My sister — should some of her money be invested?

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mkaytn17
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My sister — should some of her money be invested?

Post by mkaytn17 »

My sister is 78, widowed, is diabetic (in mid stages of kidney disease), and has atrial fibrillation, although her health seems to be stable. Her TIRA is worth about $90,000, all in cash. She withdraws her RMD yearly but doesn’t spend it, living on Social Security and a small pension.

She looks to me for advice. I’ve not minded her being all in cash up to this point. If that were my balance, I’m not sure I would risk any of it myself. However with interest rates as low as they are and will continue to be, I’m tempted to recommend she invest at least some of her money. I’ve considered one of the LifeStrategy funds, and I note there has been much discussion lately on those.

If you were in her shoes, would you invest some or all of it, or none at all?
pasadena
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Re: My sister — should some of her money be invested?

Post by pasadena »

What do her current and future living conditions look like?

How does she plan on covering LTC, probably with medical assistance, in the future, and how close do you think that future is? Does she have children and are they taking care of her or ready to step in if/when needed?

Does she own her home? Is that home future-proof for an aging person with health issues?

How much money does she have outside of her TIRA?
Last edited by pasadena on Fri Sep 18, 2020 2:09 pm, edited 1 time in total.
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CAsage
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Re: My sister — should some of her money be invested?

Post by CAsage »

In her shoes, I'd consider a rolling CD ladder for half (e.g. $10k in 1, 2, 3, 4, 5 year CDs) and preserve the safety of cash. Shop around for better interest for an online savings account. Investing is inherently risky, not something I would want some with health issues and her age to try for the first time. If she was a lot younger and had time for a bond fund to recover, maybe, ... but everyone is scrambling for yield right now and it's not available safely.
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Brianmcg321
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Re: My sister — should some of her money be invested?

Post by Brianmcg321 »

What is she doing with the RMD if she doesn't spend it?
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mkaytn17
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Re: My sister — should some of her money be invested?

Post by mkaytn17 »

pasadena wrote: Fri Sep 18, 2020 2:07 pm What do her current and future living conditions look like?

How does she plan on covering LTC, probably with medical assistance, in the future, and how close do you think that future is? Does she have children and are they taking care of her or ready to step in if/when needed?

Does she own her home? Is that home future-proof for an aging person with health issues?

How much money does she have outside of her TIRA?
She does have children who will step in to help if/when needed. She has no LTC plans in place and hopes the end will come quickly, when it’s time.

She lives in her own home, although it is not completely paid for, but it is a ranch style home which she can get around in easily.

Outside the TIRA, she has about $20,000.
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mkaytn17
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Re: My sister — should some of her money be invested?

Post by mkaytn17 »

Brianmcg321 wrote: Fri Sep 18, 2020 2:13 pm What is she doing with the RMD if she doesn't spend it?
Well, I guess I have to amend that statement a little. She did replace her car a couple of years ago and has has made repairs on her home when necessary.
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mkaytn17
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Re: My sister — should some of her money be invested?

Post by mkaytn17 »

CAsage wrote: Fri Sep 18, 2020 2:08 pm In her shoes, I'd consider a rolling CD ladder for half (e.g. $10k in 1, 2, 3, 4, 5 year CDs) and preserve the safety of cash. Shop around for better interest for an online savings account. Investing is inherently risky, not something I would want some with health issues and her age to try for the first time. If she was a lot younger and had time for a bond fund to recover, maybe, ... but everyone is scrambling for yield right now and it's not available safely.
Thanks, CAsage. I’ll look into that option.
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Brianmcg321
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Re: My sister — should some of her money be invested?

Post by Brianmcg321 »

If you are wanting something simple like a one fund I would look at the Target Retirement Income Fund instead of the Life Strategy.

https://www.portfoliovisualizer.com/bac ... ion1_1=100
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cheese_breath
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Re: My sister — should some of her money be invested?

Post by cheese_breath »

Given her age and medical condition as you describe it, I'd keep it all in cash or cash equivalent to minimize the risk. You never know when she might need it, and you don't want it to be during a market downturn.

Let me share my experience with the same type of decision. As many on the forum know, my DW had a massive stroke in April, 2017. At that time I was about 30-35% TSM and the rest in TIAA Traditional. I decided to go private pay for her care rather than Medicaid, and I struggled for awhile about what to do with the stocks. In July I converted everything to TIAA Traditional to minimize the risk, and even though I missed the big stock runup since, I've never been sorry because I know I would have been VERY sorry if the market had gone the other way.

And by the way, DW is younger than your sister.
The surest way to know the future is when it becomes the past.
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mkaytn17
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Re: My sister — should some of her money be invested?

Post by mkaytn17 »

Brianmcg321 wrote: Fri Sep 18, 2020 2:23 pm If you are wanting something simple like a one fund I would look at the Target Retirement Income Fund instead of the Life Strategy.
Thank you, great visualization! Too bad she hasn’t been in it the last 15 years!
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mkaytn17
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Re: My sister — should some of her money be invested?

Post by mkaytn17 »

cheese_breath wrote: Fri Sep 18, 2020 2:25 pm Given her age and medical condition as you describe it, I'd keep it all in cash or cash equivalent to minimize the risk. You never know when she might need it, and you don't want it to be during a market downturn.

Let me share my experience with the same type of decision. As many on the forum know, my DW had a massive stroke in April, 2017. At that time I was about 30-35% TSM and the rest in TIAA Traditional. I decided to go private pay for her care rather than Medicaid, and I struggled for awhile about what to do with the stocks. In July I converted everything to TIAA Traditional to minimize the risk, and even though I missed the big stock runup since, I've never been sorry because I know I would have been VERY sorry if the market had gone the other way.

