Retirement help with Dad - VGHAX

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Anonymous321
Posts: 4
Joined: Wed Nov 18, 2020 10:55 am

Retirement help with Dad - VGHAX

Post by Anonymous321 »

Help with elderly father age 87 - turns out Dad owns only VGHAX ($600,000) and cash ($500,000) with only social security income. His expenses are about $9,000 month. I am concerned about funding his long term needs - want to keep things as simple as possible for him and family. I understand he's not well diversified but that's what he did. We could use distributions from VHGAX to help fund monthly expenses. We could try to get him to move some away from VGHAX but there are some tax considerations. Any suggestions for the VHGAX piece and cash piece - allocations? Thanks
User avatar
David Jay
Posts: 9620
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Retirement help with Dad - VGHAX

Post by David Jay »

Anonymous321 wrote: Wed Nov 18, 2020 3:41 pm Help with elderly father age 87 - turns out Dad owns only VGHAX ($600,000) and cash ($500,000) with only social security income. His expenses are about $9,000 month. I am concerned about funding his long term needs - want to keep things as simple as possible for him and family. I understand he's not well diversified but that's what he did. We could use distributions from VHGAX to help fund monthly expenses. We could try to get him to move some away from VGHAX but there are some tax considerations. Any suggestions for the VHGAX piece and cash piece - allocations? Thanks
Welcome to the forum!

To clarify, he spends $9000 a month above and beyond SS? With reasonable growth in the Vanguard Health Care fund, he will still have a hard time outliving his money. If he continues to spend at this pace, he should be good to about age 100.

A look at expenses is probably in order if you are concerned about longevity beyond the century mark.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
Topic Author
Anonymous321
Posts: 4
Joined: Wed Nov 18, 2020 10:55 am

Re: Retirement help with Dad - VGHAX

Post by Anonymous321 »

Hi - Thank you for the reply - New here - great forum

1) It's about $9,000 total before social security of $2,000 a month - he's in good health now - just concerned about whether he'll need more specialized care or nursing in the future ie assisted living etc

2) Should we diversify the VGHAX holding? It does provide distributions to help fund monthly expenses but not sure if we should leave it or sell some and incur capital gains tax

3) He also has some cash - $500,000 - should that be in a fund?

Thanks
delamer
Posts: 10590
Joined: Tue Feb 08, 2011 6:13 pm

Re: Retirement help with Dad - VGHAX

Post by delamer »

Does he have other assets, like a home?

He has 6 years of net expenses (after Social Security) in cash. At his age that seems sufficient — assuming that amount includes income taxes?
Topic Author
Anonymous321
Posts: 4
Joined: Wed Nov 18, 2020 10:55 am

Re: Retirement help with Dad - VGHAX

Post by Anonymous321 »

No other assets - $500,000 cash was from sale of house - now in checking acct.

Would you diversify the VGHAX or cash? Scared of bond funds with interest rates so low and not sure if need to take some VGHAX off the table with distributions funding some of the monthly expenses.

Thanks
User avatar
firedup
Posts: 27
Joined: Tue Jul 30, 2019 5:42 pm

Re: Retirement help with Dad - VGHAX

Post by firedup »

How does your Dad feel about his allocation? Does it concern him? Is he open to change?

It's true that all that money in the health care sector with VGHAX isn't diversified, but I imagine between the annual cap gains and dividends it's kicking out over $40K a year which is a nice supplement to his SS.

If you want to reallocate a bit, I would sell some specific lots of VGHAX to minimize cap gains.

Then, maybe move some of that money (and some the cash) to Total Stock Market or even Wellesley which is roughly 40/60 stocks/bonds for more diversification.

Good luck!
"We are more alike, my friends, than we are unalike" --Maya Angelou
Topic Author
Anonymous321
Posts: 4
Joined: Wed Nov 18, 2020 10:55 am

Re: Retirement help with Dad - VGHAX

Post by Anonymous321 »

Thanks!
7eight9
Posts: 1545
Joined: Fri May 17, 2019 7:11 pm

Re: Retirement help with Dad - VGHAX

Post by 7eight9 »

If income is the issue, a $100,000 SPIA (87M Texas - for sake of example) would pay $1,363 per month (16.35%). $300K would get ~$4K monthly income. Takes a lot of pressure off the rest of the portfolio.

Link --- https://www.immediateannuities.com/info ... tep-1.html
I guess it all could be much worse. | They could be warming up my hearse.
User avatar
David Jay
Posts: 9620
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Retirement help with Dad - VGHAX

Post by David Jay »

7eight9 wrote: Wed Nov 18, 2020 8:16 pm If income is the issue, a $100,000 SPIA (87M Texas - for sake of example) would pay $1,363 per month (16.35%). $300K would get ~$4K monthly income. Takes a lot of pressure off the rest of the portfolio.

Link --- https://www.immediateannuities.com/info ... tep-1.html
That is a great thought - at his age an SPIA has a very good payout. Using the $300K (above), monthly requirements are now $3000/mo (9K - 4K SPIA - 2K SS). His dividends will cover the remainder of that $3000. So he can keep his equities and still has $200,000 cash in the portfolio.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
User avatar
abuss368
Posts: 22180
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Retirement help with Dad - VGHAX

Post by abuss368 »

VGHAX is the Vanguard Healthcare fund. I was unsure and looked up the ticker.
John C. Bogle: “Simplicity is the master key to financial success."
User avatar
abuss368
Posts: 22180
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Retirement help with Dad - VGHAX

Post by abuss368 »

I would look at a very simple portfolio of Total Stock and Total Bond or Intermediate Tax Exempt Bond perhaps.

You could add Vanguard High Dividend Yield (VYM) with a yield around 3.65%.
John C. Bogle: “Simplicity is the master key to financial success."
User avatar
abuss368
Posts: 22180
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Retirement help with Dad - VGHAX

Post by abuss368 »

Her lath are is not diversified. Cash is exposed to being over the FICA coverage of $250,000 and inflation risks.
John C. Bogle: “Simplicity is the master key to financial success."
Post Reply