91-year old MIL requests assistance with portfolio

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Topic Author
Copilot
Posts: 43
Joined: Sun Feb 28, 2016 2:20 am

91-year old MIL requests assistance with portfolio

Post by Copilot »

Hello Bogleheads,

My 91 year old mother-in-law (MIL) asked for my financial assistance, and I'd like to ask for your help. I posted back in 2019 after my FIL died, and am grateful for all the guidance provided, but at that time I had limited information, so it now seems more straightforward to create a new post rather than resurrecting the old one. Although my MIL specifically asked for my financial assistance in 2019, I soon realized she wasn’t really ready to make any changes. My spouse and I shared verbatim much of the guidance you provided, but she was getting a lot of pressure from her “very nice” advisor, who insisted she had to move quickly before the end of the year due to unspecified tax reasons. She also had to move to a different apartment when her husband died, and there were some financial implications there, and it was all just too much for her. Although I agreed with all the Bogleheads comments – particularly the concerns regarding both high fees and variable annuities, I realized she was of course grieving while also dealing with the upheaval of moving, and that I shouldn’t push her or make her uncomfortable – I needed to respect her wishes. So I backed off and assured her that if/when she was ready, I was here - and that my only goal is to make sure she’d have enough money and isn’t being taken advantage of.

A few months ago she made an odd comment about having to visit her advisor to “pay him her RMD,” and we started gently asking some questions. MIL (now 91) then opened up and again asked me for assistance. She says she can’t sleep at night because she’s worried about her annuities, and her other child (who helps with errands, etc.) now agrees that she’s likely paying too much in fees. We are overseas so can only offer limited assistance; her other child helps with things like medical appointments and errands but not with finances. It’s often tough to get clear and complete info from MIL, but working with both her and her other child, we were able to piece together some additional information. Again – MIL has clearly expressed that she wants our help, and we have absolutely no interest other than ensuring she (a) has enough for her expenses, and (b) isn’t being taken advantage of. Please see below overview and questions – thank you for your help!

• Age 91, in pretty good health. Family history of living to be well over 100.
• Lives in a CCRC where she is guaranteed to be able to stay, even if her money runs out (though possibly in a smaller apartment).
• State of residence: MD

Living Expenses: $49,400 per year (not including taxes)
• This represents $31,200 annually to the CCRC, $6000 for other living expenses, and $12,200 for healthcare-related expenses. (Medicare supplement from her retirement plan, plus a separate drug plan, plus Rx meds). I’m trying to make sure this truly includes all of her expenses, and am also looking into whether we can reduce some of those expenses.
• This does NOT include taxes – not sure what she pays for federal or state taxes, but I’ve asked.

Social Security Income: $16,000 per year

This means she needs: $33,400/year (plus whatever she needs for federal/state taxes)

Assets: Total of $187K
• $5300 Variable Annuity
• $35K Variable Annuity
• $147K in mutual funds with financial advisor

Asset Details
• $5300 IRA Annuity:
- Guaranteed Minimum Death Benefit of $15,555 (return of premium). She says they paid an extra upgrade for this, but as a result, she can’t let the balance go below $5000. This saddens me since her children don’t need/want the death benefit – we want her to have the money.
- Fees – the only one spelled out is the annual charge of $30.
- Issue date 2000, annuity commencement date 2025, total payments from inception $32K, total distributions from inception $17K (I don’t understand the difference between payments and distributions), year to date gain $117, gain from inception -$9567. She is taking RMDs of about $770 from this account, and it says it’s invested in “1yr fixed guart.”

• $35K IRA is currently in a variable annuity:
- Purchase date 2007, premium payment was $17K, annuity performance of $18,800 including fees/expenses. Annuity commencement date is 2030.
- Invested in MFS Total Return Bond 40%, Amer Gbl Growth 10%, Amer Asset Alloc 10%, Amer Grwth 10%, Amer Grwth&Incm 10%, Franklin DynaTech VIP Fd 10%, MFS Grwth Series 10%.
- Last quarter she made only $9.87. She pays her CCRC from this account.

• $147K in mutual funds with financial advisor:
- Insured cash account of just under $4K, with the rest in mutual funds (ICEIX, IMAIX, IVVIX, IYGIX, MMIIX, MIMIX, MEIIX, PRSCX).
- Dividends are being reinvested. They’re definitely churning – I can see all sorts of sales each month, and lots of wash sales.
- There’s a monthly advisory fee of $201 plus an annual service fee of $245, and who knows what other fees are hidden in all those sales – by June 2021 it looks like she had already paid sales fees of almost $1200, and those are the ones I can easily see.

