Suggestions for Dad's portfolio. He's 92.

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chuckb84
Posts: 199
Joined: Wed Oct 21, 2015 10:41 am
Location: New Mexico

Suggestions for Dad's portfolio. He's 92.

Post by chuckb84 » Thu Oct 26, 2017 1:59 pm

This is a summary of my Dad's retirement accounts over the past 10 years. He's turning 92 and just made me an administrator of his accounts....just in case. My Mom is 88 and in poor health.I am now the same age Dad was when he retired, and I have to say, I'm impressed and hope to follow his example!

But I do have a couple of questions about changes I think he should make. Sorry for the length of this, but I wanted to include all the pertinent information.

Here's the synopsis. He has accounts with Vanguard and with Wells Fargo that are roughly equal in size. The two accounts combined put him solidly in the two comma club :). Their mortgage was paid off many years ago. (They've lived in the same house since 1967!)

Over the 10 years available on Vanguard online, he's earned a return of 6.1%, and the account has slightly more money in it now than in 2007, despite steady withdrawals. He's consistently withdrawn about 5.5% annually, and earned an average of 6.1% over the past 10 years, despite a horrifying 40% drop in 2007-2009.

The portfolio is currently:

Vanguard 500 Index Fund Admiral Shares 61%
Vanguard Convertible Securities Fund 3%
Vanguard Equity Income Fund Admiral Shares 13%
Vanguard Prime Money Market Fund 3%
Vanguard Wellesley Income Fund Admiral Shares 8%
Vanguard Windsor II Fund Admiral Shares 12%

My main concern here is that the Vanguard account is 92% stocks, and 98% US stocks.

The Wells Fargo Account is 88% equities (nearly all US). 62% of the portfolio is in these stocks, apparently for dividend income(?).

AMGEN INC,CHEVRON CORPORATION,ALLSTATE CORP,MONSANTO CO NEW,PFIZER INCORPORATED,WELLS FARGO & CO NEW,JOHNSON & JOHNSON,MICROSOFT CORP,MORGAN STANLEY & CO,WAL-MART STORES INC,EXXON MOBIL CORP,DISCOVER FINANCIAL,GENERAL ELECTRIC COMPANY,PNC FINANCIAL SERVICES,WASTE MGMT INC DEL,JPMORGAN CHASE & CO,LOCKHEED MARTIN CORP,PFIZER INCORPORATED,MCDONALDS CORP,ABBVIE INC,CISCO SYSTEMS INC,NORFOLK SOUTHERN CORP,M & T BANK CORP,NUCOR CORP,EMERSON ELECTRIC CO,KRAFT HEINZ CO,MERCK & CO INC NEW,HEWLETT PACKARD,W P CAREY INC,HONEYWELL INTERNATIONAL,BANK MONTREAL QUEBEC,PPL CORPORATION,CHUBB LTD,GENERAL MILLS INC,KIMBERLY-CLARK CORP,ABBOTT LABORATORIES,COCA-COLA COMPANY,PROCTER & GAMBLE CO,REGIONS FINANCIAL CORP,INTEL CORP,LEGGETT & PLATT INC,BP PLC SPONS ADR,ROCHE HOLDINGS LTD ADR,AT & T INC,QUALCOMM INC,DXC TECHNOLOGY CO,BALLARD POWER SYSTEMS,MICRO FOCUS INTL PLC ADR, GENUINE PARTS CO

16% is in Mutual Funds. And 23% in three ETFs.

My takeaways: (1) he has pension income and Mom and Dad both get SS (I don't know when they started it), (2) this is a very aggressive portfolio for a 92 year old (3) The stock exposure is very high and essentially all US.

I can't argue with the success of this setup over the course of his 30 year (and counting) retirement, but I'd be interested in thoughts from this group.

His long term goal has been to invest aggressively to have the income that he wanted for them to travel a lot, with, the SS and pension income sufficient to support their (very frugal) necessities. I think the goal now is to leave a substantial estate for the children and grandchildren.

I'm inclined to suggest that he should greatly reduce his stock exposure and plan for possible end-of-life medical expenses, but I've no idea how he'll react to this. My Mom had a close call a few years ago, and despite excellent health insurance, they had $200K of out of pocket medical expenses just in one year.

Comments appreciated. And I'm sure there is information I should have included but didn't, and other factors that should be used for making decisions. Comments appreciated on that, too.

inbox788
Posts: 4186
Joined: Thu Mar 15, 2012 5:24 pm

Re: Suggestions for Dad's portfolio. He's 92.

Post by inbox788 » Thu Oct 26, 2017 2:58 pm

I wouldn't make any sudden changes. First step would be a 6 month emergency fund and 2-3 years living expenses. They may already have these with SS and pension, and no mortgage. So the invested funds are either travel funds or for estate planning.

Are they still able to travel? They should travel as much as the can or want.

For estate planning, they should be looking at making regular gifts and considering the step up basis on the equities and property. Are the accounts taxable or tax deferred? Any Roth?

Are they on Medicare? do they have Medigap? $200k seems awfully high for out of pocket. What was the total medical/hospital bill for the year? Excellent health insurance doesn't necessarily mean inexpensive. Did they choose or have access to more expensive services?

You could tweak his funds to lower EF, but do it in a tax efficient manner.

delamer
Posts: 3222
Joined: Tue Feb 08, 2011 6:13 pm

Re: Suggestions for Dad's portfolio. He's 92.

Post by delamer » Thu Oct 26, 2017 3:13 pm

Are all these funds in taxable accounts or are any in IRAs?

If everything us taxable, do you have any idea of the magnitude of the long-term capital gains?

It seems that it would be worth it to move some money into cash or very short-term bonds to guard against a stock market drop just as funds are needed. This is easy if the assets are in tax-advantaged accounts since there are no tax consequences. But with taxable, you'd probably want to sell assets with lower capital gains.

All that said, if they already have $100,000 to $150,000 available in cash, i'd leave things as they are.

CnC
Posts: 262
Joined: Thu May 11, 2017 12:41 pm

Re: Suggestions for Dad's portfolio. He's 92.

Post by CnC » Fri Oct 27, 2017 9:22 am

Actually 100% stocks at 92 with 1m+ assets along with pension and social security is a reasonable allocation for him. He has more than enough money a 75% stock market drop will not affect him in the slightest.


His goal is to leave his heirs money. So theoretically his asset allocation would be an aggregate of their risk tolerances.


I also agree that 200,000 out of pocket for medical expenses seems very odd. My mother lived through two years of cancer chemo radiation and prescription drugs and ±3 months of hospice and her medical bills amounted to peanuts. This was at a tier 1 cancer center with her doing every treatment they suggested.

All this and her supplant with Medicare covered 99% of costs.

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