Simple investment plan for 80 yr old in assisted living?

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Topic Author
guywhogetsit
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Joined: Tue Mar 20, 2018 11:52 am

Simple investment plan for 80 yr old in assisted living?

Post by guywhogetsit » Tue Mar 20, 2018 12:48 pm

I'm a newbie/lurker here so I hope its ok to ask for this level of help and that I've provided sufficient but not overwhelming detail.

I need some help constructing and maintaining a very simple investment plan for my 80 year old Aunt who, due to developing dementia, has moved to assisted living and I've taken on her financial affairs.

For assets, she is starting with $685k in non-tax advantaged savings and $200k in IRAs. She does not have substantial unrealized capital gains so investing is very flexible.

I'm leaning towards:
. Maintain $30k in moneymarket to pay monthly bills
. invest $655k in a non-tax advantaged target date fund or 4 fund portfolio at about 30/70 stock/bond split.
. invest $200k in tax advantaged target date fund or 4 fund portfolio at about 50/50 stock/bond split.
. Direct RMD, interest and dividends from all accounts to money market
. Each month draw a % set and adjusted each year from non-tax advantaged account to maintain about $30k cash in MM account (allowing some monthly fluctuation). I'd start at 7.5% annual/12 = .625% monthly = 49K 1st year.
. Shift to same approach using her tax advantaged account once regular savings depleted

More info if helpful:
I need to generate about $50k per year from interest, dividends and principle to cover her expenses above Social Security. It's awkward/difficult to predict but aiming to make her savings last 10-15 years. I'm not really prioritizing advice on this - mainly looking for a simple, conservative model portfolio based on following assets:
. about $320k (36% of assets) in cash and some CDs maturing over next 10 months (includes recent sale of home)
. about $365k (41% of assets) in high cost stock (29%) and bond (71%) funds I've moved from Ameriprise intact until I liquidate and re-invest
. about $200k (23% of assets) in IRA invested in high cost stock (258%), bond (40%) and money market (35%) funds I've moved from Ameriprise intact until I liquidate and re-invest

Let me know if any other relevant info needed to offer perspective!

Thank you,

Guy

Beehave
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Re: Simple investment plan for 80 yr old in assisted living?

Post by Beehave » Tue Mar 20, 2018 5:29 pm

Based on your aunt's age and needs I'd be very leery of putting a lot of her money at risk in the market. This seems to me like a very good instance of where an annuity may make sense to cover at least some of the fixed cost required beyond Social Security.

With the cash on hand you could set up an annuity that would cover her needs (or a significant percentage) for life. If you do that, then the excess money can be invested aggressively, if you feel that is the right thing to do. The annuity (for a cost) can be set up so that if she passes before the cost of the annuity has been "repaid" to her that the heirs get a corresponding refund payment. The rest of the money can then be invested aggressively (or not) because the basics have been covered, so that's an opportunity for growth.

Not my business, but a consideration would be what use she intended for her savings (if known). Did she want to leave money to relatives or charity or for care of a pet? Then the annuity may not make sense. Did she want the money to be used to make herself comfortable? Then maybe the annuity makes sense.

Others should definitely comment. I'm not sure what I would do if I were in your shoes, so please take my words above as a possibility to consider more than as a specific recommendation. If you are not familiar with annuities, a really good place to get information and do price/benefit modeling is immediateannuities.com. You can use their costing tool without identifying yourself and, as they used to say - - "no salesman will call."

Best wishes to you and to your aunt.

Chris K Jones
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Re: Simple investment plan for 80 yr old in assisted living?

Post by Chris K Jones » Tue Mar 20, 2018 5:33 pm

I would be leary of putting much in equities. If the market drops for an extended period of time, it will be your fault in the eyes of the rest of the family. My Mom is 86 years old an I handle her money. She is more than 90% in cash and cash equivalents. Best wishes. You are a good guy for helping her.

