Too old to invest at 70+ years?

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jplee3
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Too old to invest at 70+ years?

Post by jplee3 » Thu Oct 12, 2017 2:22 pm

Hey all,

So I'm trying to urge my wife to learn why investing is a good idea, both for us and for her parents. I'm having her read the Boglehead's Guide to Retirement now. The situation for her parents is a little more drastic as they are in their 70s and have pretty low net worth considering their age. They are not very financially sound or prudent when it comes to making decisions. My fear is that we would have to act on our [Asian cultured] inclinations to financially help them once they run low or out of funds. They have their assets spread across multiple bank accounts and also one or two cash stockpiles. They are afraid of investing for fear of losing money - they hear "stock market" and probably liken it to stock-picking.

My wife keeps saying "aren't they too old to start investing now?" - I'm not quite sure how to respond to that but it seems like the answer should be something along the lines of "it's better to invest *now* than never" - she's also afraid that they'll lose all their money.

What are some 'illustrations' perhaps that I can use to help quell these fears and try to get her (and them) more comfortable with the idea that investing is a good idea. Would it be prudent perhaps to look for a sound financial advisor who can relate and help them understand otherwise?

Thoughts or advice?

The Wizard
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Re: Too old to invest at 70+ years?

Post by The Wizard » Thu Oct 12, 2017 2:27 pm

This is a touchy topic.
One usual question that often arises is: have they asked for your help?

One likely scenario is a stock market drop of 20% or more next year a few months after they put a portion of their funds into a total stock index fund.
Can you imagine what will happen then?
Last edited by The Wizard on Thu Oct 12, 2017 2:30 pm, edited 1 time in total.
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MotoTrojan
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Re: Too old to invest at 70+ years?

Post by MotoTrojan » Thu Oct 12, 2017 2:30 pm

How old do people in your family tend to make it? How much $ we talking about? What are expenses?

Stock market may just have more risk of resentment/angst than it is worth, but something like a TIPS/Cd-ladder would preserve some capital and stop inflation from eroding their assets.

jplee3
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Re: Too old to invest at 70+ years?

Post by jplee3 » Thu Oct 12, 2017 2:33 pm

The Wizard wrote:
Thu Oct 12, 2017 2:27 pm
This is a touchy topic.
One usual question that often arises is: have they asked for your help?

Not yet... we've broached the subject lightly on a couple of occasions but they're the type who don't like to bother others (especially us). But the other side of the coin is that they don't plan ahead with *anything* and that's scares us. If something happens with them where they need help, it's usually always last minute or my wife finds out about it on her own and gets all tripped up over it. Same issue with the restaurant they currently own - they ask her to help with some stuff like depositing checks for them and checking that there's enough money in the restaurant account to pay bills. Then as soon as they leave to go out of town (with little to no contact), all these issues come up and my wife is left scrambling and calling or being called to help with restaurant stuff - nothing that requires going there but more logistical things that aren't an easy "yes" or "no" on the phone). So *this* is what scares us about them and their situation. I'm trying to be preemptive with my intentions of getting help on their behalf...

sport
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Re: Too old to invest at 70+ years?

Post by sport » Thu Oct 12, 2017 2:35 pm

Can you afford to replace any money they might lose in the market? If so, a conservative AA such as 20/80 could make a lot of sense. So, if their investments are successful, they are ahead, and if they lose, you make it up.

WhiteMaxima
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Re: Too old to invest at 70+ years?

Post by WhiteMaxima » Thu Oct 12, 2017 2:40 pm

It's very too late to invest. Consider this as your family money, You can pass along to your heir.

jplee3
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Re: Too old to invest at 70+ years?

Post by jplee3 » Thu Oct 12, 2017 2:43 pm

MotoTrojan wrote:
Thu Oct 12, 2017 2:30 pm
How old do people in your family tend to make it? How much $ we talking about? What are expenses?

Stock market may just have more risk of resentment/angst than it is worth, but something like a TIPS/Cd-ladder would preserve some capital and stop inflation from eroding their assets.


Thanks - I'll have to look into the TIPS/CD-ladder more. Haven't really heard of that before.

mptfan
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Re: Too old to invest at 70+ years?

Post by mptfan » Thu Oct 12, 2017 2:52 pm

jplee3 wrote:
Thu Oct 12, 2017 2:33 pm
The Wizard wrote:
Thu Oct 12, 2017 2:27 pm
This is a touchy topic.
One usual question that often arises is: have they asked for your help?
Not yet...
Then stay out of it.
I eat risk for breakfast. :)

Fallible
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Re: Too old to invest at 70+ years?

Post by Fallible » Thu Oct 12, 2017 2:53 pm

Have you all gotten together for a family talk about these matters? If not, that is a good place to start so that they understand your concerns and how they are affecting you and your wife. It's really a must place to start since they have not asked for your help and you will need that so you have their cooperation, especially if investing for the first time in the stock market.

How far are they into their 70s and how is their health?

In your second post, you mention that they own a restaurant. I think we need more specifics about their finances, including the restaurant. Do they plan to sell it anytime soon? Is it doing well? How much do they have to invest? How well do you think they could understand and accept the risks in investing? What less risky alternatives to stocks have you considered?

As for contacting a financial advisor or planner, I would first want to have that family talk, gather all pertinent information, determine their willingness and understanding of various ways to invest. And it's good to remember that even with an advisor or planner, the client should remain in charge and know what is going on. Plus, good advisors are hard to find.
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GerryL
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Re: Too old to invest at 70+ years?

Post by GerryL » Thu Oct 12, 2017 3:08 pm

If you're considering investing in the stock market, remember that is really for money that won't be needed for at least 8-10 years. Too much risk of a loss that can't be recovered if it hits at the wrong time. So maybe the question to start with is how long do they want/expect their money to last. The volatile nature of the stock market might be inappropriate for them. Structuring some of their funds in relatively safe investment so that it will be available when they need it (CDs?) and so they won't be tempted to spend through it may be the kind of investing they need to do.

