Advice for My Mom's Retirement Portfolio

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Advice for My Mom's Retirement Portfolio

Post by mergerreview » Tue May 15, 2018 9:19 am

My mom is a 66 year old retired widow. I assumed responsibility for managing her finances when my dad died in 2012, and the last several years have focused on simplifying and restoring order to her financial life. I would appreciate the forum's advice.

Debt: Only debt is a $34,000 car loan, with a 1.9% interest rate. Primary purpose of car loan is to rebuild credit rating that was damaged due to bills that went unpaid as my dad's health deteriorated. Credit score back up to 706.

Annual Spending: $75,000

Annual Social Security: $19,000

Pension: $30,000

Dividend Payments from Bank Stock and Real Estate Investments (see below): $21,000

Residence: $400,000 condo (no mortgage)

Tax Filing Status: Single

State of Residence: Michigan

Investment assets


Voting securities in a privately held midwestern bank = market value: $320,000 (these are relatively illiquid and would carry capital gains on $75,000 of appreciation experienced in last 4 years).

LLC interest in a privately held real estate partnership that holds a medical office building = market value: $220,000 (building is for sale and partnership will be dissolved upon sale. Capital gains likely to be on $20,000).

Savings bonds @4% = market value: $105,000 (reach final maturity in increments over next 5 years).


Jackson Life Perspective II Annuity IRA = Accumulated value: $120,000; Surrender value: $114,000; current guaranteed annual payment, if annuitized: $7900 (and growing).

Jackson Life Action Annuity IRA = $309,000 cash @1.5%; Surrender value: $297,000; Free withdrawal of 15% per year w/o penalty.

Vanguard IRA = $450,000 money market.


My mom has been using a taxable savings account and maturing savings bonds to supplement the difference between her income and spending. The taxable savings account now is depleted. I am my mom's emergency fund and have the income to fill that role comfortably, if necessary.

I understand the concentration risk associated with the bank stock, but for non-financial reasons, I am not permitted to reallocate that investment. I understand the similar risk with the real estate partnership and that likely will be sold within the next 18 months.

When I assumed responsibility, the IRA assets were sitting at Jackson Life. I have been transferring the free withdrawal amount annually out of Jackson Life. Until January, I had been transferring them to Betterment and the accumulated value of the transferred assets has reached $450,000. For cost reasons, I just transferred the $450,000 from Betterment to Vanguard. Absent advice to the contrary, I would continue to transfer the free withdrawal amount annually from Jackson Life Action Annuity to Vanguard as a dollar cost average transfer/purchase.

I need an investment plan for my mom's assets. My mom is risk adverse and it would be good to minimize volatility. My objectives for her assets are to ensure her financial security and generate income for her use.

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Re: Advice for My Mom's Retirement Portfolio

Post by Pajamas » Tue May 15, 2018 12:34 pm

Might want to give more information, for instance, is the Vanguard IRA a regular IRA that will be subject to required minimum distributions at 70 1/2 or is it a Roth? More information about the annuities would be helpful, too.

Maybe take a step back and think about overall goals since her current expenses are easily covered. Could she eventually need assisted living? Is leaving an inheritance important to her?

Here is an outline of some basic retirement planning information, some of which you should read even though you have been managing here finances for a while now: ... art-up_kit

Here's the general basic information, some of which won't apply to your mother:

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Re: Advice for My Mom's Retirement Portfolio

Post by mergerreview » Tue May 15, 2018 12:47 pm

Thank you, Pajamas. I will review the materials in the links.

The Vanguard IRA is a traditional IRA that will be subject to RMD.

Assisted living is a possibility, but her condo also is fully accessible (single floor, elevator access, located in a business district, and proximate to hospitals and health care providers).

No requirement that she leave an inheritance.

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David Jay
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Re: Advice for My Mom's Retirement Portfolio

Post by David Jay » Tue May 15, 2018 12:48 pm

Welcome to the forum.

Clearly your Mom is well provided for. She needs $5000 year for basic living expenses and has about a million without including bank stock or office building. She will need a bit more cash when the office building sells but she will have an additional $200,000 or so.

She could get by with 100% in a bond fund and likely leave a nice legacy. The only real threat is inflation, so I would recommend something with a bit of stocks. For the ultimate in simplicity there is the LifeStrategy Conservative fund with 20% stocks. It is unlikely that this fund will ever suffer a downturn of more than, say, 10% so it is pretty low-stress. The entire IRA could easily consist of this one fund, the taxable funds should be placed with an eye to tax efficiency.

I have suggested to my wife that she put everything in LifeStrategy Moderate (we need a bit more growth than your Mom) after my passing for simplicity (virtually all of our retirement portfolio is in various IRAs).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Re: Advice for My Mom's Retirement Portfolio

Post by dharrythomas » Tue May 15, 2018 1:06 pm

Welcome to the forum!! Hope we can help.

Your mother is in good shape. As the savings bonds mature, put them in the checking account to replenish her account. I'd wait a couple of years on converting the annuities into income streams since your values will increase not only with time but also with the anticipated increases in interest rates. When your mother needs the money she can annuitize the first one, I'd keep pulling 15% of the other to Vanguard as long as you can.

I'm sure you'll here other options about the annuities from others.

I'd put the Vanguard IRA in either the Target Retirement 2015 Fund or the LifeStrategy Conservative Growth Fund. That way she can get a little growth.

Your mother does have a tax issue coming in a few years when she has to start drawing down the tax deferred accounts, but there are worse problems to have and she'll be drawing the income to fund it.

Depending on the intent of the money, when the real estate is sold, she can either be conservative and invest in something like the Tax Managed Balanced Fund or because she has so much in annuities (bond like) she could invest in Total Stock Market or Total World Stock. It looks like your father was a small town businessman or banker that didn't much trust the stock market, so aggressive investments may be a stretch.

I get the feel of a conservative, disciplined, well managed life. Your parents did well and should be proud. Pushing her to be too aggressive or to totally replace the annuities her husband bought to protect her could make her uncomfortable.

Good luck.


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Re: Advice for My Mom's Retirement Portfolio

Post by mergerreview » Wed May 16, 2018 5:42 am

Thank you all for the guidance.

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