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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Joined: Fri Feb 24, 2017 4:42 pm

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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Joined: Fri Nov 13, 2009 4:56 pm

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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Joined: Sun May 08, 2016 10:10 am

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.

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David Jay
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Location: Michigan

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
Posts: 2
Joined: Wed May 17, 2017 4:51 pm

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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Joined: Sun Mar 04, 2007 9:50 am

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.


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