MotoTrojan
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Re: Too old to invest at 70+ years?

Post by MotoTrojan » Thu Oct 12, 2017 3:13 pm

jplee3 wrote:
Thu Oct 12, 2017 2:43 pm
MotoTrojan wrote:
Thu Oct 12, 2017 2:30 pm
How old do people in your family tend to make it? How much $ we talking about? What are expenses?

Stock market may just have more risk of resentment/angst than it is worth, but something like a TIPS/Cd-ladder would preserve some capital and stop inflation from eroding their assets.


Thanks - I'll have to look into the TIPS/CD-ladder more. Haven't really heard of that before.
Basically just contribute to a 5-year CD every 6 months (initially can do some shorter ones too or just high-yield savings) so every 6 months, they get what they need for expenses, or get more than needed and roll-over some of it into another CD. Just a way to keep a steady cash-flow, at a pretty good interest rate. 100% FDIC insured, you know what you'll get. Only "risk" is that the Fed may increase rates and your CD won't get as much as a new one would, but the ladder is like DCA'ing into interest rates in that regard.

dbr
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Re: Too old to invest at 70+ years?

Post by dbr » Thu Oct 12, 2017 3:20 pm

Investing can't do much to bail people out of spending too much out of too little.

For any specific suggestions we would need to know what they have and what their spending needs are.

It does sound like having to help them out is a probable scenario.

finite_difference
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Re: Too old to invest at 70+ years?

Post by finite_difference » Thu Oct 12, 2017 3:24 pm

Never too old.

In this case might want to be conservative though, something like 40/60 or 30/70. Much better than 100% cash. It may be hard to pull off with your parents in law though — much easier with your own parents.

They’ll need to trust you. And not tinker with it. If the stock market crashes 50% and they are 30/70, they’ll “lose” 15% of their savings. Will they panick and sell it all? Or blame you for 2 years until it goes back up? :)
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

jplee3
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Re: Too old to invest at 70+ years?

Post by jplee3 » Thu Oct 12, 2017 5:28 pm

mptfan wrote:
Thu Oct 12, 2017 2:52 pm
jplee3 wrote:
Thu Oct 12, 2017 2:33 pm
The Wizard wrote:
Thu Oct 12, 2017 2:27 pm
This is a touchy topic.
One usual question that often arises is: have they asked for your help?
Not yet...
Then stay out of it.
Until the help they ask for is in the form of a loan or cash so they can afford something? :oops:

My point was/is that they are the kind of people who are not proactive until something bad happens to them or you point out that something bad *could* happen (and even then they might not listen but at least it was worth a try?)
Fallible wrote:
Thu Oct 12, 2017 2:53 pm
Have you all gotten together for a family talk about these matters? If not, that is a good place to start so that they understand your concerns and how they are affecting you and your wife. It's really a must place to start since they have not asked for your help and you will need that so you have their cooperation, especially if investing for the first time in the stock market.

How far are they into their 70s and how is their health?

In your second post, you mention that they own a restaurant. I think we need more specifics about their finances, including the restaurant. Do they plan to sell it anytime soon? Is it doing well? How much do they have to invest? How well do you think they could understand and accept the risks in investing? What less risky alternatives to stocks have you considered?

As for contacting a financial advisor or planner, I would first want to have that family talk, gather all pertinent information, determine their willingness and understanding of various ways to invest. And it's good to remember that even with an advisor or planner, the client should remain in charge and know what is going on. Plus, good advisors are hard to find.

Regarding the restaurant, they would like to sell it but there's really very little traction. If they do sell it's not going to be for what they're asking ($250k?). Also, they're in a leased space so they don't own the building/property, which doesn't help. It's not doing super great but it's not doing that bad. It's pretty average. The staff they have are old, tired and just plain bad. My estimate on what they bring home per year is probably in the ballpark of $50-60k? And they work way too much for that little, IMHO. As far as "investments" their idea of investing is buying a lot of land with friends in hopes that the lot will increase in value...basically speculation. Otherwise, it's not very deep beyond that and putting a thousand bucks in CDs and the rest in low-interest checking/saving accounts.

Part of the issue with this is that they *talk* about retirement but it's just talk. The reality of it is that the restaurant is their life - my wife and I think that they won't stop working until something seriously bad happens to two either or both of them where they physically cannot work. We're trying to encourage them away from that type of situation. Much of it hinges on whether or not they can actually sell the restaurant - I'm not even sure how they're coming to the valuation they came to - they received one really "lowball" offer (in their opinion and the landlord's) on it already though. At some point they said they were ready to just "walk away" from it all when they were "talking" more about retirement. I'm pretty sure they're not just going to walk away unless forced to.

dbr wrote:
Thu Oct 12, 2017 3:20 pm
Investing can't do much to bail people out of spending too much out of too little.

For any specific suggestions we would need to know what they have and what their spending needs are.

It does sound like having to help them out is a probable scenario.

As far as what they have, I'm estimating it's somewhere in the ballpark of $200k roughly between checking accounts and hard cash.
Last edited by jplee3 on Thu Oct 12, 2017 5:43 pm, edited 2 times in total.

MathWizard
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Re: Too old to invest at 70+ years?

Post by MathWizard » Thu Oct 12, 2017 5:42 pm

Yes, 70 is too old to "start" investing. If they were going to be investing, they should have
been in the market long ago, and should have decided to do so on their own, not convinced.
That would not end well.

My MIL was at our house when I was teaching my son about investing. I was giving him examples
of what our rates of return were for savings /checking/ CDs / Money market / bonds and stocks.

When she heard what we had made over the previous 10 years, she asked whether she should be
investing as well (She mainly had CDs and farmland she sharecropped.) At 80, she did not have
sufficient time to recover from a market downturn, but I was not gong to tell her that she was too old
to start investing.

Since she sharecropped, I told her that stocks are risky, and that since she was in farming, that
her income already had enough risk.

