kepakids4 wrote:My mother is 76 years old and recently lost her husband. I need some help in making some financial decisions for her. My mother is not in great health so I do not expect her to live much more than 5-7 years.
She does not have any real expenses and does not require alot of money to live on and gets buy on her social security and money in the bank. Her income does not require her to file an income tax return.
First question, my Dad had a $40,000 IRA at Putnam Investments invested in Class A shares of George Putnam Balanced Fud and Putnam Multi Cap Growth Fund. I want to roll this over to Vanguard. She will be using this IRA for additional money. Where should she invest this?
She also has another $40,000 received from life insurance. She does not need access to this money but I do not want it sitting in a bank savings account. Any suggestions on where to invest this cash.
I'm sorry about your Dad.
Are you sure that your Mom does not need to file tax returns? I pay zero federal taxes since my taxable income is Social Security and interest on taxable savings, and Schedule A wipes that out, but I need the federal return so that I can file the state income tax return. My state taxes even low income people. It also has a property tax break that is obtained via the state return based on income.
I assume your Mom is going to be using the IRA rather than the life insurance proceeds for spending because of mandatory withdrawals? I am not sure of the rules about this, but since your Mom now has your Dad's IRA, I think she is required to start withdrawals from that in some way. Those will be taxable, assuming it is a Traditional, not a Roth, IRA and may even increase her income enough so that part of her Social Security becomes taxable.
I started to read up on the inherited IRA distribution requirements for a spouse, but it promptly gave me a headache. My guess is she might be required to take out about $2000 a year based on what the IRS thinks is a twenty year life expectancy based on her age.
I would just say, keep both in very safe stuff. Even though your Mom is 76 and not in the best of health, you never know how long she may live, and there will be no time to recover if it is in something volatile that goes down significantly.
I'm not far from your Mom's age, and I have 90% of my savings, IRAs and otherwise, in 5 year CDs in credit unions. That gives me the maximum interest rate but if I need to take money out earlier, the (usually six month) penalty is not that high. Having several CDs rather than having to withdraw the entire amount early is helpful. Digital Federal Credit Union (dcu.org) is offering 5 year CDs at 1.84% interest. Anyone can join that credit union by contributing $10 to one charity out of a list of charities on their website. It is a large, long established credit union and I have done business with them for many years without even living in a state where they have a branch. They are in various credit union associations which allow transactions and ATM access nationwide.