Help with my parent's finances

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Topic Author
handiggity
Posts: 3
Joined: Fri Mar 13, 2015 6:31 pm

Help with my parent's finances

Post by handiggity »

Hello everyone! Thank you for this wonderful forum. I have been lurking here almost daily for a few years. I wanted to get the forum's input regarding my parent's finances. My mother was/is the main breadwinner so I will mention mostly her finances. Both my parents are healthy and doing well. Yearly expenses are ~60k.

Emergency funds: Yes

Debt: None

Tax Filing Status: Married, filling jointly

Tax Rate: 22% federal, California 7.25%

State of Residence: CA

Age: mother 75, father 85

Desired Asset allocation: 30/70

Total Portfolio: 1.6 million (not including two rental properties)

Current retirement assets:

Taxable at Vanguard
750k cash

Traditional IRA at Vanguard: 750k Vanguard Target Retirement Income

Traditional IRA at Transamerica: 80k, ClearTrack Retirement Income, 1.2% expense ratio

Two rental properties in another state on the east coast: 1.3 million equity (no debt), ~6k monthly rental income

Social Security: combined ~3700 monthly

Questions:
1. Can and should my mother rollover her traditional IRA at Transamerica to her traditional IRA at Vanguard?

2. How should she invest the 750K cash in the taxable Vanguard brokerage account? She MAY want to buy a rental property in CA during the next downturn but she is not sure.

3. Should she convert some of the traditional IRA to ROTH over the next few years? She does not currently have a ROTH account.

4. Any other advice the forum can provide for my parents?

Thank you in advance for your time and expertise.
Last edited by handiggity on Tue Sep 14, 2021 2:45 pm, edited 1 time in total.
HomeStretch
Posts: 6810
Joined: Thu Dec 27, 2018 3:06 pm

Re: Help with my parent's finances

Post by HomeStretch »

1. Yes ASAP to simplify (fewer accounts) and use lower-ER funds at Vanguard.

3. For starters, your mom should consider opening a Roth IRA this year and (assuming she is not eligible to contribute) convert even a small amount like $100 from her Traditional IRA to a Roth IRA to start the 5-year clock on initial Roth IRAs.
delamer
Posts: 12263
Joined: Tue Feb 08, 2011 6:13 pm

Re: Help with my parent's finances

Post by delamer »

It probably makes sense to do Roth conversions up to the top of the 22% federal bracket, in order to reduce RMDs for whichever parent ends up being the survivor.

How is the other $500,000 in the portfolio invested? Is it in an IRA of your father’s?

I can’t imagine taking on another rental property at age 75+, but to each her own. :D If she wants to keep the $750K in cash, then she should increase her stock holdings in the IRA, since they are way under their target of 30% stocks (depending on how the missing money is invested).
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
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nedsaid
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Joined: Fri Nov 23, 2012 12:33 pm

Re: Help with my parent's finances

Post by nedsaid »

A caution regarding rental properties, as far as I am concerned the last thing you want to be is an elderly landlord managing rental properties. My assumption here is that your parents, with their out of state rental properties are using a property manager and that is okay. Don't think that I would buy another rental property, not sure they need more complication in their lives. Seeing that the current rentals have their mortgages all paid off, this works out for your parents. In your parents' situation, the rentals are working well for them as they are clearing $6K a month.
A fool and his money are good for business.
dbr
Posts: 36933
Joined: Sun Mar 04, 2007 9:50 am

Re: Help with my parent's finances

Post by dbr »

Has anyone actually visited the rental properties recently? Even with a management company it might be good to get eyes on.

I will avoid implying that anything might be amiss, but a member of our family passed away and others discovered some things about some absentee rentals held by the deceased that were not what anyone would want.
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BolderBoy
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Location: Colorado

Re: Help with my parent's finances

Post by BolderBoy »

handiggity wrote: Sun Sep 12, 2021 5:30 pm Traditional IRA at Transamerica: 80k, ClearTrack Retirement Income, 1.2% expense ratio

1. Can and should my mother rollover her traditional IRA at Transamerica to her traditional IRA at Vanguard?
Absolutely. Pronto.

Let me expand a bit. Sell the Transamerica holding to a cash position then transfer the cash to the VG IRA, buy more of the VG IRA fund.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
Topic Author
handiggity
Posts: 3
Joined: Fri Mar 13, 2015 6:31 pm

Re: Help with my parent's finances

Post by handiggity »

Thank you everyone for taking the time to help with my parents' finances. Sorry I made a typo and corrected it. Total assets are 1.6 million (not including the two paid off rental properties).

My mother just opened a Roth IRA yesterday.
She will also be contacting Transamerica today to consolidate the traditional IRAs at Vanguard.

We have relatives in NJ that watch over the two properties.
Furthermore, my parents may move back to NJ in a few years.

One more question. She still works as a part time realtor. Should she deposit 7k into the Roth from her earnings this year? If yes (I presume yes), can she still do Roth conversions up to the 22% federal tax bracket at the same time?
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