This was lucky, because this happened was the summer of 2006, only 2 years before the market
took quite a tumble.

jplee3
Posts: 63
Joined: Thu Nov 13, 2014 9:15 pm

Re: Too old to invest at 70+ years?

Post by jplee3 » Thu Oct 12, 2017 5:45 pm

MathWizard wrote:
Thu Oct 12, 2017 5:42 pm
Yes, 70 is too old to "start" investing. If they were going to be investing, they should have
been in the market long ago, and should have decided to do so on their own, not convinced.
That would not end well.

My MIL was at our house when I was teaching my son about investing. I was giving him examples
of what our rates of return were for savings /checking/ CDs / Money market / bonds and stocks.

When she heard what we had made over the previous 10 years, she asked whether she should be
investing as well (She mainly had CDs and farmland she sharecropped.) At 80, she did not have
sufficient time to recover from a market downturn, but I was not gong to tell her that she was too old
to start investing.

Since she sharecropped, I told her that stocks are risky, and that since she was in farming, that
her income already had enough risk.

This was lucky, because this happened was the summer of 2006, only 2 years before the market
took quite a tumble.
Thanks for the pointer... so then would you just suggest the TIPS/CD ladder that MotoTrojan was discussing earlier at least to 'preserve' their assets so that they're not losing value? I think at a minimum we'd want to help them "keep up with inflation" as close to possible with the least risk?

MathWizard
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Re: Too old to invest at 70+ years?

Post by MathWizard » Thu Oct 12, 2017 6:05 pm

jplee3 wrote:
Thu Oct 12, 2017 5:45 pm
MathWizard wrote:
Thu Oct 12, 2017 5:42 pm
Yes, 70 is too old to "start" investing. If they were going to be investing, they should have
been in the market long ago, and should have decided to do so on their own, not convinced.
That would not end well.

My MIL was at our house when I was teaching my son about investing. I was giving him examples
of what our rates of return were for savings /checking/ CDs / Money market / bonds and stocks.

When she heard what we had made over the previous 10 years, she asked whether she should be
investing as well (She mainly had CDs and farmland she sharecropped.) At 80, she did not have
sufficient time to recover from a market downturn, but I was not gong to tell her that she was too old
to start investing.

Since she sharecropped, I told her that stocks are risky, and that since she was in farming, that
her income already had enough risk.

This was lucky, because this happened was the summer of 2006, only 2 years before the market
took quite a tumble.
Thanks for the pointer... so then would you just suggest the TIPS/CD ladder that MotoTrojan was discussing earlier at least to 'preserve' their assets so that they're not losing value? I think at a minimum we'd want to help them "keep up with inflation" as close to possible with the least risk?
I agree with at least the CD ladder. That is FDIC insured.

I'd just suggest it to see if they think that is working well before going further.
If they have not asked for help, I would take baby steps.

I'm not thrilled with my TIPS, so I would not push it on them. Keep it
in mind for later if they become worried about inflation.

How is SS meeting their needs? Maybe they really do not need much more than that.

Did they take SS early, or wait until 70? 200K at 70 having delayed SS until 70 is much different than $200K at 70 having
taken SS at 62.

I know a lot of people who take SS as soon as possible, and pass up an excellent "longevity insurance" by just waiting
to claim.

mouses
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Re: Too old to invest at 70+ years?

Post by mouses » Thu Oct 12, 2017 6:12 pm

MathWizard wrote:
Thu Oct 12, 2017 6:05 pm

Did they take SS early, or wait until 70? 200K at 70 having delayed SS until 70 is much different than $200K at 70 having
taken SS at 62.

I know a lot of people who take SS as soon as possible, and pass up an excellent "longevity insurance" by just waiting
to claim.
I started SS as soon as possible. I'd have to get to almost 80 for that to have been the less favorable decision.

finite_difference
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Re: Too old to invest at 70+ years?

Post by finite_difference » Thu Oct 12, 2017 6:19 pm

Also, don’t forget about SPIAs. Could buy one for $75k, then buy another one later for $75k, etc.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

jplee3
Posts: 63
Joined: Thu Nov 13, 2014 9:15 pm

Re: Too old to invest at 70+ years?

Post by jplee3 » Thu Oct 12, 2017 6:24 pm

MathWizard wrote:
Thu Oct 12, 2017 6:05 pm
jplee3 wrote:
Thu Oct 12, 2017 5:45 pm
MathWizard wrote:
Thu Oct 12, 2017 5:42 pm
Yes, 70 is too old to "start" investing. If they were going to be investing, they should have
been in the market long ago, and should have decided to do so on their own, not convinced.
That would not end well.

My MIL was at our house when I was teaching my son about investing. I was giving him examples
of what our rates of return were for savings /checking/ CDs / Money market / bonds and stocks.

When she heard what we had made over the previous 10 years, she asked whether she should be
investing as well (She mainly had CDs and farmland she sharecropped.) At 80, she did not have
sufficient time to recover from a market downturn, but I was not gong to tell her that she was too old
to start investing.

Since she sharecropped, I told her that stocks are risky, and that since she was in farming, that
her income already had enough risk.

This was lucky, because this happened was the summer of 2006, only 2 years before the market
took quite a tumble.
Thanks for the pointer... so then would you just suggest the TIPS/CD ladder that MotoTrojan was discussing earlier at least to 'preserve' their assets so that they're not losing value? I think at a minimum we'd want to help them "keep up with inflation" as close to possible with the least risk?
I agree with at least the CD ladder. That is FDIC insured.

I'd just suggest it to see if they think that is working well before going further.
If they have not asked for help, I would take baby steps.

I'm not thrilled with my TIPS, so I would not push it on them. Keep it
in mind for later if they become worried about inflation.

How is SS meeting their needs? Maybe they really do not need much more than that.

Did they take SS early, or wait until 70? 200K at 70 having delayed SS until 70 is much different than $200K at 70 having
taken SS at 62.

