Help for a relative

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Topic Author
Dinosaur Dad
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Help for a relative

Post by Dinosaur Dad »

I have a relative, age 60. She inherited $500k recently, but has no other assets. Her work history shows an average of roughly $25k/year in salary in her highest years, so unfortunately her SS will only be about $8-$10k/year. She lived with another relative for some time but that relative died recently and so she now has a small apartment. She's also had some health issues.

With a conservative portfolio mainly in bonds and CDs I could enable her to supplement social security, but clearly there's going to be a shortfall at some point, even with a conservative budget of ~$36k/year (low for the HCOL area she lives in). I would love for her to work, even part time, but health issues have been problematic.

I don't see what else I can do except help her manage that nest egg and prevent it from being drawn down too quickly. I wonder if there are any other strategies I'm missing e.g. Medicaid trust of some sort. I've thought about a fixed immediate annuity to take all risk off the table, but I'm not sure if that's the best strategy. And it also seems like her nest egg will disqualify her from any sort of government assistance until she's completely tapped out.

I have a soft spot for her because she helped an elderly relative with in-home care for a long time, really made sacrifices to do so.

Perhaps there are some Bogleheads out there in a similar position...what's the best strategy to help here? By any analysis, I see financial problems down the line, but there must be some smart steps I can take now. Anyone out there in a similar position? How have you handled it?
"Take calculated risks - that is quite different from being rash." | General George S. Patton
Grt2bOutdoors
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Re: Help for a relative

Post by Grt2bOutdoors »

Dinosaur Dad wrote: Tue Jul 30, 2019 4:19 pm I have a relative, age 60. She inherited $500k recently, but has no other assets. Her work history shows an average of roughly $25k/year in salary in her highest years, so unfortunately her SS will only be about $8-$10k/year. She lived with another relative for some time but that relative died recently and so she now has a small apartment. She's also had some health issues.

With a conservative portfolio mainly in bonds and CDs I could enable her to supplement social security, but clearly there's going to be a shortfall at some point, even with a conservative budget of ~$36k/year (low for the HCOL area she lives in). I would love for her to work, even part time, but health issues have been problematic.

I don't see what else I can do except help her manage that nest egg and prevent it from being drawn down too quickly. I wonder if there are any other strategies I'm missing e.g. Medicaid trust of some sort. I've thought about a fixed immediate annuity to take all risk off the table, but I'm not sure if that's the best strategy. And it also seems like her nest egg will disqualify her from any sort of government assistance until she's completely tapped out.

I have a soft spot for her because she helped an elderly relative with in-home care for a long time, really made sacrifices to do so.

Perhaps there are some Bogleheads out there in a similar position...what's the best strategy to help here? By any analysis, I see financial problems down the line, but there must be some smart steps I can take now. Anyone out there in a similar position? How have you handled it?
Can she work until age 70? and even if she can not work until age 70, she should defer collecting on it until age 70 as this will give her the maximum amount of social security benefits. Second, consider a Single Premium Insurance Annuity - not a variable annuity, and not Whole Life Insurance. If you went to www.immediateannuities.com and purchased a SPIA at age 65, she could generate a payment of $2,500 a month (this is assuming she purchased it today as if she were age 65), it will be less if she actually purchased it today at age 60. The downside of this is the payments will stop when she becomes deceased, or she could buy an SPIA with a return of premium should she become deceased before the full principal has been returned to her in the form of payments. I don't think things will be as drastic as you might believe, but over time inflation will erode the value of those annuity payments.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Topic Author
Dinosaur Dad
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Location: Connecticut

Re: Help for a relative

Post by Dinosaur Dad »

Grt2bOutdoors wrote: Tue Jul 30, 2019 4:32 pm
Dinosaur Dad wrote: Tue Jul 30, 2019 4:19 pm I have a relative, age 60. She inherited $500k recently, but has no other assets. Her work history shows an average of roughly $25k/year in salary in her highest years, so unfortunately her SS will only be about $8-$10k/year. She lived with another relative for some time but that relative died recently and so she now has a small apartment. She's also had some health issues.

With a conservative portfolio mainly in bonds and CDs I could enable her to supplement social security, but clearly there's going to be a shortfall at some point, even with a conservative budget of ~$36k/year (low for the HCOL area she lives in). I would love for her to work, even part time, but health issues have been problematic.