Questions/Comments:
• So it looks like she has enough for maybe 6 years of expenses, but there’s definitely a chance she could outlive her money, and she could also incur higher healthcare expenses in the future, or requires a more expensive "level of care" at her CCRC.
• I want to keep this very simple for MIL and other family members. I am overseas and can only help in a limited way. Her other child can help by taking her to a bank, helping her with necessary documents, etc., but they have limited availability and financial background, so we would only ask them to assist in very specific and straightforward ways. MIL does make some transactions online, but only very limited ones, and she gets increasingly confused, so we would want to automate things as much as possible.
• If changes are recommended, I want to help explain to MIL the reasons why (fees, etc.), but I may not be able to get the details needed to do a complete analysis of the fees, and I’m not sure that’s even necessary. I also don’t want to make her feel that her late husband made poor choices – that will only make her feel bad. My focus is on giving her the information needed to make the right decision.
• I think the first step is definitely to get the $147K away from that financial advisor and those fees – move it to Schwab or Fidelity, both of whom have physical offices near her. She would feel much better being able to deal initially with an actual person, and her other child could drive her there to set things up. She’s very worried about having her RMDs automatically taken out, and having her fees for the CCRC automatically transferred each month – I think her financial advisor has made her think these things are really complicated, but I explained that they’re quite easy. She knows friends and family who have worked with Schwab and Fidelity, and feels good about potentially working with them.
• If she does open an account with Schwab or Fidelity, what asset allocation is recommended at her age – and are there specific index funds you would suggest? MIL would want us to just suggest something specific for her. We've never worked with either one (we use Vanguard), so appreciate any recommendations.
• My thought is that we should also surrender the $35K variable annuity and add it to her Schwab or Fidelity account, for simplicity’s sake.
• With the other annuity being just above $5K, and her not wanting to go below that amount, what do you recommend? Should she just leave it there, even if that’s not the optimal financial solution?
• I don’t think any of her children have financial power of attorney. Being overseas, we would not serve in that role, and I’m not sure the other child would want to or be able to take that on, but it’s something we can look into.
• What else should we consider?

Thanks very much for your assistance!
twh
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Re: 91-year old MIL requests assistance with portfolio

Post by twh »

I just don't know how these advisors sleep at night. A new annuity for a 89 yr old is nuts and that's exactly what he sold her.

The ICEIX, IMAIX, IVVIX, IYGIX, MMIIX, MIMIX, MEIIX, PRSCX all have expense ratios 0.5% to 0.8%. She doesn't need any funds like that - she can easily get into some index funds that do the same for a lot less and no extra fees on top of the expense ratios. And, a quick look at some of them seem to put her in more equities than a 91 yr old should probably be in. Now, adding the annuity payments into the picture, maybe some of that makes sense. I think you are right to move the brokerage account to Schwab or Fidelity.
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celia
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Re: 91-year old MIL requests assistance with portfolio

Post by celia »

Copilot wrote: Fri Dec 03, 2021 10:40 pm A few months ago she made an odd comment about having to visit her advisor to “pay him her RMD,” and we started gently asking some questions.
Did you ever figure out what this meant? It is a possible red flag to me.

At have 92, her RMD would be 20% of her IRA. I surely hope she isn’t giving that to her ‘advisor’. She also has to pay taxes on the amount withdrawn.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
Topic Author
Copilot
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Re: 91-year old MIL requests assistance with portfolio

Post by Copilot »

Thanks for the responses so far.

twh - to be fair, she already had the annuities years before this financial "advisor" got involved, but yes - I'm very concerned about the variable annuities as well as the high fees and expense ratios she's paying for the brokerage account. Thanks for your response.

celia - yes, that comment was a huge red flag to us! We're still trying to figure out exactly what is going on with the RMDs - and that's made more challenging because she doesn't always use the correct terminology and also gets confused. And I think her "advisor" has really scared her with regard to RMDs - in my opinion he's made it sound like this is all so complicated that she needs his help, that there's a sense of urgency, and that there are horrible implications if she gets it wrong - all of which has confused and scared her. We think she gets her RMD from the $35K IRA/Variable Annuity and then pays her CCRC fees from that. But we don't know what's going on with taxes, and we still don't quite understand the comment she made, so we're definitely still researching that.

Thank you again - appreciate any additional suggestions from the Bogleheads!
MHA556
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Re: 91-year old MIL requests assistance with portfolio

Post by MHA556 »

If I read this right she is paying around 5k yearly minimum to this advisor, which is basically 10% of her yearly expenses! And about 2.7% total on her 187k in assets.