I know a lot of people who take SS as soon as possible, and pass up an excellent "longevity insurance" by just waiting
to claim.
Thanks... I know they have one CD already, so I'll look into that a little more. Would it make sense for them to invest in bonds at all?

Yea, it's definitely baby steps with them. Doesn't help that we're over an hour away from them either and only see them once or twice a month.

With SS they definitely don't get enough to live off for a month. Part of this is because they have a mortgage on a home - although they're currently renting two of the rooms out so it helps subsidize the cost to where they technically could afford it with SS.... actually my estimated figure about of their income is off - the $50-60k I said was their income is actually what their *spending* is at least. I don't recall all the exact numbers I was running in my head and the calculator on the fly the other night but I think their savings ratio was somewhere between 20-30%. Either way, SS wouldn't be able to support their current lifestyle by a long shot. And cost of living here in SoCal would typically exceed what they get regardless.

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Sandtrap
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Re: Too old to invest at 70+ years?

Post by Sandtrap » Thu Oct 12, 2017 9:16 pm

You are perhaps attempting to cross a cultural-generational divide that involves a lot more than finance. They are your in-laws (wife's parents) vs your parents. They are in their 70's, and, as senior asians?, very private about finances which seems inherently distrustful and therefore difficult to work with, especially outsiders, and very very very resistant to change. Nothing is directly and immediately proactive, everything is for timely consideration. So you have to be patient and take small steps.
Perhaps lst suggest simplification and optimization of their existing financial picture. . . .so it will be easier for you and your DW to help them should they become ill or aged. And so forth.
My suggestions are based more on "approach" than "what to do" based on my background, culture, and prior experience with aging parents in a similar situation including family business, etc.
The question is not only, are they too old to "invest", but how best to simplify and optimize their existing financial situation, then go from there.
While others here are fantastic at the nuts and bolts of finance help, this is meant to help you with the approach.

I hope this one perspective is actionably helpful to you and not intrusive.
J :D

hightower
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Re: Too old to invest at 70+ years?

Post by hightower » Thu Oct 12, 2017 10:04 pm

jplee3 wrote:
Thu Oct 12, 2017 6:24 pm
MathWizard wrote:
Thu Oct 12, 2017 6:05 pm
jplee3 wrote:
Thu Oct 12, 2017 5:45 pm
MathWizard wrote:
Thu Oct 12, 2017 5:42 pm
Yes, 70 is too old to "start" investing. If they were going to be investing, they should have
been in the market long ago, and should have decided to do so on their own, not convinced.
That would not end well.

My MIL was at our house when I was teaching my son about investing. I was giving him examples
of what our rates of return were for savings /checking/ CDs / Money market / bonds and stocks.

When she heard what we had made over the previous 10 years, she asked whether she should be
investing as well (She mainly had CDs and farmland she sharecropped.) At 80, she did not have
sufficient time to recover from a market downturn, but I was not gong to tell her that she was too old
to start investing.

Since she sharecropped, I told her that stocks are risky, and that since she was in farming, that
her income already had enough risk.

This was lucky, because this happened was the summer of 2006, only 2 years before the market
took quite a tumble.
Thanks for the pointer... so then would you just suggest the TIPS/CD ladder that MotoTrojan was discussing earlier at least to 'preserve' their assets so that they're not losing value? I think at a minimum we'd want to help them "keep up with inflation" as close to possible with the least risk?
I agree with at least the CD ladder. That is FDIC insured.

I'd just suggest it to see if they think that is working well before going further.
If they have not asked for help, I would take baby steps.

I'm not thrilled with my TIPS, so I would not push it on them. Keep it
in mind for later if they become worried about inflation.

How is SS meeting their needs? Maybe they really do not need much more than that.

Did they take SS early, or wait until 70? 200K at 70 having delayed SS until 70 is much different than $200K at 70 having
taken SS at 62.

I know a lot of people who take SS as soon as possible, and pass up an excellent "longevity insurance" by just waiting
to claim.
Thanks... I know they have one CD already, so I'll look into that a little more. Would it make sense for them to invest in bonds at all?

Yea, it's definitely baby steps with them. Doesn't help that we're over an hour away from them either and only see them once or twice a month.

With SS they definitely don't get enough to live off for a month. Part of this is because they have a mortgage on a home - although they're currently renting two of the rooms out so it helps subsidize the cost to where they technically could afford it with SS.... actually my estimated figure about of their income is off - the $50-60k I said was their income is actually what their *spending* is at least. I don't recall all the exact numbers I was running in my head and the calculator on the fly the other night but I think their savings ratio was somewhere between 20-30%. Either way, SS wouldn't be able to support their current lifestyle by a long shot. And cost of living here in SoCal would typically exceed what they get regardless.
Those last two bits of extra info are quite revealing. Living in a ultra HCOL area and still paying a mortgage at the age of 70+ is a guaranteed losing scenario. As you pointed out, they likely have a very low net worth for their age and spending habits though we can't determine it exactly because we don't know what their business is actually worth, nor do we know what they still owe on the mortgage or any other debt. In order to support a spending habit of 50-60k/yr and retire now, they would need somewhere in the neighborhood of $1.25 million (25X annual spending).
Regardless, they will ultimately have to face reality which is they can not afford to live the way they do now any longer. Otherwise YOU will be paying for their lifestyle. It would be better to be honest with them sooner rather than later IMO, even if it is painful. They should sell their house and downsize their life style now. Renting a small apartment that fits into their budget is what needs to happen IMO.
This is a common scenario in the US unfortunately. Americans simply don't save enough and they always live way above their means. The result is that eventually they can no longer support their lifestyle and it becomes a painful wake up call late in life.
I feel for you though. I have a very poor relationship with my own parents and having a conversation about money with them like this would be difficult for me. My in-laws are more approachable on that subject, but it would still be tough to have to tell them that they need to downsize.

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Sandtrap
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Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳

Re: Too old to invest at 70+ years?