I don't see what else I can do except help her manage that nest egg and prevent it from being drawn down too quickly. I wonder if there are any other strategies I'm missing e.g. Medicaid trust of some sort. I've thought about a fixed immediate annuity to take all risk off the table, but I'm not sure if that's the best strategy. And it also seems like her nest egg will disqualify her from any sort of government assistance until she's completely tapped out.

I have a soft spot for her because she helped an elderly relative with in-home care for a long time, really made sacrifices to do so.

Perhaps there are some Bogleheads out there in a similar position...what's the best strategy to help here? By any analysis, I see financial problems down the line, but there must be some smart steps I can take now. Anyone out there in a similar position? How have you handled it?
Can she work until age 70? and even if she can not work until age 70, she should defer collecting on it until age 70 as this will give her the maximum amount of social security benefits. Second, consider a Single Premium Insurance Annuity - not a variable annuity, and not Whole Life Insurance. If you went to www.immediateannuities.com and purchased a SPIA at age 65, she could generate a payment of $2,500 a month (this is assuming she purchased it today as if she were age 65), it will be less if she actually purchased it today at age 60. The downside of this is the payments will stop when she becomes deceased, or she could buy an SPIA with a return of premium should she become deceased before the full principal has been returned to her in the form of payments. I don't think things will be as drastic as you might believe, but over time inflation will erode the value of those annuity payments.
Thanks for your comment. The challenge is generating income between now and then (she's not working currently), which would reduce the amount available for a purchased annuity when she reaches age 65. I also need to research whether an annuity of that type would impact her eligibility for Medicaid Nursing Home benefits or any other type of government assistance.
"Take calculated risks - that is quite different from being rash." | General George S. Patton
billfromct
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Re: Help for a relative

Post by billfromct »

Was she previously married for 10 years if divorced? Is she a widow?

There may be some SS spousal or survivor benefits if the the above applies.

As mentioned, if she can wait until age 70, she can get the highest SS benefit that is adjusted for inflation for the rest of her life.

bill
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Dinosaur Dad
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Re: Help for a relative

Post by Dinosaur Dad »

billfromct wrote: Tue Jul 30, 2019 4:48 pm Was she previously married for 10 years if divorced? Is she a widow?

There may be some SS spousal or survivor benefits if the the above applies.

As mentioned, if she can wait until age 70, she can get the highest SS benefit that is adjusted for inflation for the rest of her life.

bill
Thanks billfromct

Never married, so unfortunately not an option.

Understood about waiting for SS until 70. Just would have to figure out how to get there from here.
"Take calculated risks - that is quite different from being rash." | General George S. Patton
billfromct
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Re: Help for a relative

Post by billfromct »

I would think having $500k in assets would have a much larger impact on getting Medicaid or any other state or Federal aid.

If she went into a nursing home, she would have to spend down her assets (to $2,000?) to qualify for Medicaid nursing home aid.

bill
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dm200
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Re: Help for a relative

Post by dm200 »

Dinosaur Dad wrote: Tue Jul 30, 2019 4:19 pm I have a relative, age 60. She inherited $500k recently, but has no other assets. Her work history shows an average of roughly $25k/year in salary in her highest years, so unfortunately her SS will only be about $8-$10k/year. She lived with another relative for some time but that relative died recently and so she now has a small apartment. She's also had some health issues.
With a conservative portfolio mainly in bonds and CDs I could enable her to supplement social security, but clearly there's going to be a shortfall at some point, even with a conservative budget of ~$36k/year (low for the HCOL area she lives in). I would love for her to work, even part time, but health issues have been problematic.
I don't see what else I can do except help her manage that nest egg and prevent it from being drawn down too quickly. I wonder if there are any other strategies I'm missing e.g. Medicaid trust of some sort. I've thought about a fixed immediate annuity to take all risk off the table, but I'm not sure if that's the best strategy. And it also seems like her nest egg will disqualify her from any sort of government assistance until she's completely tapped out.
I have a soft spot for her because she helped an elderly relative with in-home care for a long time, really made sacrifices to do so.
Perhaps there are some Bogleheads out there in a similar position...what's the best strategy to help here? By any analysis, I see financial problems down the line, but there must be some smart steps I can take now. Anyone out there in a similar position? How have you handled it?
Laddered CDs fully federally insured by FDIC or NCUA.

