61 Year old in need of advice

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Erik_123451
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Joined: Mon Aug 13, 2018 7:32 am

61 Year old in need of advice

Post by Erik_123451 » Mon Aug 13, 2018 8:03 am

Hi All,

I have been lurking for a while now finally decided to create an account to ask for some advice on my dads behalf, He is 61 years old and has about 150k just sitting in his savings account doing nothing for him. He communicated that he is wanting to make that money work for him and wanted some advice on how to invest the money. He has never invested before as he has been an owner operator (big rigs) almost all his life and never has had the opportunity to invest in any job sponsored program, and probably never informed himself of other options out there.. At this point of his life what do you guys think would be a good option for him?

Cash on hand: 150k all in savings account
Debt: Mortgage 100k at 1.8% interest rate
Total gross income- about 90k set to semi- retire in 2 years.

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Earl Lemongrab
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Re: 61 Year old in need of advice

Post by Earl Lemongrab » Mon Aug 13, 2018 2:54 pm

How does he get paid? 1099 as an independent contractor? Or does he work for a placement company that issues a W2. If truly independent he can and should have been making use of a solo 401(k).

Before anything else, that question needs to be answered. No good advice can be issued, other than maybe do a Roth IRA and don't touch the mortgage. Where did he that rate anyway?
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CaliJim
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Re: 61 Year old in need of advice

Post by CaliJim » Mon Aug 13, 2018 3:10 pm

Hmm.

You haven't given us much to go on... but IMHO... retirement (semi or othewise) doesn't look promising at this point.

Sound's like your dad is in the retirement red zone. Search this web site for "SPIA" and "OTAR" then read all you can.

He should not be taking much risk.

Your dad is likely a candidate for purchasing a SPIA when he retires, and likely should delay retirement as long as he can. He should invest the $150k in a 2 or 3 year CD.

Putting what little money he has at risk by investing in, say, a 40/60 stock-index/bond-index portfolio would likely be too much risk for him.

Read OTAR's book if you can.

WRT annuities...DO NOT let him invest in 'variable annuities', 'fixed variable annuity' or anything other type of annuity, except perhaps a 'single premium immediate annuity'.

Also read the Boglehead's Guide to Retirement Planning.
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Dottie57
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Re: 61 Year old in need of advice

Post by Dottie57 » Mon Aug 13, 2018 3:26 pm

Erik_123451 wrote:
Mon Aug 13, 2018 8:03 am
Hi All,

I have been lurking for a while now finally decided to create an account to ask for some advice on my dads behalf, He is 61 years old and has about 150k just sitting in his savings account doing nothing for him. He communicated that he is wanting to make that money work for him and wanted some advice on how to invest the money. He has never invested before as he has been an owner operator (big rigs) almost all his life and never has had the opportunity to invest in any job sponsored program, and probably never informed himself of other options out there.. At this point of his life what do you guys think would be a good option for him?

Cash on hand: 150k all in savings account
Debt: Mortgage 100k at 1.8% interest rate
Total gross income- about 90k set to semi- retire in 2 years.
What are his retirement resources? What will he live on when retired?

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Peter Foley
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Re: 61 Year old in need of advice

Post by Peter Foley » Mon Aug 13, 2018 3:55 pm

Is he married?
What do you estimate his annual expenses are?

He is likely to have a fairly low income and tax rate when he retires. At a minimum he should put some money in an IRA for the next couple of years. That will lower his taxes now and he will likely pay less in taxes when retired.

I agree that with minimal savings he does not have much ability to take risk. I would be concerned about him investing in the stock market with no prior experience. Would he panic and sell for a loss during the next market correction? A combination of I-bonds and a CD ladder would be my suggestion.

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dwickenh
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Re: 61 Year old in need of advice

Post by dwickenh » Mon Aug 13, 2018 3:58 pm

Need to know:

monthly/yearly expenses he expects in retirement.

SS amount to be claimed at full retirement age(he can look at ssa.gov)
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

livesoft
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Re: 61 Year old in need of advice

Post by livesoft » Mon Aug 13, 2018 4:02 pm

It's probably going to be very slow going to get any changes made.

One easy change that may be hard to accomplish is to find a higher interest rate savings account. Do you know what interest rate is being paid on current savings account? Does he need to have a walk-in bank for his savings account? Or would he be OK with using the internet? If he is OK with the internet, then he could even put the money in the Vanguard Prime Money Market fund which is paying a rate slightly above 2% nowadays.

Other things that he should probably do: Open an IRA to save on taxes. Vanguard would be a good place for such an IRA.
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Erik_123451
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Re: 61 Year old in need of advice

Post by Erik_123451 » Tue Aug 14, 2018 8:45 am

Earl Lemongrab wrote:
Mon Aug 13, 2018 2:54 pm
How does he get paid? 1099 as an independent contractor? Or does he work for a placement company that issues a W2. If truly independent he can and should have been making use of a solo 401(k).