Post by Sandtrap » Thu Oct 12, 2017 10:35 pm

hightower wrote:
Thu Oct 12, 2017 10:04 pm
jplee3 wrote:
Thu Oct 12, 2017 6:24 pm
MathWizard wrote:
Thu Oct 12, 2017 6:05 pm
jplee3 wrote:
Thu Oct 12, 2017 5:45 pm
MathWizard wrote:
Thu Oct 12, 2017 5:42 pm
Yes, 70 is too old to "start" investing. If they were going to be investing, they should have
been in the market long ago, and should have decided to do so on their own, not convinced.
That would not end well.

My MIL was at our house when I was teaching my son about investing. I was giving him examples
of what our rates of return were for savings /checking/ CDs / Money market / bonds and stocks.

When she heard what we had made over the previous 10 years, she asked whether she should be
investing as well (She mainly had CDs and farmland she sharecropped.) At 80, she did not have
sufficient time to recover from a market downturn, but I was not gong to tell her that she was too old
to start investing.

Since she sharecropped, I told her that stocks are risky, and that since she was in farming, that
her income already had enough risk.

This was lucky, because this happened was the summer of 2006, only 2 years before the market
took quite a tumble.
Thanks for the pointer... so then would you just suggest the TIPS/CD ladder that MotoTrojan was discussing earlier at least to 'preserve' their assets so that they're not losing value? I think at a minimum we'd want to help them "keep up with inflation" as close to possible with the least risk?
I agree with at least the CD ladder. That is FDIC insured.

I'd just suggest it to see if they think that is working well before going further.
If they have not asked for help, I would take baby steps.

I'm not thrilled with my TIPS, so I would not push it on them. Keep it
in mind for later if they become worried about inflation.

How is SS meeting their needs? Maybe they really do not need much more than that.

Did they take SS early, or wait until 70? 200K at 70 having delayed SS until 70 is much different than $200K at 70 having
taken SS at 62.

I know a lot of people who take SS as soon as possible, and pass up an excellent "longevity insurance" by just waiting
to claim.
Thanks... I know they have one CD already, so I'll look into that a little more. Would it make sense for them to invest in bonds at all?

Yea, it's definitely baby steps with them. Doesn't help that we're over an hour away from them either and only see them once or twice a month.

With SS they definitely don't get enough to live off for a month. Part of this is because they have a mortgage on a home - although they're currently renting two of the rooms out so it helps subsidize the cost to where they technically could afford it with SS.... actually my estimated figure about of their income is off - the $50-60k I said was their income is actually what their *spending* is at least. I don't recall all the exact numbers I was running in my head and the calculator on the fly the other night but I think their savings ratio was somewhere between 20-30%. Either way, SS wouldn't be able to support their current lifestyle by a long shot. And cost of living here in SoCal would typically exceed what they get regardless.
Those last two bits of extra info are quite revealing. Living in a ultra HCOL area and still paying a mortgage at the age of 70+ is a guaranteed losing scenario. As you pointed out, they likely have a very low net worth for their age and spending habits though we can't determine it exactly because we don't know what their business is actually worth, nor do we know what they still owe on the mortgage or any other debt. In order to support a spending habit of 50-60k/yr and retire now, they would need somewhere in the neighborhood of $1.25 million (25X annual spending).
Regardless, they will ultimately have to face reality which is they can not afford to live the way they do now any longer. Otherwise YOU will be paying for their lifestyle. It would be better to be honest with them sooner rather than later IMO, even if it is painful. They should sell their house and downsize their life style now. Renting a small apartment that fits into their budget is what needs to happen IMO.
This is a common scenario in the US unfortunately. Americans simply don't save enough and they always live way above their means. The result is that eventually they can no longer support their lifestyle and it becomes a painful wake up call late in life.
I feel for you though. I have a very poor relationship with my own parents and having a conversation about money with them like this would be difficult for me. My in-laws are more approachable on that subject, but it would still be tough to have to tell them that they need to downsize.
Good observation, "hightower".
This happens all the time in Hawaii (highest HCOL) to older generations. Most every 5000 sf residential property with a plantation era tiny house on it is worth well over 1 million. Multi-generations have to move in to afford the HCOL even though the mortgage is paid off. And, rents are so high that, again, working children, or married working children have to move in with their parents just to afford rent and a minimal lifestyle. A large percentage are minorities and/or asian so are culturally frugal and passionate savers, yet, they still marginally make ends meet.
The strongest solution is to move to a LCOL area and/or downsize.
Obvious but so so difficult to do. Especially for seniors.

jplee3
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Re: Too old to invest at 70+ years?

Post by jplee3 » Thu Oct 12, 2017 11:40 pm

Sandtrap wrote:
Thu Oct 12, 2017 9:16 pm
You are perhaps attempting to cross a cultural-generational divide that involves a lot more than finance. They are your in-laws (wife's parents) vs your parents. They are in their 70's, and, as senior asians?, very private about finances which seems inherently distrustful and therefore difficult to work with, especially outsiders, and very very very resistant to change. Nothing is directly and immediately proactive, everything is for timely consideration. So you have to be patient and take small steps.
Perhaps lst suggest simplification and optimization of their existing financial picture. . . .so it will be easier for you and your DW to help them should they become ill or aged. And so forth.
My suggestions are based more on "approach" than "what to do" based on my background, culture, and prior experience with aging parents in a similar situation including family business, etc.
The question is not only, are they too old to "invest", but how best to simplify and optimize their existing financial situation, then go from there.
While others here are fantastic at the nuts and bolts of finance help, this is meant to help you with the approach.

