Need advice on funds for newly retired 72yr old

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
wadesh
Posts: 11
Joined: Thu May 09, 2013 10:32 pm
Location: Chicago

Need advice on funds for newly retired 72yr old

Post by wadesh »

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.
Johm221122
Posts: 6393
Joined: Fri May 13, 2011 6:27 pm

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

Post by Johm221122 »

Welcome to forum,
How much income does she need from 150000?
Taxable or ira?
Were is money now?
John
Topic Author
wadesh
Posts: 11
Joined: Thu May 09, 2013 10:32 pm
Location: Chicago

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

Post by wadesh »

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.
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

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

Post by retiredjg »

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.
Default User BR
Posts: 7502
Joined: Mon Dec 17, 2007 6:32 pm

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

Post by Default User BR »

retiredjg wrote:Wellesley Income is a fund that everybody thinks of fondly.
Not everybody.


Brian
Johm221122
Posts: 6393
Joined: Fri May 13, 2011 6:27 pm

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

Post by Johm221122 »

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
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

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

Post by retiredjg »

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.
trasmuss
Posts: 235
Joined: Sun Oct 26, 2008 7:10 am

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

Post by trasmuss »

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
Topic Author
wadesh
Posts: 11
Joined: Thu May 09, 2013 10:32 pm
Location: Chicago

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

Post by wadesh »

Thanks all. Great advice and food for thought. Thanks again.
Topic Author
wadesh
Posts: 11
Joined: Thu May 09, 2013 10:32 pm
Location: Chicago

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

Post by wadesh »

So, I came across this post I did 10 years ago. I thought it would be interesting to post back the result 10 years later. I ended up putting 100% of her funds not into Wellesley or the managed payout fund but into the Wellington fund (the 65/35 stock bond fund). We didn't do the SPIA because at the time because she didn't want to give up control of the funds.

My mother passed away last summer at 82. The 150k we invested in Wellington generated a total of about $85,000 in div and cap gains over those 10 years as best I can tell from Vanguard reporting. she lived off these payments combined with SS and the 20k she had in her IRA (also in Wellington).

When she passed away last summer, she basically had the original principal, about $157,000. I count us lucky that the majority of 2013-2023 was a bull market. things could have gone the other way for sure, but Im so happy that what I helped her choose worked out for her needs in her last 10 years of life.
valleyrock
Posts: 1129
Joined: Sun Aug 12, 2018 7:12 am

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

Post by valleyrock »

Thanks very much for reporting back on this. It's great how it worked out.
Post Reply