70 Years Old, $50000 to invest

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TheBammyGuy
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Joined: Fri Jan 10, 2020 12:19 pm

70 Years Old, $50000 to invest

Post by TheBammyGuy » Fri Jan 10, 2020 12:24 pm

Hey there,

I'm 70 years old and recently sold one of my apartments which I was renting. After everything, I was left with about $50,000 to invest and wanted to know if it would make sense to take the $50,000 and put it into the VTINX (Vanguard Target Retirement Income Fund)

I'm not trying to achieve massive returns with this, as it obviously has a bond allocation of 70 percent. Though I'd much rather use this to grow and give to my children.

I have rental properties which I live off and I live comfortably. I am risk averse, though I did think it makes the most sense to leave this money to grow as I won't need this money in the coming years.

This will be put into a brokerage, so there will be a taxable situation to think about. Do let me know what you think.

lakpr
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Re: 70 Years Old, $50000 to invest

Post by lakpr » Fri Jan 10, 2020 1:08 pm

TheBammyGuy wrote:
Fri Jan 10, 2020 12:24 pm
Hey there,

I'm 70 years old and recently sold one of my apartments which I was renting. After everything, I was left with about $50,000 to invest and wanted to know if it would make sense to take the $50,000 and put it into the VTINX (Vanguard Target Retirement Income Fund)

I'm not trying to achieve massive returns with this, as it obviously has a bond allocation of 70 percent. Though I'd much rather use this to grow and give to my children.

I have rental properties which I live off and I live comfortably. I am risk averse, though I did think it makes the most sense to leave this money to grow as I won't need this money in the coming years.

This will be put into a brokerage, so there will be a taxable situation to think about. Do let me know what you think.
VTINX is massively tax-inefficient, but it can make sense if you are otherwise in the 12% bracket or lower. If you are in the 22% tax bracket, you are much better off actually to invest everything into the stock market, and let it ride -- and I am specifically recommending this because you said your aim is to leave this to your children. $50k is really a small amount of money in the overall picture { and if that comes across as condescending, I apologize up front, and it's certainly not my intention }

You may also think about giving your children an early inheritance; you are allowed to gift $15k per person per year, and no tax filing requirements.

Living Free
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Re: 70 Years Old, $50000 to invest

Post by Living Free » Fri Jan 10, 2020 1:22 pm

TheBammyGuy wrote:
Fri Jan 10, 2020 12:24 pm
Hey there,

I'm 70 years old and recently sold one of my apartments which I was renting. After everything, I was left with about $50,000 to invest and wanted to know if it would make sense to take the $50,000 and put it into the VTINX (Vanguard Target Retirement Income Fund)

I'm not trying to achieve massive returns with this, as it obviously has a bond allocation of 70 percent. Though I'd much rather use this to grow and give to my children.

I have rental properties which I live off and I live comfortably. I am risk averse, though I did think it makes the most sense to leave this money to grow as I won't need this money in the coming years.

This will be put into a brokerage, so there will be a taxable situation to think about. Do let me know what you think.
In addition to the issues mentioned above, if you use that fund then only 30% of $50k will be in stocks, which is only $15k. So it's just not going to be enough capital to grow into a massive sum over the next couple of decades, presuming reasonable rates of stock returns. I suppose there will be additional growth of the money invested in the fixed income portion of that, but the question is how much will that out-earn inflation from the fixed income portion, after you have paid taxes on the fixed income portion of the return?

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Googliebear
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Re: 70 Years Old, $50000 to invest

Post by Googliebear » Sat Jan 11, 2020 7:23 am

TheBammyGuy wrote:
Fri Jan 10, 2020 12:24 pm

I'm not trying to achieve massive returns with this, as it obviously has a bond allocation of 70 percent. Though I'd much rather use this to grow and give to my children.
Are your children responsible adults? Do they currently max out their Roth IRA's?

If the answer to the first question is yes and the answer to the second question is no, I'd recommend gifting them the money over the next couple of years to funnel the funds into tax free Roth accounts that can compound for a couple of more decades.

Being that you're 70, and the chances that your children are no longer working will obviously change what account they can invest the money in, but paying down debt can also be an investment.