I hope this one perspective is actionably helpful to you and not intrusive.
J :D
Good reminder, I think that's very true as far as their perception towards change and doing things new. They are very much "old-school" in their thinking so it's quite a challenge. Simplification/optimization seems to make sense as a first step - practically, I would think that means consolidating their non-business assets into a single bank account so it's not spread around. And especially taking that cold hard cash they have sitting around and depositing most if not all of it. My wife seems to think that they get suckered into opening new accounts at places because they're promised "great returns" lol
hightower wrote:
Thu Oct 12, 2017 10:04 pm
jplee3 wrote:
Thu Oct 12, 2017 6:24 pm
MathWizard wrote:
Thu Oct 12, 2017 6:05 pm
jplee3 wrote:
Thu Oct 12, 2017 5:45 pm
MathWizard wrote:
Thu Oct 12, 2017 5:42 pm
Yes, 70 is too old to "start" investing. If they were going to be investing, they should have
been in the market long ago, and should have decided to do so on their own, not convinced.
That would not end well.

My MIL was at our house when I was teaching my son about investing. I was giving him examples
of what our rates of return were for savings /checking/ CDs / Money market / bonds and stocks.

When she heard what we had made over the previous 10 years, she asked whether she should be
investing as well (She mainly had CDs and farmland she sharecropped.) At 80, she did not have
sufficient time to recover from a market downturn, but I was not gong to tell her that she was too old
to start investing.

Since she sharecropped, I told her that stocks are risky, and that since she was in farming, that
her income already had enough risk.

This was lucky, because this happened was the summer of 2006, only 2 years before the market
took quite a tumble.
Thanks for the pointer... so then would you just suggest the TIPS/CD ladder that MotoTrojan was discussing earlier at least to 'preserve' their assets so that they're not losing value? I think at a minimum we'd want to help them "keep up with inflation" as close to possible with the least risk?
I agree with at least the CD ladder. That is FDIC insured.

I'd just suggest it to see if they think that is working well before going further.
If they have not asked for help, I would take baby steps.

I'm not thrilled with my TIPS, so I would not push it on them. Keep it
in mind for later if they become worried about inflation.

How is SS meeting their needs? Maybe they really do not need much more than that.

Did they take SS early, or wait until 70? 200K at 70 having delayed SS until 70 is much different than $200K at 70 having
taken SS at 62.

I know a lot of people who take SS as soon as possible, and pass up an excellent "longevity insurance" by just waiting
to claim.
Thanks... I know they have one CD already, so I'll look into that a little more. Would it make sense for them to invest in bonds at all?

Yea, it's definitely baby steps with them. Doesn't help that we're over an hour away from them either and only see them once or twice a month.

With SS they definitely don't get enough to live off for a month. Part of this is because they have a mortgage on a home - although they're currently renting two of the rooms out so it helps subsidize the cost to where they technically could afford it with SS.... actually my estimated figure about of their income is off - the $50-60k I said was their income is actually what their *spending* is at least. I don't recall all the exact numbers I was running in my head and the calculator on the fly the other night but I think their savings ratio was somewhere between 20-30%. Either way, SS wouldn't be able to support their current lifestyle by a long shot. And cost of living here in SoCal would typically exceed what they get regardless.
Those last two bits of extra info are quite revealing. Living in a ultra HCOL area and still paying a mortgage at the age of 70+ is a guaranteed losing scenario. As you pointed out, they likely have a very low net worth for their age and spending habits though we can't determine it exactly because we don't know what their business is actually worth, nor do we know what they still owe on the mortgage or any other debt. In order to support a spending habit of 50-60k/yr and retire now, they would need somewhere in the neighborhood of $1.25 million (25X annual spending).
Regardless, they will ultimately have to face reality which is they can not afford to live the way they do now any longer. Otherwise YOU will be paying for their lifestyle. It would be better to be honest with them sooner rather than later IMO, even if it is painful. They should sell their house and downsize their life style now. Renting a small apartment that fits into their budget is what needs to happen IMO.
This is a common scenario in the US unfortunately. Americans simply don't save enough and they always live way above their means. The result is that eventually they can no longer support their lifestyle and it becomes a painful wake up call late in life.
I feel for you though. I have a very poor relationship with my own parents and having a conversation about money with them like this would be difficult for me. My in-laws are more approachable on that subject, but it would still be tough to have to tell them that they need to downsize.

Yes, it is definitely HCOL even those it's on the mid-lower end of the spectrum for LA. The other awful thing they did was buy whole life insurance for themselves. That's a complete money drain. They were also paying for their mom's whole life insurance ($600 a month!) up until she passed. They got $13k back for it (which is probably pennies compared to what they paid over the lifetime of the policy) and gave it to their little sister in Hawaii because they feel bad for her (even though she has a decent job) and feel compelled to help her.

Another suggestion that was made elsewhere was that they downsize the restaurant too if they feel they need to keep working. Not sure how that would practically work though if they can't sell the current one.

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Watty
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Re: Too old to invest at 70+ years?

Post by Watty » Fri Oct 13, 2017 12:16 am

For comparison the Vanguard Retirement income fund is about 30% stocks/70% bonds.

https://personal.vanguard.com/us/funds/ ... undId=0308

It would be reasonable to consider the restraunt that they own to be part of their stock asset allocation and the money in the banks as bonds. It could be that when you look at it that way they already have a reasonable asset allocation and could even be invested more aggressively than that mutual fund.

The mention of a "cash stockpick" concerns me not only for the risk of it being stolen but also for their personal safety if someone assaults them to steal it. They may be comfortable and experienced with holding significant cash but as they age they may become less capable and there are lots of things that could go wrong with having cash like that.

MathWizard
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Re: Too old to invest at 70+ years?

Post by MathWizard » Fri Oct 13, 2017 12:32 am

mouses wrote:
Thu Oct 12, 2017 6:12 pm
MathWizard wrote:
Thu Oct 12, 2017 6:05 pm

Did they take SS early, or wait until 70? 200K at 70 having delayed SS until 70 is much different than $200K at 70 having
taken SS at 62.

