Portfolio for an elderly person in poor health?

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Bohemiana
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Portfolio for an elderly person in poor health?

Post by Bohemiana » Thu May 24, 2018 12:32 pm

What would you suggest for a portfolio with approx. a 7-year time horizon? For example, for an elderly woman in (76) not in excellent health.

Portfolio value $1.7m

Currently the mix is as follows:

44% domestic stocks (individual stocks and funds)
25% CDs with 1-3 years maturities
9% bond fund
5% International stock fund
13% cash

I think there is too much in cash but what would you do with it? Be very safe with more CDs? Or on the other hand, I was thinking maybe FFNOX and/or FSIVX

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Pajamas
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Re: Portfolio for an elderly person in poor health?

Post by Pajamas » Thu May 24, 2018 12:41 pm

Apparently those two funds would simply duplicate assets already held.

General life expectancy in the U.S. for a 76 year old female is 12 to 13 years. Depending on her spending, she would probably not run out of money with 100% CDs as she has $1.7 million.

If it were my responsibility to decide, I would tend towards simplicity and risk avoidance since there is no need for her to take significant risk.

Bohemiana
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Re: Portfolio for an elderly person in poor health?

Post by Bohemiana » Thu May 24, 2018 1:12 pm

Currently her spending is very low, less than $2500 per month but with declining health it could increase up to about $6k if she needs additional care. Good point though, no sense risking anything more. Would you liquidate anything to further minimize risk?

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k66
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Re: Portfolio for an elderly person in poor health?

Post by k66 » Thu May 24, 2018 1:29 pm

What is her expected bequeathment request? Does she have an expectation to leave any significant amount to heirs or charity?

Assuming maximum annual expenditures of $72k (i.e. $6k per month), with a $1.7M portfolio, that implies 4.2% per annum withdrawals. That is easily sustainable for the 12 to 13 years that Pajamas noted, but always difficult to say what the residual would be--and whether it met her expectations--when it comes time to manage her estate.
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Pajamas
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Re: Portfolio for an elderly person in poor health?

Post by Pajamas » Thu May 24, 2018 3:51 pm

Not knowing anything except what you've said, I would look at it like this:

She has 38% in cash or CDs, which is $646k. Then she has 49% stocks and 9% bonds and four percentage points lost in there somewhere.

The average of $2.5k to $6k monthly spending would be $4.25 x 12 = $51k annually. With a life expectancy of 12-13 years, she has exactly enough liquid assets (cash & CDs) at $646k to cover that. Of course that is based on rough estimates of spending and lifespan but it seems that the current overall allocation is fine.

Might want to look at the individual stocks with an eye to converting them to funds and at the funds to make sure they are good funds with low expenses. The CDs should be laddered. Might put more cash into CDs if there is an opportunity for higher interest there. She doesn't need $220k or so in cash if CDs will pay more. Most of the cash should be drawing a decent money market or similar interest rate rather than sitting in a low-interest checking or savings account.

You could simply run the numbers like that every year taking into account her current and expected spending. You could even consider secondary goals such as her estate as k66 pointed out but the stocks and bonds should fine for that.

Also make sure that she isn't foregoing anything she needs such as assistance with housekeeping or safety equipment and anything she might enjoy such as a new television because of unrealistic concerns about her finances. I would even actively look for ways to spend reasonable sums of money to improve her quality of life and possibly lifespan.

gilgamesh
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Re: Portfolio for an elderly person in poor health?

Post by gilgamesh » Thu May 24, 2018 6:10 pm

Pajamas wrote:
Thu May 24, 2018 3:51 pm


Also make sure that she isn't foregoing anything she needs such as assistance with housekeeping or safety equipment and anything she might enjoy such as a new television because of unrealistic concerns about her finances. I would even actively look for ways to spend reasonable sums of money to improve her quality of life and possibly lifespan.
^^^^ this

Spend as much as she needs to be ultra-comfortable...hire help as needed. Hopefully she can reset and go from worrying about money to spending it lavishly to make rest of life as comfortable as possible - she earned it.

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LadyGeek
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Re: Portfolio for an elderly person in poor health?

Post by LadyGeek » Thu May 24, 2018 6:58 pm

This thread is now in the Investing - Help with Personal Investments forum (portfolio help).
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JoeRetire
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Re: Portfolio for an elderly person in poor health?

Post by JoeRetire » Thu May 24, 2018 7:04 pm

Bohemiana wrote:
Thu May 24, 2018 12:32 pm
What would you suggest for a portfolio with approx. a 7-year time horizon? For example, for an elderly woman in (76) not in excellent health.

Portfolio value $1.7m
I would suggest asking her about her goals and desires.

Does she wish to live it up the next few years?
Does she wish to ensure her healthcare is covered for the remainder of her life?
Does she wish to maximize the legacy she leaves?
Does she wish to simplify her finances so she doesn't have to think about them?
Something else?

Without knowing where she wants to go, it's hard to suggest a path that will get her there.

Nate79
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Re: Portfolio for an elderly person in poor health?

Post by Nate79 » Thu May 24, 2018 8:26 pm

What does cash mean? High yield savings account? Then it's fine. Can maybe move more to CDs. CDs allow you to break them at a loss of a certain amount of interest so if she were to need the money in an emergency it's not the end of the world. I would make sure the CDs are at competitive rates.

If any stocks are in retirement accounts with no tax consequences to sell I would sell and buy index funds ( total stock market, etc). If any single stocks in taxable have losses I would sell those and buy index funds.

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