Wow. The sooner the better to get her moved obviously. No idea on funds but something simple should do it.


And my mom thinks it is strange that I “pick my own funds” (because it is so hard to read the fund info I guess).
rossington
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Re: 91-year old MIL requests assistance with portfolio

Post by rossington »

Copilot wrote: Sat Dec 04, 2021 12:03 am Thanks for the responses so far.

twh - to be fair, she already had the annuities years before this financial "advisor" got involved, but yes - I'm very concerned about the variable annuities as well as the high fees and expense ratios she's paying for the brokerage account. Thanks for your response.

celia - yes, that comment was a huge red flag to us! We're still trying to figure out exactly what is going on with the RMDs - and that's made more challenging because she doesn't always use the correct terminology and also gets confused. And I think her "advisor" has really scared her with regard to RMDs - in my opinion he's made it sound like this is all so complicated that she needs his help, that there's a sense of urgency, and that there are horrible implications if she gets it wrong - all of which has confused and scared her. We think she gets her RMD from the $35K IRA/Variable Annuity and then pays her CCRC fees from that. But we don't know what's going on with taxes, and we still don't quite understand the comment she made, so we're definitely still researching that.

Thank you again - appreciate any additional suggestions from the Bogleheads!
I hate to say this but there are big problems here. At 91 she does not have a designated POA. This should have been taken care of years ago. Without a POA she has to authorize ALL financial decisions on her own. You say she is doing well but if she is asking for your help in all these complicated financial matters the situation is clearly overwhelming her...no matter how you rationalize it. Unless you are going to trust complete strangers over family members (ie: you or your wife/or both) to manage all financial aspects of her life it's decision making time...now.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
mary1492
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Re: 91-year old MIL requests assistance with portfolio

Post by mary1492 »

xyzzy
Last edited by mary1492 on Tue Oct 04, 2022 3:10 am, edited 1 time in total.
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Stinky
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Re: 91-year old MIL requests assistance with portfolio

Post by Stinky »

This sounds like elder abuse by the financial advisor. Pure and simple.

On the annuities - I would surrender the $35k annuity, place the proceeds into a regular IRA with Fidelity or Schwab, and make all RMDs from that account. If the $5k annuity truly has a $15k death benefit, I would keep that annuity. The fee drag on the $5k annuity is annoying, but the “bonus” of a 3x death benefit in the future makes it worth keeping.

On the taxable mutual funds - I’d definitely sell all funds and move the proceeds to Fidelity or Schwab. I’ll defer to others as to the fund selection going forward.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
Topic Author
Copilot
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Re: 91-year old MIL requests assistance with portfolio

Post by Copilot »

Thanks very much for all the responses - they are much appreciated.

rossington - I'm sure your post was well-intentioned so I'll try not to be too defensive here - but as noted in my original post, my husband and I are deployed overseas and have been for years, so we are not in a situation to serve as her DPOA. And respectfully, there are family dynamics that aren't evident in a post but need to be considered. I agree that she should have a DPOA, but I can't force her to set one up, and I also can't force another family member to act in that role. I don't think I'm the only one out there who does things for themselves the Boglehead way, but who has parents or other family members who still haven't gotten around to writing a will, or who make poor financial decisions, etc. Your bolded/underlined phrases and comment about "no matter how I rationalize it" - I'm not trying to rationalize anything, but I have to decide what type of assistance is possible and appropriate. I also need to be careful since this is not my own parent, and there are other adult children who live nearby, have much closer relationships, and have routinely helped with daily tasks - so I wasn't going to swoop in immediately after her husband died, force her to do things when she clearly told me she wasn't ready to make changes yet, and potentially cause conflict with the other children/primary caregivers. It took years to develop this level of trust, and it took me gently asking questions multiple times over the course of years to get her to the point where she did finally ask for assistance. We don't want her to be taken advantage of, and we are trying - where possible and where welcomed by all involved, to assist her as best we can. We will certainly continue to recommend a DPOA, but ultimately that will be something that she and her family back in the U.S. need to decide and make happen.

MHA556, mary1492, and Stinky - thanks so much for your comments. We're trying to work with one of the other adult children to help her move the mutual funds ASAP. Appreciate your different perspectives regarding the annuities as well.

Everyone's feedback is much appreciated. I'd welcome any additional thoughts regarding specific funds as well, as we will likely have to outline all the recommendations in a simple and concise step-by-step written outline to pass to the family member who is assisting her. Thank you again!
delamer
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Re: 91-year old MIL requests assistance with portfolio

Post by delamer »

Would it be possible to set up a 3-way telephone call with your MIL, a local Fidelity or Schwab advisor, and yourself/husband? Maybe the local sibling could set it up.