Enjoy the feeling of gifting while your alive, it'll most likely be more enjoyable for the both of you.

msk
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Re: 70 Years Old, $50000 to invest

Post by msk » Sat Jan 11, 2020 7:45 am

Googliebear wrote:
Sat Jan 11, 2020 7:23 am
Enjoy the feeling of gifting while your alive, it'll most likely be more enjoyable for the both of you.
+1. I give all my kids monthly stipends. Fortuitously, because of our varied and assorted tax residences scattered all over the globe, there are no tax implications for any. All of them can retire today if they so wish. One added bonus: I never have to worry about birthday gifts ever again :D I would just put the whole $50k in the stock market. Pay out 5% of balance annually. So $2500 this year. Next year the balance could be $40k or even up to $60k. Pay out 5% of that next year. If history is any guide, since 1871 your original $50k will still be worth in REAL terms $50k, even 50 years from now. Only nuisance is that your annual gifting fluctuates up and down with the previous year's market performance.

jimkinny
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Re: 70 Years Old, $50000 to invest

Post by jimkinny » Sat Jan 11, 2020 8:00 am

I am 71 and invest fairly conservatively. Your fund selection is a pretty good choice with you being risk averse but still wanting some growth. 70% bonds for safety and 30% for growth. Another thing to to consider is perhaps a CD. Check out bankrates.com, the cd summary page. The bonds in the target date fund are likely yielding in the range of 1.6%-1.8%. A 5 year treasury is at that level. So check out 5 year CDs. Not much growth but if you can beat inflation there will be a bit of growth. I would likely buy 35K of CDs and 15K of vanguards total stock market index but that makes things a bit complicated and you might focus on the riskier aspect of equities in a single equity fund.
All in all, I think the target date fund is very acceptable.

Topic Author
TheBammyGuy
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Re: 70 Years Old, $50000 to invest

Post by TheBammyGuy » Sat Jan 11, 2020 11:08 am

lakpr wrote:
Fri Jan 10, 2020 1:08 pm
TheBammyGuy wrote:
Fri Jan 10, 2020 12:24 pm
Hey there,

I'm 70 years old and recently sold one of my apartments which I was renting. After everything, I was left with about $50,000 to invest and wanted to know if it would make sense to take the $50,000 and put it into the VTINX (Vanguard Target Retirement Income Fund)

I'm not trying to achieve massive returns with this, as it obviously has a bond allocation of 70 percent. Though I'd much rather use this to grow and give to my children.

I have rental properties which I live off and I live comfortably. I am risk averse, though I did think it makes the most sense to leave this money to grow as I won't need this money in the coming years.

This will be put into a brokerage, so there will be a taxable situation to think about. Do let me know what you think.
VTINX is massively tax-inefficient, but it can make sense if you are otherwise in the 12% bracket or lower. If you are in the 22% tax bracket, you are much better off actually to invest everything into the stock market, and let it ride -- and I am specifically recommending this because you said your aim is to leave this to your children. $50k is really a small amount of money in the overall picture { and if that comes across as condescending, I apologize up front, and it's certainly not my intention }

You may also think about giving your children an early inheritance; you are allowed to gift $15k per person per year, and no tax filing requirements.
Ah I appreciate all of the info here. I don't take any of this as rude in the least. I'm actually my grandmothers grandson -- I wrote the OP as her, she wanted to get some 'expert advice' on the matter.

My grandmother is very risk averse, though in my view she really doesn't have to be -- but then again, I'm not 70 years old (I'm 18). So I understand that living through multiple recessions can scare you into thinking that your timing could be bad and you could lose your savings. She's had some friends who have those horrible stories of losing it all in the market, that's where I think this comes from.

Her financial situation is fine, she takes all of us on trips and such in Europe every few years. She has a rental property and a pension (alongside my grandfather) so they live just fine. This money (according to her) is money that she's comfortable to invest, though I think that this is the most comfortable she's going to get.

I'll have to chat with her a bit further. Thanks for all the info, I appreciate it.
Googliebear wrote:
Sat Jan 11, 2020 7:23 am
TheBammyGuy wrote:
Fri Jan 10, 2020 12:24 pm

I'm not trying to achieve massive returns with this, as it obviously has a bond allocation of 70 percent. Though I'd much rather use this to grow and give to my children.
Are your children responsible adults? Do they currently max out their Roth IRA's?

If the answer to the first question is yes and the answer to the second question is no, I'd recommend gifting them the money over the next couple of years to funnel the funds into tax free Roth accounts that can compound for a couple of more decades.

Being that you're 70, and the chances that your children are no longer working will obviously change what account they can invest the money in, but paying down debt can also be an investment.