I know a lot of people who take SS as soon as possible, and pass up an excellent "longevity insurance" by just waiting
to claim.
I started SS as soon as possible. I'd have to get to almost 80 for that to have been the less favorable decision.
I am expecting to live a little longer than 80, however, the biggest
factor in waiting is that I am married to a wife with a heritage of long life expectancy. The odds favor one of us living well beyond the breakeven point. By having her take her Benefit at FRA, having me delay to 70, we maximize dollars with the numbers I use. This is also insurance against outliving my money. I don't want to have to worry about running out. I'd rather leave money on the table.

We'll probably leave an inheritance, but I don't expect that my kids will need it. We've taught them good habits, and made sure they have a good education. I expect them to be about on par with our wealth when they are our age.

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Re: Too old to invest at 70+ years?

Post by Yukon » Fri Oct 13, 2017 5:44 am

In an effort to tread lightly with them I'd consider helping them find an accurate valuation to their restaurant (if they agree to the help) ....which would lead to deeper discussions on what that valuation means in their grand scheme of finances and retirement. Just a hunch but I'm guessing that staying healthy enough to run their restaurant for as long as they can would be the "easiest" solution for them. (Drastically cutting back their cost of living would be 100% prudent but it's difficult to teach old dogs new tricks)
Don't Work Forever.

jplee3
Posts: 63
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Re: Too old to invest at 70+ years?

Post by jplee3 » Fri Oct 13, 2017 10:18 am

Yukon wrote:
Fri Oct 13, 2017 5:44 am
In an effort to tread lightly with them I'd consider helping them find an accurate valuation to their restaurant (if they agree to the help) ....which would lead to deeper discussions on what that valuation means in their grand scheme of finances and retirement. Just a hunch but I'm guessing that staying healthy enough to run their restaurant for as long as they can would be the "easiest" solution for them. (Drastically cutting back their cost of living would be 100% prudent but it's difficult to teach old dogs new tricks)

Thanks, they did get help from their landlord's broker as far as getting a better listing put up there *I think*. Ultimately though, they're the ones who determine the valuation and like you alluded to: it's easier just to not do all that hard work [by working themselves harder, ironically]. We've talked to them about how when they retire they can't be careless with their money and they say "ok ok ok" like they acknowledge it - I doubt they actually realize it though. An indicator of this is they say they'll be "bored" during retirement and think they'll be sitting around in an apartment all day...lol. Thing is, I'm willing to wager that a majority of their peers are retired and probably have some money *or* their peers' children are supporting their respective lifestyles (which is totally old school Chinese: "what's that mom? dad? you want a new Lexus? And Gucci slippers for the house? And a Coach purchase? And a vacation to Taiwan? sure! here's $100k!"). My MIL used to always tell my wife about her friend's friend or other friend who has a son who makes $100k per month as a sales engineer and lives in a 6 bed 5 bath house in Alhambra, just got married and the wife makes [a measly] $150k per year and recently bought their parents a Lexus and a trip to Japan etc, until we asked her to stop telling us those things, both for her sake and ours... :greedy :moneybag :greedy :oops:

BTW: is there any reason why they shouldn't just dump the whole life insurance black hole they've been throwing their money into as well? Maybe take that money and contribute it towards CDs instead?

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Sandtrap
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Re: Too old to invest at 70+ years?

Post by Sandtrap » Fri Oct 13, 2017 10:39 am

The life insurance can indeed be a black hole.
For example: My grandmother (popo) poured millions in premiums over the years into an extremely expensive policy until she was no longer insurable. The "nice insurance" salesman made good money. He convinced her that the expensive policy would help pay estate taxes becaus she was wealthy. And, that would take the " burden" of paying estate taxes off of her children.
The same thing happened to my mother in her elder years. She outlived the policy. Both times I could say nothing. Youngest son, what do we know? Ayaa. :( Yes. Very old school C. Thanks for the humor. :D

This is just one example and may be different for others in different experiences.
And may be helpful to you. IMHO the insurance premiums may perhaps be invested wisely elsewhere if they are not dependent on life insurance otherwise.

As far as the restaurant. It may be the reason they are healthy and gives them vitality. You can be helpful to make it further prosper, increase revenue, streamline, cut costs. And, at the point where it is a strain on their health and lifestyle, then consider selling at as higher profit. If you are a businessman, then this is a good option of many options.
Yes. They may be very bored without the business. It also gives them a sense of security and direction and grounding. Also, perhaps, very "old school" where "retirement" is not in the vocabulary.

j :D

CnC
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Re: Too old to invest at 70+ years?

Post by CnC » Fri Oct 13, 2017 11:14 am

Sandtrap wrote:
Fri Oct 13, 2017 10:39 am
The life insurance can indeed be a black hole.
For example: My grandmother (popo) poured millions in premiums over the years into an extremely expensive policy until she was no longer insurable. The "nice insurance" salesman made good money. He convinced her that the expensive policy would help pay estate taxes becaus she was wealthy. And, that would take the " burden" of paying estate taxes off of her children.
The same thing happened to my mother in her elder years. She outlived the policy. Both times I could say nothing. Youngest son, what do we know? Ayaa. :( Yes. Very old school C. Thanks for the humor. :D

This is just one example and may be different for others in different experiences.
And may be helpful to you. IMHO the insurance premiums may perhaps be invested wisely elsewhere if they are not dependent on life insurance otherwise.

As far as the restaurant. It may be the reason they are healthy and gives them vitality. You can be helpful to make it further prosper, increase revenue, streamline, cut costs. And, at the point where it is a strain on their health and lifestyle, then consider selling at as higher profit. If you are a businessman, then this is a good option of many options.
Yes. They may be very bored without the business. It also gives them a sense of security and direction and grounding. Also, perhaps, very "old school" where "retirement" is not in the vocabulary.

j :D
How is it possible to pay "millions" into insurance and not get anything out of it?

While I'm not really pleased with my Whole life policy if I had it to do over again I wouldn't but it is 10 pay and several hundred thousand in death benefits for total costs in the low 10 thousands in total costs.

