Need advice on funds for newly retired 72yr old

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Need advice on funds for newly retired 72yr old

Postby wadesh » Thu May 09, 2013 11:59 pm

My 72 yr old mother recently retired and sold her home and is moving into a retirement community. She's trusting me to invest her funds and I'm looking at a few relatively conservative options at Vanguard but would like any opinions. She has about 150,000 that I can invest. Goal is to generate income and preserve capital.

I'm looking at:
Wellesley Income Fund Admiral Shares - I like the 60% bond 40% stock split. Seems straight forward and reasonable income. Low expense of .18% has me. Reputation of this funds seems top notch such that I don't think I could go terribly wrong with it.

I also saw Vanguards Managed Payout Funds, specifically the Distribution focused fund. Looks like this is a combination of a number of Vanguard Index funds including stocks, REIT, Commodities even a Market Neutral Fund. My concern is that it seems very heavily weighted to Stocks funds (72%) which makes me a little nervous for a retired person. Other downside is expenses are .51% which isn't terrible but much higher than Wellesley. I'd be curious if anyone is active in this fund or has first hand experience with it.

I'm leaning towards the Wellesley fund but would love opinions. I'd like to keep things simple with maybe 1 or 2 funds.
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Re: Need advice on funds for newly retired 72yr old

Postby Johm221122 » Fri May 10, 2013 9:34 am

Welcome to forum,
How much income does she need from 150000?
Taxable or ira?
Were is money now?
John
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Re: Need advice on funds for newly retired 72yr old

Postby wadesh » Fri May 10, 2013 5:21 pm

The 150,000 is currently sitting in a Vanguard Prime MM acct ..it was cash from the sale of her house. Its a taxable account. Other than this she doesn't have much. about 5k in checking.5k in savings acct and another 18k in a trad IRA. No life insurance, longterm care or anything. I bought the Retirement CoOp unit for her but she has to live off of the little savings she has combined with about $1000 per month in SocSec. The SocSec will cover her monthly fees at the retirement community but I need to generate some income for her for other expenses such as car insurance, food, cloths, gas, etc.

We're still working out how much she'll need after her SocSec check but I ballpark about 500-600 per month. I think that's probably the max I'd be able to safely generate off that amount of savings. The Vanguard Managed Payout Funds says the Dist fund would pay out about 800 per month which is appealing but Im skeptical that her funds would last very long under that kind of payout.
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Re: Need advice on funds for newly retired 72yr old

Postby retiredjg » Fri May 10, 2013 6:30 pm

Wellesley Income is a fund that everybody thinks of fondly. It does have a great long term record and the expenses are mighty low for a managed fund. However, it is not as diversified as some would like. For example, it only contains 64 different stocks.

For this reason, some people mix Wellesley with the Target Retirement Income fund which has thousands of stocks and a wider variety of bonds. I'm just throwing this out for consideration.

I think 500 a month is a reasonable amount to withdraw - that's right at 4%.

Another thing to consider is purchasing a single premium immediate annuity (SPIA). By doing that, you would essentially be buying a specific income for life. At her age, she might get more than $500 a month, but if she dies before the whole $150k is spent, you don't get any money back. Well, there are ways to get money back, but it would involve her getting less each month than if she does not buy that option.

Do not consider any other kind of annuity, just a SPIA. You can get estimates off the internet, but I don't know which sites are reliable and which are not so I won't suggest one.
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Re: Need advice on funds for newly retired 72yr old

Postby Default User BR » Fri May 10, 2013 6:53 pm

retiredjg wrote:Wellesley Income is a fund that everybody thinks of fondly.

Not everybody.


Brian
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Re: Need advice on funds for newly retired 72yr old

Postby Johm221122 » Fri May 10, 2013 7:25 pm

As mentioned a SPIA would allow her to spend more wilth out worrying about outliving her money, here is one link
http://www.immediateannuities.com/
She could get 7%, at 100k that's $600, then she could but the rest in something like Wellesley, retirement income, CDs or short term bond fund
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Re: Need advice on funds for newly retired 72yr old

Postby retiredjg » Fri May 10, 2013 7:57 pm

Default User BR wrote:
retiredjg wrote:Wellesley Income is a fund that everybody thinks of fondly.

Not everybody.


Brian

You're right. I meant the colloquial "everybody". In other words "lots of folks", but not everybody.
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Re: Need advice on funds for newly retired 72yr old

Postby trasmuss » Sat May 11, 2013 10:27 am

I wouldn't even consider the managed payout funds for the reason you mentioned; too high equity exposure.

The answer will depend upon how the person will respond to risk taking and how they will react when their portfolio drops in value. You mention preservation of capital; virtually no fund (including short term bond funds) will be exempt from drops in value.

If the person has never invested beyond CD's before and is risk adverse, I agree that an immediate fixed annuity may be best for a good portion of the money. You can get them with periods of guaranteed payments (less monthly income) as was mentioned above.

Beyond the annuity you may wish to invest some in case needs come up that monthly payments won't cover. A combination of a funds like Wellesley, Target Income, Short Term Investment Grade, or CD's may be appropriate.

Tom
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Re: Need advice on funds for newly retired 72yr old

Postby wadesh » Tue May 14, 2013 9:06 pm

Thanks all. Great advice and food for thought. Thanks again.
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