Enjoy the feeling of gifting while your alive, it'll most likely be more enjoyable for the both of you.
Crazily enough in this day and age , yes, both of them are responsible adults who are both in good paying jobs and contribute to their 401k's (unsure of Roth, though I'll talk to them about it)
jimkinny wrote:
Sat Jan 11, 2020 8:00 am
I am 71 and invest fairly conservatively. Your fund selection is a pretty good choice with you being risk averse but still wanting some growth. 70% bonds for safety and 30% for growth. Another thing to to consider is perhaps a CD. Check out bankrates.com, the cd summary page. The bonds in the target date fund are likely yielding in the range of 1.6%-1.8%. A 5 year treasury is at that level. So check out 5 year CDs. Not much growth but if you can beat inflation there will be a bit of growth. I would likely buy 35K of CDs and 15K of vanguards total stock market index but that makes things a bit complicated and you might focus on the riskier aspect of equities in a single equity fund.
All in all, I think the target date fund is very acceptable.
A good deal of my other funds are actually in CD's -- unsure of the exact total. But enough to bring my family on the trips that I'm planning, and I'm probably not going to be touching the other CD's that I have. Just trying to beat inflation or stick with it.

Thanks for the info.

--------

I hope no one thinks its weird that I'm my grandmothers grandson (18) looking into advice for her. It took a lot of convincing to get her into this fund, and tell her about what Vanguard is. I'll be beyond happy to share all the information you've given me to her. Thanks folks!

Herekittykitty
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Re: 70 Years Old, $50000 to invest

Post by Herekittykitty » Sat Jan 11, 2020 11:41 am

TheBammyGuy wrote:
Sat Jan 11, 2020 11:08 am

.....I'm actually my grandmothers grandson -- I wrote the OP as her, she wanted to get some 'expert advice' on the matter......


.....I hope no one thinks its weird that I'm my grandmothers grandson (18) looking into advice for her. It took a lot of convincing to get her into this fund, and tell her about what Vanguard is. I'll be beyond happy to share all the information you've given me to her. Thanks folks!.....
I'd recommend you go back to your first post and right at the beginning say what you did in this post - that you are 18 and asking questions at the request of your 70 year old grandmother.

Then edit into the post the information you just gave us.

And no, it is not at all "weird" that you are asking advice for an older relative to share with them. It happens here all the time. But do let people know preferably in your first post.

BTW it is great to see an 18 year old on this board. You are a great age to start learning and investing yourself!!! May I recommend for you:

The Bogleheads Wiki article "Getting Started" https://www.bogleheads.org/wiki/Getting_started

And the book (very short, easy to read, and well worth it) "If You Can" made available free online (or you can buy it if you want a paper copy) by the generosity of the author William Bernstein who is an expert in the field. It is the second book down on this site:
http://efficientfrontier.com/ef/0adhoc/2books.htm

If you have questions for yourself feel free to ask them, likely best in a separate post for yourself.

If your grandmother wants, she could hop right in herself on her own behalf. Lots of people her age do just that. Or you can keep asking for her, if you and she want to do it that way. Just do identify that's what is happening.

Best wishes.

:D
I don't know anything.

Jablean
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Re: 70 Years Old, $50000 to invest

Post by Jablean » Sat Jan 11, 2020 9:13 pm

One thing to remind her of since this will be in a taxable and not tax sheltered account is that the bonds/CDs are going to throw off income. Yes, she'll probably just have them reinvested but the issue for her is actually their yearly tax implications. It may not be enough to matter on her taxes but it's something to be aware of.

When the stocks are inherited (not gifted) the recipients get a step-up in basis. If she were to sell for $20 a stock she bought for $10 she would owe tax on the $10 difference. If the inheritor gets the stock when it's worth $20 then that becomes their cost basis and if they were to turn around an sell it they would have zero taxable income because the cost would be the same as the sales price. With a mixed fund like the target date Fidelity/Vanguard will figure out how much of the inheritance is in stock and how much in bonds.

Financologist
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Re: 70 Years Old, $50000 to invest

Post by Financologist » Sat Jan 11, 2020 9:28 pm

Grandma should keep this money and invest it aggressively based on the long time horizon. Consider splitting 70/30 between a domestic stock index and international stock index. If things change she will have access to these funds and if it turns out she never uses it then it can be passed to the next generation when that time comes. If Grandma is so rich that there is virtually no chance she'll need this money then she can give it or keep it as she pleases.

