fidelity, and putting everything (other than cash) into Fidelity Four-in-one Fund (FFNOX). Though the ER of that fund is a bit higher than if she held separate stock and bond funds, my feeling was that she would not be motivated to manage her investments (eg rebalance, etc), so simpler was better. I have also convinced her that her pension is her #1 priority.

She is now very concerned about her financial health when she retires. She does not want to have to continue working into old age, but she may not have a choice. Her life style is not extravagant and her only source of income is her teacher's salary.

Does anybody here have any recommendations for her?

[livesoft]

FFNOX is a fine fund for her.

My recommendation would be for her to contribute the maximum to a retirement plan at work. What retirement plans are available at her work?

[zebrafish]

I have a friend who is a public school teacher in MA, and who has no interest or motivation in finance.

She is now very concerned about her financial health when she retires. She does not want to have to continue working into old age, but she may not have a choice. Her life style is not extravagant and her only source of income is her teacher's salary. Does anybody here have any recommendations for her?

I think the underlined statements are completely at odds with one another. I would tell her to do what any good teacher would tell a student-- she needs to educate herself. Hopefully, she can understand this logic. Perhaps you could tell her that you'll help her, but only if she reads a good book on personal finance or investing. Give her a homework assignment!

[protagonist]

FFNOX is a fine fund for her.

My recommendation would be for her to contribute the maximum to a retirement plan at work. What retirement plans are available at her work?

Thanks, Livesoft. Yes, I told her the same thing. I forget what was available (this was 2 years ago)... I'll have to review this with her next time I see her. Realistically, how grim are her prospects? My guess is that they are not so bad if she continues working, but the idea of any kind of early retirement is out of the question. She is rather sick of teaching, but afraid to change professions because of the lack of security and pension. That seems realistic to me.

[dbr]

I think there are a few things to attend to:

Pension planning to get the optimum benefit based on years, salary, and age.

Make sure SS benefits are understood if she qualifies in this particular employment. This could be important if gaining credited years now can increase the benefit substantially.

Even on a modest salary there are still 15-20 years savings possible.

Is there an interest in qualifying for an administrative position with more pay? For a person dedicated to teaching, I am not sure such a thing should be wished on one's worst enemy, but that is an individual decision.

Is there an possibility of a life partner appearing on the horizon?

[Pennstateclj1]

She can't go back in time and plant a tree, so the next best option is to plant her tree today. You're right that for someone in her position a pension is the best bet. It's nice of you to try and help her out but ultimately the desire to change must come from within. Not merely saying it, but actively doing something to change her circumstances. Self education always helps, for someone like her maybe a book like Your Money or Your Life would help get her motivated. Impossible for any of us to know what will spur her into action.

As Zebrafish noted, your opening sentence and closing paragraph are complete opposites.

[protagonist]

. I would tell her to do what any good teacher would tell a student-- she needs to educate herself. Hopefully, she can understand this logic. Perhaps you could tell her that you'll help her, but only if she reads a good book on personal finance or investing. Give her a homework assignment!

I've tried, and I am making slow progress, but it's a bit like pulling teeth. She hates this stuff, and as such she is her own worst enemy. She prefers reading 13th century Sufi poetry, and would rather spend an hour in a dentist's chair having her teeth drilled than reading Bernstein or Swedroe. I understand....she is brilliant but stubborn and it is a mental block. I'm still working on trying to get her to declare her carryover losses on her 2010 income tax form from her mutual fund sales. As frustrating as it is, I think empathy is important here if I am going to make any progress.

[livesoft]

Realistically, how grim are her prospects? My guess is that they are not so bad if she continues working, but the idea of any kind of early retirement is out of the question. She is rather sick of teaching, but afraid to change professions because of the lack of security and pension. That seems realistic to me.

Acquaintances of mine in this situation have done the following:

1. Inherited from siblings or parents
2. Gotten married
3. Did private tutoring
4. Moved to very low cost-of-living situation to a single-wide
5. All of the above
6. Moved back home to live with and take care of elderly parent

She is probably very frugal (the proverbial schoolmarm?), she will not need much but will have to cover health care somehow which should be easier going forward from here.

Also give her the book "Why Smart People Make Big Money Mistakes ..." by Gilovich and Belsky to read.