And by the way, DW is younger than your sister.
Thank you for sharing your experience and I’m so sorry about your DW. You’re right, age isn’t always the determining factor. I know that firsthand because my DH died at 48. I would feel terrible indeed if I were the one responsible for her losing any of her money!
pasadena
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Re: My sister — should some of her money be invested?

Post by pasadena »

I would also keep most, if not all, in cash. She basically has about a $110,000 cushion and she might need that. LTC can be expensive - you should look into that, just to have a good understanding of how much it may cost, and how much her current income + medicaid would cover, especially if she ends up needing regular dialysis.

I know a few elderly people with serious health issues that still lived well into their 90's.

I'm of the opinion that she *may* need that money, but she probably has no need for additional risk. The CD ladder with short steps as proposed by CAsage sounds like a good idea, if you really want to do something. Make sure the additional cash outside of the tIRA is in a savings account that consistently has a good rate, comparatively. Ally bank is one of those - not the best, but always in the top 10 or so. That is, if your sister is comfortable using an online bank.

Honestly, at this stage of her life, safe and simple is the way to go. Also making sure her affairs are in order, including a durable power of attorney with medical power.
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cheese_breath
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Re: My sister — should some of her money be invested?

Post by cheese_breath »

pasadena wrote: Fri Sep 18, 2020 3:42 pm Honestly, at this stage of her life, safe and simple is the way to go. Also making sure her affairs are in order, including a durable power of attorney with medical power.
Durable Power of Attorney, Medical Power of Attorney, HIPAA Authorization. All three if you're going to be responsible for her care.
The surest way to know the future is when it becomes the past.
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mkaytn17
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Re: My sister — should some of her money be invested?

Post by mkaytn17 »

Thanks for your input, Pasadena and cheese_breath.

We sure hope she doesn’t end up in dialysis. We lived through that with my mother, and it’s tough!

Good reminder about the legal documents too — I’ll ask if she’s done those.
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BL
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Re: My sister — should some of her money be invested?

Post by BL »

I don't think starting investing at our age is a good idea when she hasn't been doing it, and hasn't insisted on it. No point in creating worries at that age.

Rates for cash are not good as I am sure you have noticed. At least inflation is not yet a concern. If she is comfortable using online bank, a place like Ally might be appropriate as savings or CDs are FDIC insured.

Not sure if a SPIA would make sense, but immediateAnnuities.com calculator shows $50,000 paid to insurance company would yield $355/month for life, or $329/month for life and a guarantee of 10 years of payouts for a 78 yr old female in my state.
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mkaytn17
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Re: My sister — should some of her money be invested?

Post by mkaytn17 »

BL wrote: Fri Sep 18, 2020 11:15 pm I don't think starting investing at our age is a good idea when she hasn't been doing it, and hasn't insisted on it. No point in creating worries at that age.

Rates for cash are not good as I am sure you have noticed. At least inflation is not yet a concern. If she is comfortable using online bank, a place like Ally might be appropriate as savings or CDs are FDIC insured.

Not sure if a SPIA would make sense, but immediateAnnuities.com calculator shows $50,000 paid to insurance company would yield $355/month for life, or $329/month for life and a guarantee of 10 years of payouts for a 78 yr old female in my state.
Thank you, BL, another option to consider.
mptfan
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Re: My sister — should some of her money be invested?

Post by mptfan »

mkaytn17 wrote: Fri Sep 18, 2020 2:03 pm She looks to me for advice.
When you say she looks to you for advice, what does that mean? Has she asked for your advice?
illumination
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Re: My sister — should some of her money be invested?

Post by illumination »

Someone that's never really invested their entire life is going to be freaking out the next bear market...and blame you for it.

Even if the stock market does "decent" over the next few years, the amount invested at this point for her is going to be pretty trivial in terms of growth. Say you invested like 30% of her money in equities, in a rosy scenario you're averaging like $2k-$3k a year if everything goes according to plan. I'm just not sure if it's worth the drama and you being an "owner" of her financial situation for that potential upside.
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mkaytn17
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Re: My sister — should some of her money be invested?

Post by mkaytn17 »

mptfan wrote: Sat Sep 19, 2020 9:33 am
mkaytn17 wrote: Fri Sep 18, 2020 2:03 pm She looks to me for advice.
When you say she looks to you for advice, what does that mean? Has she asked for your advice?
She no longer feels confident to decide what to do with it, so, yes, she did ask for advice. We moved the money into a 6-month CD when rates fell in the spring.

I have given her daughter a copy of Bogleheads Guide to Investing and I’m encouraging her to educate herself on handling her own finances and then she’ll hopefully be able to help her mother instead of me.
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mkaytn17
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Re: My sister — should some of her money be invested?

Post by mkaytn17 »

illumination wrote: Sat Sep 19, 2020 10:52 am Someone that's never really invested their entire life is going to be freaking out the next bear market...and blame you for it.

Even if the stock market does "decent" over the next few years, the amount invested at this point for her is going to be pretty trivial in terms of growth. Say you invested like 30% of her money in equities, in a rosy scenario you're averaging like $2k-$3k a year if everything goes according to plan. I'm just not sure if it's worth the drama and you being an "owner" of her financial situation for that potential upside.
Good point, illumination, and even though I hate her to miss out on some growth, it’s probably best to keep her cash safe.
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