Help with my Moms IRA, age 70 with 90% stocks

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plasma800
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Help with my Moms IRA, age 70 with 90% stocks

Post by plasma800 » Sun Jul 16, 2017 8:52 pm

Hi All,

I'm hoping I can get some pointers. I know a lot about my own portfolio, but I'm unsure how to advise my mom.

She's 70, still works (because she likes to), and is in stellar health for her age group.

She has a Traditional IRA with WF Advisors with about 67,000 left in it.

I've been begging her for a copy of her statement, and she finally got me one.

Whoever is running her portfolio over there has her money invested in exactly 80 individual stocks ranging from big banks, technology, coca cola, communications and what not.

Dividends are really low, but she's gained overall because of the stock market run.

I'm searching for a different way with Vanguard. Something safer than 90% stocks with her little nest egg.
Her house is paid off, and she's adamant about taking a $100,000 home equity loan, and she's getting 3.25% interest on that loan, and she sign on wed. The full value of her home is about $180,000.

She says she doesn't want to burden her kids, which I can appreciate.

At that point, she'll have 167,000 to invest. She also gets my late fathers social security. Her working income is about $2,000 per month with bursts of commission. This is enough to cover monthly electricity, cable, water, and her property tax rate is locked in really low.

Her car is 17 years old, and while it runs, it keeps eating her pocket in repairs. So she is looking to purchase a modest new car hoping to find a 0% interest as her credit is stellar.

How would one go about safely splitting her nest egg up, where it gains some ground over the 3.25% on the 100k, but removes risk and fees. I don't know what wells fargo is charging her, but I would hazard a guess it's 1%.

I also don't have past statements, so I don't know that they aren't shuffling her portfolio around.

So where do I start with a solid plan for her? :sharebeer

Would one at this age keep the 3 fund concept?
Last edited by plasma800 on Sun Jul 16, 2017 9:13 pm, edited 1 time in total.

mhalley
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by mhalley » Sun Jul 16, 2017 8:59 pm

Why On earth is she taking out a loan to invest in the stock market, ESP with markets at an all time high? Maybe a reverse mortgage would make more sense.
Last edited by mhalley on Sun Jul 16, 2017 9:05 pm, edited 1 time in total.

plasma800
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by plasma800 » Sun Jul 16, 2017 9:02 pm

mhalley wrote:Why On earth is she taking out a loan?
I agree with you on that one. It's very possible her Husband could be near passing and she feels more comfortable with more emergency cash on hand. I've attempted to dissuade her, but she's an adult and does as she pleases.

plasma800
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by plasma800 » Sun Jul 16, 2017 9:12 pm

mhalley wrote:Why On earth is she taking out a loan to invest in the stock market, ESP with markets at an all time high? Maybe a reverse mortgage would make more sense.
She was going to just put it in a savings account. I was the one who suggested at least an inflation protected bond or something.

So to be clear, she's not taking the loan specifically to invest, she just needs some cash.

I tried to open the door to a reverse mortgage, and she wasn't hearing it. She's pretty headstrong.

mhalley
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by mhalley » Sun Jul 16, 2017 10:10 pm

Well, why does she need 100k? Also, she certainly can't afford a new car, unless it is one of the cheapest ones they make. So she plans on taking out a 3% loan and putting it in a vehicle that returns 1%? The whole plan is so beyond the pale I don't know if you should be involved at all for when the inevitable happens.

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BL
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by BL » Sun Jul 16, 2017 10:34 pm

I might consider a Target retirement Income fund, 70% bonds as a set-and-forget fund. at least for the IRA. Maybe just 30% total stock market in taxable, and the rest in CDs or bonds (muni bonds if in 25+% tax bracket). Maybe check Ally online bank for savings rate and CD rates.

Did she just lose her husband? This is very stressful. I would not encourage any more decision-making than absolutely required if so.

Is she asking for help or is she wanting to do this on her own? Be careful if she is not requesting help. Maybe give her Jane Bryant Quinn's book How to Make Your Money Last: The Indispensable Retirement Guide Jan 10, 2017
She could look up topics of interest with this reference.
Last edited by BL on Sun Jul 16, 2017 10:38 pm, edited 1 time in total.

plasma800
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by plasma800 » Sun Jul 16, 2017 10:37 pm

mhalley wrote:Well, why does she need 100k? Also, she certainly can't afford a new car, unless it is one of the cheapest ones they make. So she plans on taking out a 3% loan and putting it in a vehicle that returns 1%? The whole plan is so beyond the pale I don't know if you should be involved at all for when the inevitable happens.
I offered to buy her a car, she won't let me.

Ok, so enough bashing of her decisions.. I can't control her thoughts. I'd like to return to my original question.

Let's pretend she never buys a car, which she might not, she loves her 17 year old car, it just needs a different repair every week.

Let's forget that she takes a loan and just say she has 167000 dollars and a mortgage of 100k.

What do portfolios of retired people look like? It's certainly not 90% individual stocks.