Following that math millions in premiums should buy you 10's of millions in death benefits.

mxs
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Re: Too old to invest at 70+ years?

Post by mxs » Fri Oct 13, 2017 11:16 am

mptfan wrote:
Thu Oct 12, 2017 2:52 pm
jplee3 wrote:
Thu Oct 12, 2017 2:33 pm
The Wizard wrote:
Thu Oct 12, 2017 2:27 pm
This is a touchy topic.
One usual question that often arises is: have they asked for your help?
Not yet...
Then stay out of it.
That sounds good, except for the fact that if this isn't dealt with now, you will deal with it later when it is only worse.

jplee3
Posts: 63
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Re: Too old to invest at 70+ years?

Post by jplee3 » Fri Oct 13, 2017 11:40 am

mxs wrote:
Fri Oct 13, 2017 11:16 am
mptfan wrote:
Thu Oct 12, 2017 2:52 pm
jplee3 wrote:
Thu Oct 12, 2017 2:33 pm
The Wizard wrote:
Thu Oct 12, 2017 2:27 pm
This is a touchy topic.
One usual question that often arises is: have they asked for your help?
Not yet...
Then stay out of it.
That sounds good, except for the fact that if this isn't dealt with now, you will deal with it later when it is only worse.
Exactly... "stay out of it" doesn't work in everyone's situation. In some family dynamics, assuming you want to maintain a half-decent relationship status with that family member(s), that mentality will come back to bite you in the rear. In our case, this could mean having to pay for things we would have never dreamed of paying for related to medical expenses, etc. They are on medicare I think and my wife's grandmother was put in a nursing home funded by the govt so I think my in-laws are assuming they'll just do the same thing. I don't know if that's actually how it works or if there are other stipulations. Either way, I don't want to have to find out the hard way...

Sandtrap wrote:
Fri Oct 13, 2017 10:39 am
The life insurance can indeed be a black hole.
For example: My grandmother (popo) poured millions in premiums over the years into an extremely expensive policy until she was no longer insurable. The "nice insurance" salesman made good money. He convinced her that the expensive policy would help pay estate taxes becaus she was wealthy. And, that would take the " burden" of paying estate taxes off of her children.
The same thing happened to my mother in her elder years. She outlived the policy. Both times I could say nothing. Youngest son, what do we know? Ayaa. :( Yes. Very old school C. Thanks for the humor. :D

This is just one example and may be different for others in different experiences.
And may be helpful to you. IMHO the insurance premiums may perhaps be invested wisely elsewhere if they are not dependent on life insurance otherwise.

As far as the restaurant. It may be the reason they are healthy and gives them vitality. You can be helpful to make it further prosper, increase revenue, streamline, cut costs. And, at the point where it is a strain on their health and lifestyle, then consider selling at as higher profit. If you are a businessman, then this is a good option of many options.
Yes. They may be very bored without the business. It also gives them a sense of security and direction and grounding. Also, perhaps, very "old school" where "retirement" is not in the vocabulary.

j :D
Haha, yep, our parents are so naive huh? True story per my in-laws (don't worry, I make fun of my own [Americanized Chinese] parents too for how much they hoard): "So our friends sold us $700 worth of this special powder you mix into drinks that gives you more energy and makes you live longer. It's a great investment into our health!" *facepalm*

Regarding the restaurant - yes, that is what they say. It's a double-edged sword that's the thing - it gives them vitality yet it worsens their chronic conditions with back pain, etc. They work long hours and it's as if they work themselves into the ground without realizing it. I think when people say things like that (aka "the restaurant is my life - I can never imagine living without it"), that sometimes they're in denial? I feel like there's definitely a bit of denial in their case - why else talk about retirement? They prioritized the restaurant over their own kids and still do over their grandkids. My wife thought it would change but no. A big part of the reason why they can't let go is because they don't trust their own staff, yet it's their own fault for keeping the old and expiring staff around this long - the staff knows they can step all over them and do whatever they want (especially while my in-laws are out of town) so they do and my in-laws don't do anything. It's a parasitic relationship...
I don't know if we could take on such a huge prospect - my wife and I are *not* entrepreneurial and know nothing about this kind of business. We would be kidding ourselves if we thought we could turn it around.

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Sandtrap
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Re: Too old to invest at 70+ years?

Post by Sandtrap » Fri Oct 13, 2017 12:34 pm

CnC wrote:
Fri Oct 13, 2017 11:14 am
Sandtrap wrote:
Fri Oct 13, 2017 10:39 am
The life insurance can indeed be a black hole.
For example: My grandmother (popo) poured millions in premiums over the years into an extremely expensive policy until she was no longer insurable. The "nice insurance" salesman made good money. He convinced her that the expensive policy would help pay estate taxes becaus she was wealthy. And, that would take the " burden" of paying estate taxes off of her children.
The same thing happened to my mother in her elder years. She outlived the policy. Both times I could say nothing. Youngest son, what do we know? Ayaa. :( Yes. Very old school C. Thanks for the humor. :D

This is just one example and may be different for others in different experiences.
And may be helpful to you. IMHO the insurance premiums may perhaps be invested wisely elsewhere if they are not dependent on life insurance otherwise.

As far as the restaurant. It may be the reason they are healthy and gives them vitality. You can be helpful to make it further prosper, increase revenue, streamline, cut costs. And, at the point where it is a strain on their health and lifestyle, then consider selling at as higher profit. If you are a businessman, then this is a good option of many options.
Yes. They may be very bored without the business. It also gives them a sense of security and direction and grounding. Also, perhaps, very "old school" where "retirement" is not in the vocabulary.

j :D
How is it possible to pay "millions" into insurance and not get anything out of it?

While I'm not really pleased with my Whole life policy if I had it to do over again I wouldn't but it is 10 pay and several hundred thousand in death benefits for total costs in the low 10 thousands in total costs.

Following that math millions in premiums should buy you 10's of millions in death benefits.
Very true.
You are correct.

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