I apologize if I didn't give enough details, though I resent the judgment that my family dynamics don't line up with some perceived "norm". Suffice to say, I have PoA, he has no desire to manage funds and has asked me to do it, and we both consider this family money. As long as his needs are taken care of, I have full discretion with the funds. If it makes things easier, pretend all the assets are mine and I'm taking care of a dependent father. Prefer not to go into further details unless it's relevant to investing, thanks
David Jay wrote: ↑Wed Jul 17, 2019 9:42 pm
First off you are “counting your chickens before they hatch”. Your Dad’s portfolio could go sideways in a lot of ways. Late 70s style inflation for 10 years could decimate it since he is holding it all in the bank. Long term nursing care. Lots of possibilities.
For your Dad, I would take a serious look at a TIPS ladder with a big chunk of his portfolio if he wants to stay out of the stock market. US Treasury bonds that are guaranteed to beat inflation.
You have a $500,000 portfolio so you are not in any position to live off of “passive income”. You are doing a good job with savings, so stay after it and you will be able to retire early without counting on your Dad’s money.
Correct, the intention is to move all the funds from the bank into a diversified portfolio. He doesn't care about being in the stock market. While we do have to keep some funds low-risk for long term nursing care, it seems that a large chunk can be invested. While I mentioned he has 70k annual surplus, that also includes ~80k spending which would drastically change in a nursing care situation. While I know health care is expensive and I'm looking into better estimates, given his health it looks like portfolio would have time to grow past what will likely be required. If both myself and spouse are not working, then we can also provide care.
He has already agreed that since his pension surplus covers our living expenses, we could live off that and still have a surplus to invest each year without touching either of our portfolios at all. Now granted if things go south sooner than expected, it could eat up more, enough to not have leftovers to live via passive income, but I'd have time to reenter the workforce. I also would likely get shorter term contracting gigs as necessary, easy in my industry. If it is 15-20 years, then the portfolio should have time to grow enough to cover both his health care costs and still have enough left over to generate a passive income, no?
MotoTrojan wrote: ↑Wed Jul 17, 2019 9:54 pm
I'd forget the all-weather and stick with a more traditional portfolio as your core holding. I also agree to be careful with co-mingling and get your dad into something more efficient than the HYSA. TIPS is a reasonable idea for some of the assets. If he is comfortable with it, it would also be good to hold an equity component. I'd keep this in his name so if you inherit it you'll get the stepped-up basis.
Thank you for the investing advice. Why a more traditional profile? It seems like with the current conditions, isn't all-weather a bit lower risk, in the case we'd have to dip into it for healthcare? Yes, the plan is to move the bulk of it from HYSA into the portfolio. Yes was planning on keeping the equities in his account, with the other assets in mine since they wouldn't benefit from the step up.
Watty wrote: ↑Wed Jul 17, 2019 8:26 pm
Even if your Dad wants to comingle the funds it would be good to keep the accounts separate since there is a very reasonable chance that he could live to be 95 and him living to be 105 is possible.
With his lifetime pension generating a surplus, isn't it better for the fund if he lives to 105? Granted thats if we aren't talking about 20 years of in home nursing care. (but even then it appears his pension would cover a large % annually)
Watty wrote: ↑Wed Jul 17, 2019 8:26 pm
You are talking about a lot of different things and are very likely to get in over your head. Vanguard will provide advisory services for a fee of 0.3% and you could use them for a few years to get your and your dads portfolios set up for the long term.
It would also be good to get a lawyer who specializes in elder care law to help get your Dads legal affairs in order. That would need to set up contingencies for all sorts of situations like your Dad getting married, you dying before you Dad, etc.
Yes, was planning on using vanguard's advisory service, however, I'd still need to make the decision and give direction, presumably. I'm also worried that there is a bias towards doing things the "simple way" of a simple 40/60 or things that might not take into account the current state where, in my view, having something more diversified is important. Will definitely look into it though, thanks for reminding me about it.
All the legal stuff is worked out, it's agreed to keep this family money even in the case of remarried (although potentially also providing health care / nursing care to future spouse if they don't have funds of their own, but they wouldn't have access to the money directly). His will and my will already takes care of my spouse and future children.
Hope this can clarify the situation and get things back on track to how to actually manage this. It does make sense for tracking to keep our individual money in separate accounts under our own names, but still isn't it more tax advantageous to manage the portfolio as one instead of each of us mirroing a 3-fund or all-weather? Again my primary concerns are needing to gift one another money to rebalance, even though it should be under lifetime gift tax limits, but does it actually make it murkier? I realize some families create an LLC to invest with, but then would be losing cost basis step-up, which seems like it could be several million in taxes if he lives another 15-20 years with historical returns.