Before anything else, that question needs to be answered. No good advice can be issued, other than maybe do a Roth IRA and don't touch the mortgage. Where did he that rate anyway?
He gets pain via 1099 as independent contractor... Not sure how or where he got that right I do know that he refinanced his home last year not sure with who. So do you think the solo 401K is still an option?

Erik_123451
Posts: 5
Joined: Mon Aug 13, 2018 7:32 am

Re: 61 Year old in need of advice

Post by Erik_123451 » Tue Aug 14, 2018 8:51 am

Dottie57 wrote:
Mon Aug 13, 2018 3:26 pm
Erik_123451 wrote:
Mon Aug 13, 2018 8:03 am
Hi All,

I have been lurking for a while now finally decided to create an account to ask for some advice on my dads behalf, He is 61 years old and has about 150k just sitting in his savings account doing nothing for him. He communicated that he is wanting to make that money work for him and wanted some advice on how to invest the money. He has never invested before as he has been an owner operator (big rigs) almost all his life and never has had the opportunity to invest in any job sponsored program, and probably never informed himself of other options out there.. At this point of his life what do you guys think would be a good option for him?

Cash on hand: 150k all in savings account
Debt: Mortgage 100k at 1.8% interest rate
Total gross income- about 90k set to semi- retire in 2 years.
What are his retirement resources? What will he live on when retired?
Well like i mentioned before he will not be fully retired as he wants to stay somewhat active so he will be making a couple of trips a week for some income + social security and he does own an additional semi he employs a driver and gets 60% of the profit.

Erik_123451
Posts: 5
Joined: Mon Aug 13, 2018 7:32 am

Re: 61 Year old in need of advice

Post by Erik_123451 » Tue Aug 14, 2018 9:02 am

livesoft wrote:
Mon Aug 13, 2018 4:02 pm
It's probably going to be very slow going to get any changes made.

One easy change that may be hard to accomplish is to find a higher interest rate savings account. Do you know what interest rate is being paid on current savings account? Does he need to have a walk-in bank for his savings account? Or would he be OK with using the internet? If he is OK with the internet, then he could even put the money in the Vanguard Prime Money Market fund which is paying a rate slightly above 2% nowadays.

Other things that he should probably do: Open an IRA to save on taxes. Vanguard would be a good place for such an IRA.
Hi Thanks for the feed back, I know the interest rate he is being paid in his savings account is almost 0 its pretty bad... Not sure how receptive he will be of using online savings account.... Maybe Vanguard since he knows I use them and hi is familiar with the company. What if he opens an IRA under his name and anther under my moms be able to get a little more cash in there?

livesoft
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Re: 61 Year old in need of advice

Post by livesoft » Tue Aug 14, 2018 9:07 am

If he is married and has earned income that will cover the IRA contributions, then he can open IRAs for himself and his spouse. IRS Publication 590A has information.
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Erik_123451
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Re: 61 Year old in need of advice

Post by Erik_123451 » Tue Aug 14, 2018 9:15 am

livesoft wrote:
Tue Aug 14, 2018 9:07 am
If he is married and has earned income that will cover the IRA contributions, then he can open IRAs for himself and his spouse. IRS Publication 590A has information.
Yes he is married, what would happen if he opens the accounts and lets say in 4 years he decides to fully retire will he not be able to contribute any longer? Even if he employs drivers to drive his two semi trucks?

livesoft
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Re: 61 Year old in need of advice

Post by livesoft » Tue Aug 14, 2018 11:04 am

If he employs drivers, then he will not be retired. He will be running a small business which is probably what he is doing now.

If one is running a small business as a Sole Proprietor then there are quite a few retirement accounts besides an IRA that one can have. If he hasn't used them, then he needs to learn about them. There are many IRS Publications on small businesses that are helpful. The resources are HUGE at irs.gov.
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Earl Lemongrab
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Re: 61 Year old in need of advice

Post by Earl Lemongrab » Tue Aug 14, 2018 12:55 pm

Erik_123451 wrote:
Tue Aug 14, 2018 8:45 am
He gets pain via 1099 as independent contractor... Not sure how or where he got that right I do know that he refinanced his home last year not sure with who. So do you think the solo 401K is still an option?
Hopefully not too much pain :)

Certainly a 401(k) is a possibility. However, the arrangement with the other driver would need to be examined. How is that person paid? Also 1099? Or as a W2 employee?
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Peter Foley
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Re: 61 Year old in need of advice

Post by Peter Foley » Tue Aug 14, 2018 2:34 pm

A SIMPLE IRA is another option for a self employed person. It works well if you have no employees. Deferral limits are not as high as a Solo 401k.

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