TravelforFun
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by TravelforFun » Sun Jul 16, 2017 10:41 pm

What's her annual expenses? Pretty soon she won't be able to work and will she be having any other regular incomes besides the $24K a year in SS surviving spousal benefit? At her age, her asset allocation should lean a lot more towards bonds and unfortunately, bonds gain cannot beat her HELOC interest rate.

We won't know whether the $167K will last her until we know her income and outgo.

plasma800
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by plasma800 » Sun Jul 16, 2017 10:42 pm

BL wrote:I might consider a Target retirement Income fund, 70% bonds as a set-and-forget fund. at least for the IRA. Maybe just 30% total stock market in taxable, and the rest in CDs or bonds (muni bonds if in 25+% tax bracket). Maybe check Ally online bank for savings rate and CD rates.

Did she just lose her husband? This is very stressful. I would not encourage any more decision-making than absolutely required if so.

Is she asking for help or is she wanting to do this on her own? Be careful if she is not requesting help. Maybe give her Jane Bryant Quinn's book How to Make Your Money Last: The Indispensable Retirement Guide Jan 10, 2017
She could look up topics of interest with this reference.
Great suggestions.

My reason for getting involved is to minimize my need to fork out money later, I'm working hard towards my own retirement.

My two brothers are broke and at age 49 and 53.
100% of my moms late financial needs will fall squarely on me, but when she passes, they'll be the first in line for their 1/3 of anything left over.

plasma800
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by plasma800 » Sun Jul 16, 2017 10:44 pm

TravelforFun wrote:What's her annual expenses? Pretty soon she won't be able to work and will she be having any other regular incomes besides the $24K a year in SS surviving spousal benefit? At her age, her asset allocation should lean a lot more towards bonds and unfortunately, bonds gain cannot beat her HELOC interest rate.

We won't know whether the $167K will last her until we know her income and outgo.
Well I'm sure just her insurance alone is killer. She also has the biggest Comcast package and 2 cable boxes she never touches... you can see where I'm headed there, but I might could do a complete inventory if her outgo. And I'd like to see her reduce wasted spending

plasma800
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by plasma800 » Sun Jul 16, 2017 10:46 pm

My stepfather is 87, just diagnosed with leukemia. Who knows how that ends or how soon. And he cashed his life insurance and gave it to his son years ago.

Bad move

plasma800
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by plasma800 » Mon Jul 17, 2017 8:51 am

I'd love to continue the subject. It will be a good lesson for me.

I tried to dissuade her from the home equity loan, not even a heloc, but a cash out.. but that was a no go.

At the very least, she has her eyes on a used car she likes at about 12,000 but I have a feeling it will be in the shop a lot starting SOON as it's 7 years old. And when her car is in the shop, guess who's going an hour away to get here someplace... so the warranty on a new car or the fact that they don't live in the shop sounds perfect to me, even if I have to make the payments.

A note to add, in the next few years, she has the chance to make a lot of money. She's pretty astute, and in a current position to produce a lot of money from home. Possibly over a million in total production. But if for any reason, that doesn't pan out, I'd at least like to have some sort of plan here.

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F150HD
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by F150HD » Mon Jul 17, 2017 9:29 am

this thread is confusing.

unclear what the 100k loan is for too.

indexonlyplease
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by indexonlyplease » Mon Jul 17, 2017 10:05 am

Age 70 and 90% in stocks, go MOM.

Maybe she wants to leave that aggressisve portfolio to you.

plasma800
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by plasma800 » Mon Jul 17, 2017 10:59 am

LOL.

The loan is not for any other reason than that she feels comfortable with the cash on had to cover short term living expenses if needed.

It's irrational, I know. I am unable to stop her, so I'm wanting to just create the best lemon aid that can be had out of it.

Crisium
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by Crisium » Mon Jul 17, 2017 11:34 am

Vanguard Wellesley has historically easily beaten 3.5%, and done decent during downturns. VWIAX. About 2:1 Bonds:Stocks, actively managed. A good hope for beating the loan while mitigating "all-time stock highs" fear.

Also, the all bond actively managed PIMIX with its star manager also has no problem clearing 3.5%. It's newer, and a lot of people won't like how it gets its results but they speak for themselves as it has no peer fund for its consistently high return bond results.

They have their own risks, but different from stocks.

plasma800
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by plasma800 » Mon Jul 17, 2017 12:34 pm

Crisium wrote:Vanguard Wellesley has historically easily beaten 3.5%, and done decent during downturns. VWIAX. About 2:1 Bonds:Stocks, actively managed. A good hope for beating the loan while mitigating "all-time stock highs" fear.

Also, the all bond actively managed PIMIX with its star manager also has no problem clearing 3.5%. It's newer, and a lot of people won't like how it gets its results but they speak for themselves as it has no peer fund for its consistently high return bond results.

They have their own risks, but different from stocks.
I had considered Wellesley, glad to hear a nod in that direction.

I guess WF is going to collect a nice commission x 80 when her account gets liquidated. or maybe they only charge a per trade fee.. I need to find that out.

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grabiner
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by grabiner » Mon Jul 17, 2017 6:22 pm

plasma800 wrote:LOL.