If you can agree to a plan and she has a local advisor who can implement it, that might make everything easier on all parties? And, of course, a neutral 3rd party is always useful in these family discussions anyway.
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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willthrill81
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Re: 91-year old MIL requests assistance with portfolio

Post by willthrill81 »

Stinky wrote: Sat Dec 04, 2021 5:37 am This sounds like elder abuse by the financial advisor. Pure and simple.
It's yet another situation where a financial advisor salesperson shyster raked their client mark over the coals.
The Sensible Steward
twh
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Re: 91-year old MIL requests assistance with portfolio

Post by twh »

I know Fidelity has a feature where you can be named as a "trusted" person and they will talk to you. You can set up the "trusted' person thing online as I recall.

Schwab was more difficult the last time I dealt with them as a 3rd party.
fposte
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Re: 91-year old MIL requests assistance with portfolio

Post by fposte »

I also think the primary fact here is that MIL is in a CCRC and is guaranteed the ability to stay. It would be great to have her money more responsibly handled, but the goal, IMHO, is to make sure she worries about the money less, not that the money performs better. So I'd make sure she's clear that she'll be okay whatever the money does, and you're helping her with the goal of making it simpler to handle rather than life-changing.
Nutmeg
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Re: 91-year old MIL requests assistance with portfolio

Post by Nutmeg »

I think you might be underestimating what you can do to help while living overseas, unless you live in a remote area with little access to the internet, printers, and photocopiers and cannot access U.S. notary services (either through a U.S. embassy or through occasional trips to the U.S. that you plan to take anyway.)

I have lived overseas, and I can understand the difficulties in providing financial assistance while overseas. However, an elderly relative who would normally ask for financial advice made a large ill-advised investment at that time without discussing it with me, and she and I dealt with much more hassle in doing so in the following 10 years than would have occurred if I had been involved in the beginning, and not just in the cleanup stage.

My husband and I have also helped other elderly relatives during the pandemic, when we almost might as well have lived overseas because we didn’t see our relatives for 18 months. We worked with Fidelity to transfer expensive funds to Fidelity from a financial advisor who was taking them to the cleaners and had them invested in inappropriate funds. Fidelity provided a knowledgeable person with a direct line that we could call for questions in getting the accounts set up. We handled everything with the financial adviser, the attorney, the accountant, and Fidelity by phone; we have never met any of these people in person. We did have to go inside a bank to get notary services and a medallion signature guarantee, but now that fewer institutions offer MSGs, fewer other financial institutions require them. Our relative’s funds are now at Fidelity with a POA, so we can request RMDs by phone. Both Fidelity and Vanguard offer voice verification, so verification such as with notary/MSG for transactions was needed only initially. (I don’t know about Schwab.)

Might it be possible for you to come to the US for initial setup, or to access US notary services?
Topic Author
Copilot
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Re: 91-year old MIL requests assistance with portfolio

Post by Copilot »

Many thanks to everyone who responded. There is no chance of returning to the U.S. to help, and we've had several issues even managing our own finances from overseas, but we do know there are some options available and will look into scheduling conference calls and other ways to assist in getting a new account set up for her. We are still not well-positioned (for multiple reasons, distance being only one of them) to be her DPOA, but are hopeful that we can work with other family members to get her money away from the "advisor" and develop a simple, straightforward solution for her. Thanks again for all your comments and suggestions!
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ResearchMed
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Re: 91-year old MIL requests assistance with portfolio

Post by ResearchMed »

Nutmeg wrote: Sat Dec 04, 2021 2:05 pm I think you might be underestimating what you can do to help while living overseas, unless you live in a remote area with little access to the internet, printers, and photocopiers and cannot access U.S. notary services (either through a U.S. embassy or through occasional trips to the U.S. that you plan to take anyway.)
[emphasis added]

I'm not sure whether access to a notary would really be a factor here (it sounds like it may not be), but in case it is, there are online notaries these days.

We used one for the first time a few days ago, and it was surprisingly simple.

I don't think the issue of "where we were physically located" was relevant. We were in one of the 48 contiguous US states, but I don't know that any attempt was made to verify that. The online notaries (we connected twice, due to incomplete paperwork the first time, but only needed to pay once) declared themselves to be in a state other than ours.

There was apparently all sorts of meta-data with the locked file of the completed, notarized document, which we then uploaded as though we had used a local person/notary.

RM
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