Good luck

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BL
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Re: 70 Years Old, $50000 to invest

Post by BL » Sat Jan 11, 2020 10:08 pm

Vanguard Tax Managed Balanced Fund (VTMFX)
is a balanced fund using muni bonds which might be considered if she is at least in the 24% tax bracket. The dividends from the bonds would be federal tax free, but the yields would be a bit lower than taxable bonds. The equivalent yield can be calculated if you know the tax bracket.

Here is what a Boglehead CPA author writes about the above:
https://obliviousinvestor.com/what-are- ... ced-funds/

The fund you suggested, or Life Strategy Conservative (40/60 stock/bond) would be fine if they are ok with the taxable distributions. Even worse tax-wise, Wellesley (about 35/65) is loved by many, even if it would be better in an IRA because it kicks off even more dividends.

She might like to have a good reference book on hand to look up certain topics of interest in the investing and personal finance area. I have been reading articles and books by Jane Bryant Quinn over the years (I am older than she is) and like the easily read How To Make Your Money Last written for the retirement years. Both your library and Amazon.com have it. (Get the most recent edition.) I believe she recently retired but has some articles in AARP magazine as well as her website.

I second the booklet for you and her, If you can, mentioned above. Also, Taylor has key points from lots of books, which you can find in the Wiki.

msk
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Re: 70 Years Old, $50000 to invest

Post by msk » Sun Jan 12, 2020 3:19 am

TheBammyGuy wrote:
Sat Jan 11, 2020 11:08 am
My grandmother is very risk averse, though in my view she really doesn't have to be -- but then again, I'm not 70 years old (I'm 18). So I understand that living through multiple recessions can scare you into thinking that your timing could be bad and you could lose your savings. She's had some friends who have those horrible stories of losing it all in the market, that's where I think this comes from.
:greedy I doubt if this will make any difference to her risk averseness, but I am 75 and ALL my investments (8 figures) are 100% stocks worldwide, like in Vanguard's VT. I simply do not see that 8000 companies worldwide can go to zero any time soon. Like her, I have a satisfactory income (COLA pension), so all the investments are for my heirs, and I gift them all on a monthly basis, rather than let them wait for my demise. I just think that if I live to 95 after my major heart repair job a couple of years ago, like a fortune teller predicted when I was 18, my heirs may yet thank me for my aggressive investing :greedy

rossington
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Re: 70 Years Old, $50000 to invest

Post by rossington » Sun Jan 12, 2020 4:13 am

VTSAX is the best choice for the 50k in this situation.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

smectym
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Re: 70 Years Old, $50000 to invest

Post by smectym » Sun Jan 12, 2020 5:05 am

msk wrote:
Sat Jan 11, 2020 7:45 am
Googliebear wrote:
Sat Jan 11, 2020 7:23 am
Enjoy the feeling of gifting while your alive, it'll most likely be more enjoyable for the both of you.
+1. I give all my kids monthly stipends. Fortuitously, because of our varied and assorted tax residences scattered all over the globe, there are no tax implications for any. All of them can retire today if they so wish. One added bonus: I never have to worry about birthday gifts ever again :D I would just put the whole $50k in the stock market. Pay out 5% of balance annually. So $2500 this year. Next year the balance could be $40k or even up to $60k. Pay out 5% of that next year. If history is any guide, since 1871 your original $50k will still be worth in REAL terms $50k, even 50 years from now. Only nuisance is that your annual gifting fluctuates up and down with the previous year's market performance.
msk, good indeed that you give your kids the stipends; I try to be the same way. This ridiculous market is spewing out a firehose of liquid gold, I can’t spend it all. But somehow, the kids always can figure out a way. Now why is that? But good for them.

The ones who are flush with ill-gotten gains, and yet stiff their kids on some suspect rationale like “tough love,” “they’ll thank me later,” and so on, are usually making a sad mistake.

As to how to allocate the grandma’s 50 grand, I’d respect her conservative instincts and suggest a conservative fund that has outperformed, such as VWIAX.

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Wiggums
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Re: 70 Years Old, $50000 to invest

Post by Wiggums » Sun Jan 12, 2020 8:18 am

msk wrote:
Sun Jan 12, 2020 3:19 am
:greedy I just think that if I live to 95 after my major heart repair job a couple of years ago, like a fortune teller predicted when I was 18, my heirs may yet thank me for my aggressive investing :greedy
did you fortune teller tell you that I’m your long, lost grandson? :-)

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