Managing My Elderly Moms Portfolio

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AveryAUSTIN
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Joined: Wed May 17, 2017 4:51 pm

Managing My Elderly Moms Portfolio

Postby AveryAUSTIN » Thu May 18, 2017 10:26 am

My mother is good health 83 yr old who lives in an independent living facility with a current burn rate on her money at $80K per year after social security income (current Net Worth $770K). Me and my 3 brothers understand that she will eventually exhaust her finances and we will be able to cover her expenses once that happens but would like to extend her money as long as possible (she does have some long term care policies which might eventually help). Below are her current assets.

Vanguard Taxable Acct (500K)...cost basis of 500K:
* Prime Money Mkt: 400K
* Tot Stk Indx: 25K
* Tot Bnd Indx: 10K
* High Div Yld etf: 20K
* Health etf: 15K
* Info tech etf: 15K
* Small Cap Grth etf: 15K

Bank Accounts (110K)
Non Liquid Assets - Land, Private bank shares,Life settlement policies (160K)

The question is we currently have 400K sitting in the Vanguard Prime Money Mkt. We were thinking of dollar cost averaging 100K per year into the market as we have done the past year. In about 1.5 yr I will need to start pulling money out of Vanguard to cover living expenses. Please advise what asset allocation you would suggest and what funds to consider (taking into acct this is a taxable account). Thanks Jeff

sschoe2
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Re: Managing My Elderly Moms Portfolio

Postby sschoe2 » Thu May 18, 2017 12:31 pm

Even at her age I wouldn't keep that much cash at a bank or money market fund. I'd do 50% equities and 50% bonds and enough in the bank for a small immediate emergency fund.

I keep $10k in saving ~$2k in checking and $50k in short term investment grade for an emergency fund.
I would put up to 50% total in either bond index or core bond VCORX, then of the 50% in equities I'd divy it up 60% total stock market; 20% total international, and 20% small cap (tax managed VTMSX in taxable).

ourbrooks
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Re: Managing My Elderly Moms Portfolio

Postby ourbrooks » Thu May 18, 2017 4:11 pm

If you're sure she's going to exhaust her finances, why not just buy an SPIA (single premium immediate annuity)? If you put $700,000 into buying an annuity, at her age, it'd pay out a bit more than the $80,000 for as long as she lives.

The amount the annuity pays out is not adjusted for inflation so, over time, you'd still have to make up the difference but that would happen gradually over time, instead of having to start paying it all, all at once.

The problem with any stocks at all at her age is that the market might be down when you need the money. The stock market went down over 50% in 2008 and over the period from 1999 to 2009 there was no net gain.

Mr.BB
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Re: Managing My Elderly Moms Portfolio

Postby Mr.BB » Thu May 18, 2017 4:17 pm

ourbrooks wrote:If you're sure she's going to exhaust her finances, why not just buy an SPIA (single premium immediate annuity)? If you put $700,000 into buying an annuity, at her age, it'd pay out a bit more than the $80,000 for as long as she lives.

The amount the annuity pays out is not adjusted for inflation so, over time, you'd still have to make up the difference but that would happen gradually over time, instead of having to start paying it all, all at once.

The problem with any stocks at all at her age is that the market might be down when you need the money. The stock market went down over 50% in 2008 and over the period from 1999 to 2009 there was no net gain.


I don't agree with throwing everything at an annuity. I hope your mom has a long and healthy life, (my mother-in law is going to be 91 this year), but anything can happen health wise and though you are prepared to use all her savings, I think there are more balanced solutions.
Depending on how much is covered by Social Security, Medicare, etc....maybe use 25% in a SPIA and look at using more conservative funds like Wellesley (VWINX) as well as other short term bond funds. Once that money is in an annuity, it's gone.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

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David Jay
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Re: Managing My Elderly Moms Portfolio

Postby David Jay » Thu May 18, 2017 7:30 pm

The biggest return from an SPIA at your Mom's age is mortality credits, not bond returns so the payout is much higher than market returns. I agree with this approach.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

AveryAUSTIN
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Re: Managing My Elderly Moms Portfolio

Postby AveryAUSTIN » Sun May 21, 2017 7:16 pm

Thank you everyone very much for the feedback. I think we are going to go down the road of doing a 300K SPIA or DIA to generate my 83 yr old mom a monthly income between $2900-$3800. This will slow the burn of her remaining cash and provide her a lifelong stream of cash even though we will supplement down the road when needed. This will additionally solve the burden of her outliving her money and having to rely 100% on her children which most elderly stress about. I will likely set this up through Vanguard unless there are other companies I should resource...please advise?

dbr
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Re: Managing My Elderly Moms Portfolio

Postby dbr » Sun May 21, 2017 7:28 pm

Vanguard is not an insurance company. I don't know if they are a good agent for buying an SPIA or even really an agent at all. You could check out immediateannuities.com but that is not a recommendation or voucher for them, just a source of information I am aware of.