The loan is not for any other reason than that she feels comfortable with the cash on had to cover short term living expenses if needed.
This would be better done by a Home Equity Compensation Mortgage, a loan which allows you to draw on the equity in your home as needed, but with interest only on the amount drawn. (In contrast to a home-equity line of credit, the HECM cannot be withdrawn by the bank.)
David Grabiner

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celia
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by celia » Mon Jul 17, 2017 6:55 pm

plasma800 wrote:A note to add, in the next few years, she has the chance to make a lot of money. She's pretty astute, and in a current position to produce a lot of money from home. Possibly over a million in total production.
Now I get it! She was talked into fell for one of those work-at-home schemes that cost $100,000 to buy in and you make very little. Sort of like a pyramid scheme. She isn't astute. She's foolish.

Run, run, RUN away before she drags you into the black hole. You've seen nothing yet.

I do hope I'm completely off-base here, but this is a strong possibility! If it was that easy to make so much money, she would have done it a long time ago. Even the "advisors" don't make their money by being in the program themselves. They make it by charging those up-front fees. I believe you can learn about these gigs by watching too much of the "wrong" cable stations.

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celia
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by celia » Mon Jul 17, 2017 8:29 pm

plasma800 wrote:She has a Traditional IRA with WF Advisors with about 67,000 left in it.
To get to the question you asked about (which seems to be the least of her worries), what do you mean by "67,000 left in it"? Has she been withdrawing from it besides fees eating away at it? If she turned 70 in the first half of this year, she turns 70.5 in the second half and RMDs begin this year. Has she already withdrawn her RMD for this year?

The most cost effective thing to do is for her to have it transferred to a brokerage house that offers 30 days of free trading. (Ameritrade currently offers 90 days free trades plus $100 for her size of assets.). There she/you can sell everything. Then I would put it all in something like a Target Retirement Fund (no date). That will instantly give her a reasonable AA and simplify RMDs in the following years. But some brokerages have a fee for buying Vanguard funds. So watch out for that.

Has she considered getting a higher paying job with more hours? That would help stem the monthly shortfall.

plasma800
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by plasma800 » Mon Jul 17, 2017 11:30 pm

celia wrote:
plasma800 wrote:A note to add, in the next few years, she has the chance to make a lot of money. She's pretty astute, and in a current position to produce a lot of money from home. Possibly over a million in total production.
Now I get it! She was talked into fell for one of those work-at-home schemes that cost $100,000 to buy in and you make very little. Sort of like a pyramid scheme. She isn't astute. She's foolish.

Run, run, RUN away before she drags you into the black hole. You've seen nothing yet.

I do hope I'm completely off-base here, but this is a strong possibility! If it was that easy to make so much money, she would have done it a long time ago. Even the "advisors" don't make their money by being in the program themselves. They make it by charging those up-front fees. I believe you can learn about these gigs by watching too much of the "wrong" cable stations.
Yeah, very way off base. She paid off her house in 2 years with her own business. She just hasn't worked in a while. I set her to a task in my own business that has large, solid potential, and she has the dynamic personality to work it out. She was just getting starting when the stepfather went ill. That's been about a month now and a bit of a curveball. This then made me decide to look into what she really had going on, and I've told you what I found.

After learning what I've learned about personal finance in the past few years, firing my own advisers and going out on my own, I figured it was time to see if she was getting fleeced in her IRA or not.

Even if she lost every penny tomorrow, I could fund her for the rest of her life, albeit anything of her own I can protect, that makes the most fiscal sense of course. She's not on her deathbed that's for sure.. girl still walks 4-5 miles a day. Not to mention I have a newborn at home...
Last edited by plasma800 on Mon Jul 17, 2017 11:47 pm, edited 4 times in total.

plasma800
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Re: Help with my Moms IRA, age 70 with 90% stocks

Post by plasma800 » Mon Jul 17, 2017 11:36 pm

celia wrote:
plasma800 wrote:She has a Traditional IRA with WF Advisors with about 67,000 left in it.
To get to the question you asked about (which seems to be the least of her worries), what do you mean by "67,000 left in it"? Has she been withdrawing from it besides fees eating away at it? If she turned 70 in the first half of this year, she turns 70.5 in the second half and RMDs begin this year. Has she already withdrawn her RMD for this year?

The most cost effective thing to do is for her to have it transferred to a brokerage house that offers 30 days of free trading. (Ameritrade currently offers 90 days free trades plus $100 for her size of assets.). There she/you can sell everything. Then I would put it all in something like a Target Retirement Fund (no date). That will instantly give her a reasonable AA and simplify RMDs in the following years. But some brokerages have a fee for buying Vanguard funds. So watch out for that.

Has she considered getting a higher paying job with more hours? That would help stem the monthly shortfall.

She drew 7000 out of it to put in the bank with her husband in the hospital as a just in case I believe. And ya know what.. I can't remember if she just turned 70 or 71 lol.. oh boy! :oops:

But up until now, her husband was bringing in some steady money, plus their SS each, they were making their monthly.. but with his illness, that could change of course, and I think she just panicked a little for a moment.

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