Fund/Funds for retired person who doesnt rely on the money

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JonC
Posts: 3
Joined: Sun May 06, 2018 12:16 pm

Fund/Funds for retired person who doesnt rely on the money

Post by JonC » Sun May 06, 2018 12:30 pm

Hi All, First time poster...welcom me :-)

My stepfather (Retired 75yo with 100k+ income from pension/SS) has been dealing with a MassMutual advisor and he has put him in a MassMutual IRA which is a fund of funds... I cant see the actual funds or ERs, but I am sure they are hefty as they are primarily MML funds.

If I can convince him to move the funds to Vanguard, do you suggest just a lazy 3 or 4 combo? Is there a single better balanced solution?

Im thinking:
Total Stock Market 40%
Total Bond 25%
Total Int'l25%
Vang SmallCap 10%

Stepdad thinks he should be more conservative since he is older, with a shorter investment horizon, but I think since he is investing for his kids/grandkids that the investment horizon is actually their horizon....thoughts?

Thanks!

delamer
Posts: 4809
Joined: Tue Feb 08, 2011 6:13 pm

Re: Fund/Funds for retired person who doesnt rely on the money

Post by delamer » Sun May 06, 2018 12:43 pm

You should respect the fact that it is his money and help him set up an allocation that he is comfortable holding.

That is assuming that he has asked for your help in moving/reallocating his assets.

I am not questioning your motives, but I can tell you from experience/observation that even well-intentioned efforts can come across as trying to manage a parent’s money for your benefit rather than for his/hers.

cherijoh
Posts: 4770
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Fund/Funds for retired person who doesnt rely on the money

Post by cherijoh » Sun May 06, 2018 12:47 pm

JonC wrote:
Sun May 06, 2018 12:30 pm
Hi All, First time poster...welcom me :-)

My stepfather (Retired 75yo with 100k+ income from pension/SS) has been dealing with a MassMutual advisor and he has put him in a MassMutual IRA which is a fund of funds... I cant see the actual funds or ERs, but I am sure they are hefty as they are primarily MML funds.

If I can convince him to move the funds to Vanguard, do you suggest just a lazy 3 or 4 combo? Is there a single better balanced solution?

Im thinking:
Total Stock Market 40%
Total Bond 25%
Total Int'l25%
Vang SmallCap 10%

Stepdad thinks he should be more conservative since he is older, with a shorter investment horizon, but I think since he is investing for his kids/grandkids that the investment horizon is actually their horizon....thoughts?

Thanks!
The bottom line is that he needs to feel comfortable with the decision. The last thing you want to do is convince him to move and change his allocation and then have a major market correction.

My late mother was pretty much living off her survivor pension and SS. My father had also set up a conservative portfolio of investments appropriate to their risk profile. When my dad passed away, I started doing her taxes and managing her investments. Even though she talked about the investments as my brother's and my "inheritance", she wasn't comfortable taking any additional risk. I suggested once that she discontinue reinvesting dividends/cap gains in the more conservative funds and put them into her most aggressive fund to increase the stock % in the overall portfolio. When she told me that she was uncomfortable doing so, I dropped the subject.

retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: Fund/Funds for retired person who doesnt rely on the money

Post by retiredjg » Sun May 06, 2018 12:48 pm

The stock to bond ratio could go either way. For people who do not need the money and who don't care if a lot of it disappears for a year or two, investing for the grandkids is a reasonable approach.

Many people would find it difficult to watch their money disappear even if they never expect to use it. For them, a larger allocation to bonds is more appropriate. It would be incredibly sad for someone to have way more money than they ever need but to invest it in a way that makes them uncomfortable. Imagine the irony of that - money you don't need making it hard to sleep at night...he should not go there. Better it all be in cash, losing buying power to inflation.

What funds he uses is up to things like his preferences, his tax bracket, what kind of account the money is in, and other things we don't know. There is also the possibility of large capital gains - a move that may not make any sense at all at his age.

MotoTrojan
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Joined: Wed Feb 01, 2017 8:39 pm

Re: Fund/Funds for retired person who doesnt rely on the money

Post by MotoTrojan » Sun May 06, 2018 12:56 pm

I’d reduce the chance of near-term (unwarranted) regret and skip the small-cap myself.

Maybe a 70/30 or 60/40 3-fund with 20-30% equity international.

avoidingdumbmistakes
Posts: 101
Joined: Thu Mar 29, 2018 11:38 am

Re: Fund/Funds for retired person who doesnt rely on the money

Post by avoidingdumbmistakes » Sun May 06, 2018 1:08 pm

My mother recently passed but during the 10 years between her passing and my father's, my mom asked me every single year if I thought her allocation was appropriate. She was 65% bonds/fi/cash and 35% equities for the last 10 years. I always asked her the same question: "How would you feel if more than 40% of your portfolio dropped 40% in value even though you don't need all of the money?". Her answer was always that she would feel uncomfortable for both her and me and my sister.