AveryAUSTIN
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Re: Managing My Elderly Moms Portfolio

Postby AveryAUSTIN » Sat May 27, 2017 6:46 pm

Thanks, doing my due-diligence on SPIA's. Seems to be a great solutions considering our circumstances.

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celia
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Re: Managing My Elderly Moms Portfolio

Postby celia » Sun May 28, 2017 4:16 am

The other option is to decrease her living expenses. Does she really NEED to live in a place that costs $80K + her SS benefit?

I'd be concerned about planning on your brothers and you in helping her. She could live another 20 years while one or more of you could die or need Long Term Care yourself. Or one of you could lose a working spouse and her income.

AveryAUSTIN
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Re: Managing My Elderly Moms Portfolio

Postby AveryAUSTIN » Mon May 29, 2017 11:46 am

Yes doubting our decision a bit of her moving into this costly independent living facility possibly a little too early at age 81 (6+K mth rent). The problem is she has already developed a circle of new friends, can still live a good quality independent life with lots of activities, and is a great safe environment with minimal stress. The financial liability will fall on me and my 3 brothers but thankful we are all very close and have financial meetings annually to discuss the situation. Certainly we could change her living option later to possibly cut down on that 80K burn annually but inflation might offset that. I certainly appreciate all the feedback as I try to proactively manage the situation.

dbr
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Re: Managing My Elderly Moms Portfolio

Postby dbr » Mon May 29, 2017 11:55 am

You should investigate and thoroughly understand her options when she is out of money and has to/can go on Medical Assistance. There is not necessarily any reason the family will be responsible for her support at that point. But the area is tricky and is dependent on where she is at the time. This may not be for some years and things can change in her care needs. You might consult a elder care attorney and/or start asking questions at her current facility and your county Department of Social Services. Don't do things like buy annuities until you understand more about all the options and assume nothing without investigating.

AveryAUSTIN
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Joined: Wed May 17, 2017 4:51 pm

Re: Managing My Elderly Moms Portfolio

Postby AveryAUSTIN » Mon May 29, 2017 12:19 pm

Thanks dbr for the additional suggestions and insights..great idea. Will start with her current facility which also offers Assisted Living and Nursing Care to understand a long term view. I certainly want to make sure my moms golden years are special...she deserves it.

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tractorguy
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Re: Managing My Elderly Moms Portfolio

Postby tractorguy » Mon May 29, 2017 3:01 pm

Does her facility have smaller apartments that cost less? My 91 year old MIL just moved into a facility in northern NJ that I consider very upscale and it only costs her a little over $3500/month. This is after the initial buy in (which her heirs are supposed to to get mostly back). This fee includes a meal allowance that covers her daily dinner. She's got the smallest 1 bedroom apartment in the place but it is plenty big enough for her. Between her yoga, water exercise, social time at dinner, movie night, etc. She really doesn't spend that much time in the apartment.
Lorne

AveryAUSTIN
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Joined: Wed May 17, 2017 4:51 pm

Re: Managing My Elderly Moms Portfolio

Postby AveryAUSTIN » Mon May 29, 2017 8:17 pm

The independent facility my mom is in is a Brookdale facility. There is no buy in just monthly rental of the unit which includes meals, utilities, cable, & transportation to Dr appts/etc if needed. She is in the second smallest 1 bedroom unit...750 sq ft...$6100/mth. There are definitely cheaper living options for her but she seems to be happy and has built her network of friends/etc. My goal is to tweak her Asset Allocation, possibly purchase a few SPIA's laddered to give her peace of mind, and dig deeper into her long term care policy on what it may provide in future. We feel confident that we have 8-10 yrs covered with her money but just need to proactively plan and make necessary adjustments as needed. Again I appreciate all the feedback as I am thankful for this site and the wisdom everyone provides.


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