Investment options - 85 yr old couple? (~ $250k home equity)

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StealthRabbit
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Joined: Sat Jun 13, 2009 1:25 am

Investment options - 85 yr old couple? (~ $250k home equity)

Post by StealthRabbit »

I recently helped an older couple sell their rural home as they really need to get to town and into a lessor intensive home. (pretty serious health issues, frequently passing out, not too good for driving 40 miles of curvy canyon to town)

They elected to sign onto an independent living center. It is a non-profit, but still $2800/ month

Situation: Home was only asset (~ $250k available)
Needs: ~ $3500/ month (Other income minimal... ~ $800 SS)

Longevity ???? who knows ??

How should they be investing this? :?:
I'm sure there are plenty of annuity salesmen salivating over their cash. :twisted:

I am real concerned because they are really 'shark-bait'. (I.e. they're paying several hundred $ / month in life insurance, that has a very LOW cash value) :roll:

I am willing to give them a decent return (~6%), and I can stick it into some of my income real estate that is paid off and secure them with a deed, but don't want to get into a big hassle.

Just hate to see them ripped.

:idea: Any advice welcomed. :idea:
(include anticipated return, terms and cost if appropriate)
Last edited by StealthRabbit on Thu Jun 10, 2010 8:41 pm, edited 1 time in total.
yobria
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Post by yobria »

A fixed immediate annuity.

Nick
grok87
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Post by grok87 »

yobria wrote:A fixed immediate annuity.

Nick
How about a charitable gift annuity (which is a fixed immediate annuity). The current rate for a 85 year old is 8.1%
http://www.acga-web.org/2010ratesjuly/s ... uly10.html

It's better if the woman get's it as they do not sex adjust their rates (and women typically live longer than men).

Or they could do the joint version and get a rate of 7.1% (that's probably better on second thought).
http://www.acga-web.org/2010ratesjuly/t ... uly10.html
cheers,
RIP Mr. Bogle.
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Sheepdog
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Post by Sheepdog »

I looked at estimated immediate annuity returns at the reputable Annuity Shopper http://www.annuityshopper.com/ . You could go there and fill in the state and their actual ages. I just used my state and listed both as 85 years old. $250,000 to invest? Right? They will need from that $3500 less the $800 SS or $2700 from their money ($32,400 yearly). You know where I'm going. Using Annuity Shopper two 85 year olds can get $1900 per month on $200,000 deposited.. joint life. That would still leave them short. If they put in the entire $250,000, which is not practical, would still yield them only an estimated $2381 per month..still short. The trouble with immediate annities now is that interest rates are so low. However, I can't think of anything better for someone their age.
They need to cut expenses and their life insurance would be a start. They need only enough to cover final expenses and they can find how much that is.
I would go to Annuity Shopper and fill out the form. It doesn't cost you or them anything. Get at least 3 proposals from the insurance companies listed and see where that leaves them.
Jim
Time is the school in which we learn, time is the fire in which we burn.~ Delmore Schwartz
yobria
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Post by yobria »

grok87 wrote:Or they could do the joint version and get a rate of 7.1% (that's probably better on second thought).
http://www.acga-web.org/2010ratesjuly/t ... uly10.html
cheers,
Ouch, that's a lot lower than I would have expected for 85 year olds.

At that rate, I might just invest the money at 2-3%, spend it down, and rely on SS/Medicaid if they're still around once they burn through it.

85 isn't the best age to begin financial planning...

Nick
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StealthRabbit
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Post by StealthRabbit »

Thanks a bunch for the help, keep it coming, the couple called today and were ready to stick it in a CD for 1%. I encouraged them to give us a couple days to sort this out... After all, this was a very difficult place to sell, so I already have a yr free labor tied up with them. (no commission either, just helping them out gratis)
yobria wrote:...At that rate, I might just invest the money at 2-3%, spend it down, and rely on SS/Medicaid if they're still around once they burn through it.
That would be ~9 yrs w/ $250k @ 2.5% and drawing $2700 / mo.
This may be the best idea, and likely long enough.

I wonder what to invest it in so it is not 'liquid', as that is a condition for the spouse to be eligible for VA.
yobria wrote:85 isn't the best age to begin financial planning...
And why my recommendation was to get an apartment and use 'meals-on-wheels'. This followed my first advice 4 yrs ago when I mentioned NOW (then) was the time to be selling for ~ 30% more.

I have formulated a theory after helping several seniors transition from rural areas in their mid to late 80's. (I will do it much earlier (tho I just got off 'elder-care' duty for my own folks that I had from the day I turned 18 and for the next 30+ yrs)...
dbr
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Post by dbr »

It might be a good idea to consult an elder care attorney to straighten out rules and regulations about assets, annuities, Medicare, nursing home charges, and so on and so forth. The comment above about assets and VA suggests questions here that should be answered.
ResNullius
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Post by ResNullius »

dbr wrote:It might be a good idea to consult an elder care attorney to straighten out rules and regulations about assets, annuities, Medicare, nursing home charges, and so on and so forth. The comment above about assets and VA suggests questions here that should be answered.
Ditto. Their biggest problem might be if one of them needs assisted care or nursing home, while the other can live independently. This would instantly triple their monthly expense, give or take a little. They need to know the facts, and they should get them from an elder care attorney, not an investment advisor.
Topic Author
StealthRabbit
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Post by StealthRabbit »

ResNullius wrote:
dbr wrote:... They need to know the facts, and they should get them from an elder care attorney, not an investment advisor.
Thanks for the reminder, that is on my list, but hadn't scheduled yet. I took a grad class from an elder care attor. in their state (quirky regs).

Good advice, keep shoveling it out! :D
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