[protagonist]

I think there are a few things to attend to:

Pension planning to get the optimum benefit based on years, salary, and age.

I agree.

Make sure SS benefits are understood if she qualifies in this particular employment.

She doesn't. We looked into that.

Is there an interest in qualifying for an administrative position with more pay? For a person dedicated to teaching, I am not sure such a thing should be wished on one's worst enemy, but that is an individual decision.

Completely antithetical to her personality. She would be much better suited as a writer, or public speaker.

Is there an possibility of a life partner appearing on the horizon?

Not me, if that is what you are asking. She would not be so lucky, or unlucky, as the case may be. We split up a few years back.


Thanks.

[protagonist]

Acquaintances of mine in this situation have done the following:

1. Inherited from siblings or parents

Not an option.

2. Gotten married

Rather draconian.

3. Did private tutoring

She does do a bit of private educating, but the additional income is minimal.

4. Moved to very low cost-of-living situation to a single-wide

She lives in a one-bedroom apartment, and $900/month is very reasonable rent for where we live. I don't think extravagance is much of an issue for her.

6. Moved back home to live with and take care of elderly parent

Her dad lives in Canada. It would cost her her career.

Also give her the book "Why Smart People Make Big Money Mistakes ..." by Gilovich and Belsky to read.

Please see 13th Century Sufi poetry comment above.

[protagonist]

As Zebrafish noted, your opening sentence and closing paragraph are complete opposites.

I know. Women tend to be paradoxes to men. What else is new?

[livesoft]

Please see 13th Century Sufi poetry comment above.

Saw that which is why I suggested a pyschology book.

[nedsaid]

It is frustrating but not everybody is interested and motivated about personal finance like the Bogleheads.

Help her the best you can. Whatever you do, keep it simple.

If she really is concerned about her retirement, she has to take some responsibility. If she is unwilling to educate herself, there is only so much you can do.

Unfortunately, some people just cannot be helped. It is a sad fact of life, accepting this is better than driving yourself crazy.

[Fallible]

... As frustrating as it is, I think empathy is important here if I am going to make any progress.

Empathy and patience. And the empathy would, I think, have to take into account your having once been partners as there could be emotional ties remaining that possibly neither of you is aware of or understands fully. If you feel you've provided her with all the information, contacts, and books she would need, then it may be a matter of patience, waiting and hoping. Whatever, it's surely not a matter of intelligence, but emotions that could stem from some experiences she's had even before she knew you. There have been threads here on this and I did try to find them but wasn't successful. I don't know what the key words would be, but maybe others would.

Good luck.

[livesoft]

I always liked this thread which does not directly apply, but is about a single woman: viewtopic.php?f=1&t=20481

[livesoft]

I always liked this thread which does not directly apply, but is about a single woman: viewtopic.php?f=1&t=20481

[protagonist]

I always liked this thread which does not directly apply, but is about a single woman: viewtopic.php?f=1&t=20481

That was a fascinating thread, livesoft! What makes the girl philosopher's future even more interesting is that the thread dates from the summer of 2008, just before the economic collapse, and at a time when fixed investment vehicles were yielding around 5%. She does not have a lot in common with my friend, other than innate intelligence, eloquence, and aversion to finance. The most cynical advice she received was to put all her money in CDs since she didn't care about managing her finances...funny thing is that , in the summer of '08, retrospectively, that might be what we all should have done! I wonder what became of her and her windfall. I'm very curious....too bad she disappeared.

[donall]

Have either of you looked into the Canadian SS system? Can she perhaps get some income from this source from her previous years of working?

[Fallible]

I always liked this thread which does not directly apply, but is about a single woman: viewtopic.php?f=1&t=20481

Wow, this is an extraordinary case and the BH responses were great. One can only hope they helped her and can help Protagonist now.

[protagonist]

Have either of you looked into the Canadian SS system? Can she perhaps get some income from this source from her previous years of working?

She looked into it...she claims no....but that is certainly a worthwhile thing to check.

[protagonist]

I always liked this thread which does not directly apply, but is about a single woman: viewtopic.php?f=1&t=20481

Wow, this is an extraordinary case and the BH responses were great. One can only hope they helped her and can help Protagonist now.