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Watty
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Re: Simple investment plan for 80 yr old in assisted living?

Post by Watty » Tue Mar 20, 2018 5:55 pm

Simple investment plan for 80 yr old in assisted living?
Two suggestion for the longer term investments.

The Vanguard Lifestrategy Income fund.

https://investor.vanguard.com/mutual-fu ... estrategy/#/

or the Vanguard Target retirement Income fund.

https://personal.vanguard.com/us/funds/ ... irect=true

These would be simple to manage in case something happens to you. I would set them to not automatically reinvest the dividends and capital gains distributions.
guywhogetsit wrote:
Tue Mar 20, 2018 12:48 pm
I need to generate about $50k per year from interest, dividends and principle to cover her expenses above Social Security.
One option would be to make a five year CD ladder where $40K in CD's matures each year. The dividends and RMD from the IRA would about make up the rest. That would take $200K.

An advantage of this is that it reduces her sequence of returns risk.

Topic Author
guywhogetsit
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Re: Simple investment plan for 80 yr old in assisted living?

Post by guywhogetsit » Tue Mar 20, 2018 8:01 pm

Thanks to all for the advice to consider less risky options such as an annuity or less aggressive stock/bond mix. I'll look into the fund and annuity tools mentioned.

I was mulling things over and thinking I needed a mechanism to move more and more towards cash and bonds over the time frame. One alproach ive heard of is over withdrawing equities which generates surplus cash and shifts the stock percentage down as assets depleted.

At her age and health I'm not leaning towards an annuity but maybe an income fund paired with careful depletion of remaining principle.

Interested in any additional thoughts and will circle back as I make decisions. Thank you.
Last edited by guywhogetsit on Tue Mar 20, 2018 9:17 pm, edited 1 time in total.

Kow
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Re: Simple investment plan for 80 yr old in assisted living?

Post by Kow » Tue Mar 20, 2018 8:22 pm

As you are building out your plan, make sure you consider that the cost of assisted living could rise dramatically each year (5-10%) so I recommend asking the facility how rates have increased the last few years to get a better sense. Also I'd expect care needs are going to increase as the dementia worsens and other maladies of old age set in. A nursing home also has potential to be in the future at a greater cost. I'm not sure where you live but in hcol it runs well over $10k/month so consider the long term in your planning.

LeeMKE
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Re: Simple investment plan for 80 yr old in assisted living?

Post by LeeMKE » Tue Mar 20, 2018 9:14 pm

Your original plan sounds prudent and maintains flexibility for an unknown near future.

I wouldn't seek an annuity because 1) no need to pay the commissions when the term is limited and you can manage the assets. 2) An annuity removes most of your flexibility and that might not work out so well.

She has enough assets to keep the inflation protection of some stocks in the portfolio. I wouldn't get too conservative because inflation could ravage your plans over the next decade. Stocks will help buffer the damage.

You are a saint for stepping in to help.
The mightiest Oak is just a nut who stayed the course.

Topic Author
guywhogetsit
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Re: Simple investment plan for 80 yr old in assisted living?

Post by guywhogetsit » Tue Mar 20, 2018 9:34 pm

Any thoughts on stock/bond mix in nontax advantaged vs tax advantaged accounts?

Trying to reconcile a few things (keeping in mind only 25% of assets are tax advantaged):
. Put less tax efficient (bonds) into TA
. Withdraw TA last to accrue advantage
. Be more aggressive (more stocks) given TAs longer time horizen

In short, two questions:
. Should Ira's be bond heavier., lighter or same as savings?
. Should I withdraw all savings before ira, weight towards savings or balance by same proportion from each?

I hope this isn't wandering from initial question. Appreciate the perspectives!

Kow
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Joined: Fri May 27, 2016 5:04 pm

Re: Simple investment plan for 80 yr old in assisted living?