We've been in a long bull run and she/we missed out on a lot of growth but I never blinked and eye and neither did she. It was the right thing to do regardless of the math. My best advice is to let your stepfather drive the bus on this stuff. Moving to low cost funds is very smart. The asset allocation should be all him. You can give him the pros and cons of all scenarios though.

joylesshusband
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Joined: Thu Jan 18, 2018 6:35 pm

Re: Fund/Funds for retired person who doesnt rely on the money

Post by joylesshusband » Sun May 06, 2018 1:23 pm

delamer wrote:
Sun May 06, 2018 12:43 pm
...can come across as trying to manage a parent’s money for your benefit rather than for his/hers.
bolding mine

There's no "can come across" here, the OP clearly stated that this is the actual case:
"...I think since he is investing for his kids/grandkids..."

I call this plainly unethical.
Retiring July 2018. Posting here purely for amusement.

ThrustVectoring
Posts: 399
Joined: Wed Jul 12, 2017 2:51 pm

Re: Fund/Funds for retired person who doesnt rely on the money

Post by ThrustVectoring » Sun May 06, 2018 1:29 pm

Ask him what he wants to accomplish with the money. His needs are taken care of, so does he want to spend his money down on fun activities while he's still healthy enough to enjoy them? Does he want to leave behind a large charitable contribution or inheritance? The approach taken depends entirely on what he wants to accomplish.

Sandi_k
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Location: SF Bay Area

Re: Fund/Funds for retired person who doesnt rely on the money

Post by Sandi_k » Sun May 06, 2018 1:34 pm

Vanguard Wellington or Wellesley.

JonC
Posts: 3
Joined: Sun May 06, 2018 12:16 pm

Re: Fund/Funds for retired person who doesnt rely on the money

Post by JonC » Sun May 06, 2018 1:40 pm

Thank you all for the feedback.

I am generally very math oriented, searching for optimization, and as such I hadnt even considered the emotional attachment to the balance even if he didnt need the money to live on. In a sense, it makes sense as dollars are one of the ways we keep score of success in our lifetimes (whether we like it or not).

Once I get more clarity on the funds underlying expenses, and then any added expenses added on by MassMutual, I will approach the idea of minimizing just the expenses of the holdings. I will leave the rest up to him, and if he feels more comfortable, leave it as is.

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CABob
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Joined: Sun Feb 25, 2007 8:55 pm
Location: Southern California

Re: Fund/Funds for retired person who doesnt rely on the money

Post by CABob » Sun May 06, 2018 1:46 pm

I think the first priority is to invest in a way that makes him most comfortable. I suggest an appropriate VG Life Strategy or Target Retirement fund. From your description this would be very similar to how it is invested currently with MM at presumably much lower expenses.
Bob

JonC
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Joined: Sun May 06, 2018 12:16 pm

Re: Fund/Funds for retired person who doesnt rely on the money

Post by JonC » Sun May 06, 2018 1:49 pm

joylesshusband wrote:
Sun May 06, 2018 1:23 pm
delamer wrote:
Sun May 06, 2018 12:43 pm
...can come across as trying to manage a parent’s money for your benefit rather than for his/hers.
bolding mine

There's no "can come across" here, the OP clearly stated that this is the actual case:
"...I think since he is investing for his kids/grandkids..."

I call this plainly unethical.
Sorry, not sure if you are calling me unethical, or someone else... Rest assured I am not unethical.

I did not say "I think he is investing for his kids/grandkids...". I said "....since he is...." This is something discussed that he has stated. I remind him almost monthly to enjoy the fruits of his labor, and that he cant take it with him!

calmaniac
Posts: 58
Joined: Fri Jan 30, 2015 3:32 pm

Re: Fund/Funds for retired person who doesnt rely on the money

Post by calmaniac » Sun May 06, 2018 8:52 pm

JonC, I would use your best judgement. A lot of it depends on your step-father's investing sophistication and openness to input. He may be very appreciative of your thoughtful discussion.

My father got taken to the cleaners for several years by a "reputable" advisor running a fund of funds. Each fund had its own substantial fees and then the management company had its own 1+% AUM fees on top. He was grateful when I suggested getting rid of the advisor and moving into directly managed index funds.

Similar to your logic, the parts of our estate that I think most likely to be passed on to heirs are all in stocks. This is unlikely to be money I or my spouse will need, so we can be more aggressive in the asset allocation.

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