The Girl Philosopher is a very different person with a very different situation than my friend. That said, I do find the insights of those on this site very thoughtful, intelligent and helpful. Thanks, fallible.

[nimo956]

I would definitely work to get as near the max pension as possible. MA teachers don't pay into SS, so they won't get anything when they retire. Pensions are a pretty good option for people who don't care to focus on saving or learn about investing. Both my parents retired with full pensions from the government and just spend less than they earn per month. Boom, they are set for life!

[livesoft]

Maybe OP's friend saw this video?
http://video.cnbc.com/gallery/?video=3000133666

[NYBoglehead]

I don't want to be the jerk on the post, but has she considered/is she willing to get a part-time job in the summer? Making a a few hundred extra bucks per week for a even just a few years can greatly improve her retirement prospects. She might also be able to get enough credits to qualify for a modest Social Security benefit as well by doing this.

[bottlecap]

Is herproblem with saving or investing. If she will save, she's got options. If she doesn't want to save and invest, she will have to work until she is into old age. Not knowing her, it's impossible to be sure, but I doubt writing or speaking will earn her more than what she is doing now.

If she won't save and invest, she has no other option than to work into old age.

JT

[protagonist]

Is herproblem with saving or investing. If she will save, she's got options. If she doesn't want to save and invest, she will have to work until she is into old age. Not knowing her, it's impossible to be sure, but I doubt writing or speaking will earn her more than what she is doing now.

If she won't save and invest, she has no other option than to work into old age.

JT

That's a good point. I'm not exactly sure, and it is something I should take up with her. I don't think she has a hard time saving and investing per se. I think she has issues regarding focusing her attention on money and putting any energy into learning how to do it- what she describes as a "mental block". Example- back in April I told her she could save a considerable amount of money on her 2011 taxes by taking carryover losses from 2010 , and that I would do the paperwork WITH her, not for her (the idea being to teach her about it), but first she had to request a copy of her 2010 return from the IRS (she didn't keep one), and we have to amend that return. She was very appreciative at the time, but, despite multiple reminders, she still has not taken the trouble to get her 2010 return, and has not yet filed for 2011.

(By the way, I can empathize....I hate doing this sort of thing for myself as well. But I also see it as a necessary evil- an hour of work for x dollars beats a month of work for x dollars).

[ddunca1944]

Have either of you looked into the Canadian SS system? Can she perhaps get some income from this source from her previous years of working?

She looked into it...she claims no....but that is certainly a worthwhile thing to check.

This is something that is worth checking into every few years. My aging mother lived overseas for many years. She made SS contributions back in the 50's, but the first time I checked her SS eligibility, she had not contributed enough. A few years later (with no changes on her part), I checked again and found that this time, she qualified for a small SS benefit. Things do change...

[pkcrafter]

My first thought is your friend is a candidate for asset management. You've put her in Fidelity Four in One, which is very aggressive (~85% stock) for a 48 year old that has no idea about risk or anything else. I'm not a fan of trying to catch up by taking more risk, it can backfire, and all she will understand is you're the one that did it. You didn't mention if she actually asked for your help. Perhaps it might start sinking in after a CFP evaluates her financial status. She might take what a CFP more to heart than what you tell her, and helping her find a good advisor might be the best thing you can do for her.

Paul

[protagonist]

My first thought is your friend is a candidate for asset management. You've put her in Fidelity Four in One, which is very aggressive (~85% stock) for a 48 year old that has no idea about risk or anything else. I'm not a fan of trying to catch up by taking more risk, it can backfire, and all she will understand is you're the one that did it. You didn't mention if she actually asked for your help. Perhaps it might start sinking in after a CFP evaluates her financial status. She might take what a CFP more to heart than what you tell her, and helping her find a good advisor might be the best thing you can do for her.

Paul

That's a good point about FFNOX. I didn't think about it as an aggressive fund, but I suppose it is. Partly the choice reflects my personal bias against bonds in this extreme low-interest environment (a subject that has been debated time and time again in this forum). I guess it depends what percent of her assets are in cash, and I don't recall, but I don't think it is particularly low. That said, I don't think that one with a limited nest egg is necessarily going to benefit by spending chunks of it on a financial planner. Maybe we need to find something less aggressive. What do others think? Any suggestions of alternatives with Fidelity?