Post by Kow » Thu Mar 22, 2018 9:44 pm

I'm dealing with a parent who is being kicked out of his assisted living facility due to being too much of a fall risk. Make sure to set a plan for getting into the nursing home of your choice before the time comes. Sometimes that requires a couple years of private pay first. The assisted living will only have good enough care until they don't. That may require having a check in point at about $300k left in assets as that is two years at a nursing home prior to Medicaid at current rates In my area. Things will change quickly at some point and it's good to be prepared.

ralph124cf
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Re: Simple investment plan for 80 yr old in assisted living?

Post by ralph124cf » Fri Mar 23, 2018 3:56 am

Kow wrote:
Thu Mar 22, 2018 9:44 pm
I'm dealing with a parent who is being kicked out of his assisted living facility due to being too much of a fall risk. Make sure to set a plan for getting into the nursing home of your choice before the time comes. Sometimes that requires a couple years of private pay first. The assisted living will only have good enough care until they don't. That may require having a check in point at about $300k left in assets as that is two years at a nursing home prior to Medicaid at current rates In my area. Things will change quickly at some point and it's good to be prepared.
A dementia patient will not last long in assisted living. A nursing home will come shortly. Try to get one that specializes in dementia care, rather that a generalist one.

Expect costs to double within a year.

Ralph

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ResearchMed
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Re: Simple investment plan for 80 yr old in assisted living?

Post by ResearchMed » Fri Mar 23, 2018 4:08 am

ralph124cf wrote:
Fri Mar 23, 2018 3:56 am
Kow wrote:
Thu Mar 22, 2018 9:44 pm
I'm dealing with a parent who is being kicked out of his assisted living facility due to being too much of a fall risk. Make sure to set a plan for getting into the nursing home of your choice before the time comes. Sometimes that requires a couple years of private pay first. The assisted living will only have good enough care until they don't. That may require having a check in point at about $300k left in assets as that is two years at a nursing home prior to Medicaid at current rates In my area. Things will change quickly at some point and it's good to be prepared.
A dementia patient will not last long in assisted living. A nursing home will come shortly. Try to get one that specializes in dementia care, rather that a generalist one.

Expect costs to double within a year.

Ralph
+1

And also try to get a facility that will morph into skilled nursing care, if she lives long enough.
Many of these, as mentioned, will require an ability to pay for x amount of time, and then will offer similar care at Medicaid rates if/when money runs out.

Dementia can last a long time, and also lead to considerable physical decline. Plan now for the "just in case"...

Good luck!

RM
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jn6474
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Re: Simple investment plan for 80 yr old in assisted living?

Post by jn6474 » Fri Mar 23, 2018 6:15 am

You had mentioned potentially the 3 or 4 fund portfolio.... take a look at this article on tax location from Vanguard linked below. It would be wise to look at the entire portfolio as one complete account (taxable and nontaxable) and use tax location to put bonds in the nontaxable and then all of the equities and whatever else (more bonds?) you wanted into the taxable as it will help on after tax returns. The difference is due to the way bond coupon payments are taxed versus dividends (which are taxed lower).

https://personal.vanguard.com/pdf/s556.pdf

Jack

Topic Author
guywhogetsit
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Joined: Tue Mar 20, 2018 11:52 am

Re: Simple investment plan for 80 yr old in assisted living?

Post by guywhogetsit » Sat Mar 24, 2018 2:09 pm

Thank you for the continued advice.

As far as progression, she's in a facility that offers increasing level of general care that could get expensive (+800 month) and then transitions to memory care when required but not an option for skilled nursing.

Luckily, the MC unit has about same cost (or less) as she shifts from a studio apt with care to essentially a small bedroom with bath shared with room next door and care included. The wild card is need for skilled nursing. I agree we need to reconsider facility when we get down to about $300k to plan for this potential outcome.

I will review the reference to location of assets. Looks like exactly what I need to figure out the ira/non-tax advantaged puzzle.

Thank you!

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