Her working can also be helpful, if she can do it.
Topic Author
Dinosaur Dad
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Re: Help for a relative

Post by Dinosaur Dad »

billfromct wrote: Tue Jul 30, 2019 4:55 pm I would think having $500k in assets would have a much larger impact on getting Medicaid or any other state or Federal aid.

If she went into a nursing home, she would have to spend down her assets (to $2,000?) to qualify for Medicaid nursing home aid.

bill
Agreed. And at today's costs it wouldn't take long to go through it.
"Take calculated risks - that is quite different from being rash." | General George S. Patton
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Dinosaur Dad
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Re: Help for a relative

Post by Dinosaur Dad »

dm200 wrote: Tue Jul 30, 2019 4:56 pm
Dinosaur Dad wrote: Tue Jul 30, 2019 4:19 pm I have a relative, age 60. She inherited $500k recently, but has no other assets. Her work history shows an average of roughly $25k/year in salary in her highest years, so unfortunately her SS will only be about $8-$10k/year. She lived with another relative for some time but that relative died recently and so she now has a small apartment. She's also had some health issues.
With a conservative portfolio mainly in bonds and CDs I could enable her to supplement social security, but clearly there's going to be a shortfall at some point, even with a conservative budget of ~$36k/year (low for the HCOL area she lives in). I would love for her to work, even part time, but health issues have been problematic.
I don't see what else I can do except help her manage that nest egg and prevent it from being drawn down too quickly. I wonder if there are any other strategies I'm missing e.g. Medicaid trust of some sort. I've thought about a fixed immediate annuity to take all risk off the table, but I'm not sure if that's the best strategy. And it also seems like her nest egg will disqualify her from any sort of government assistance until she's completely tapped out.
I have a soft spot for her because she helped an elderly relative with in-home care for a long time, really made sacrifices to do so.
Perhaps there are some Bogleheads out there in a similar position...what's the best strategy to help here? By any analysis, I see financial problems down the line, but there must be some smart steps I can take now. Anyone out there in a similar position? How have you handled it?
Laddered CDs fully federally insured by FDIC or NCUA.

Her working can also be helpful, if she can do it.
thanks for your comment. Seems like the safest way to go...like everyone I just wish rates were a little higher.
"Take calculated risks - that is quite different from being rash." | General George S. Patton
Megamill
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Re: Help for a relative

Post by Megamill »

Is there another friend/relative that she can live with and possibly do household chores in exchange for rent?
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dm200
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Re: Help for a relative

Post by dm200 »

As in a previous post, I would research whether this amount of assets, in her name, would disqualify her from some types of benefits. If so, then see what might be done. Perhaps an elder law attorney?
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Tamarind
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Re: Help for a relative

Post by Tamarind »

How many years are in her SS work history? If she worked at least 30 years, her SS will be at the high end of your predicted range because of the "minimum benefit".
TN_Boy
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Re: Help for a relative

Post by TN_Boy »

Dinosaur Dad wrote: Tue Jul 30, 2019 7:07 pm
billfromct wrote: Tue Jul 30, 2019 4:55 pm I would think having $500k in assets would have a much larger impact on getting Medicaid or any other state or Federal aid.

If she went into a nursing home, she would have to spend down her assets (to $2,000?) to qualify for Medicaid nursing home aid.

bill
Agreed. And at today's costs it wouldn't take long to go through it.
Well, LTC costs are only part of the equation in the planning needed, but in many areas of the country, 500k would cover around 5 years of skilled nursing, and 8 years or so of assisted living. With 5 and 8 years being a good bit longer than the median stay in these types of facilities.
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BL
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Re: Help for a relative

Post by BL »

I think you have received some good suggestions to think over. Setting it aside for 6-12 months in CDs, Money Market, or high yield savings accounts (on-line banks are more likely to have decent CDs.) Vanguard Money Market should be secure even if not FDIC insured. Read the Wiki on the subject of Windfalls.

Delaying SS is good, but only if she can do it. There is probably a good tradeoff with using some of her inheritance to delay it, assuming she is in good health with likely good longevity.

The SPIA sounds like it could be a good solution. There is no rush to decide on this permanent decision. The ideal time to buy is age 70 +. It would guarantee income for a long life. It might also eliminate restrictions otherwise made on savings amounts, since the amount put into the SPIA would no longer be available to her, just the regular income from it would. The income would be greater than the suggested safe withdrawal rate, but there would be nothing left at death.
It may be important to check with experts on this, such as calling Senior Linkage Line, contacting county services or other local senior centers, etc., to try to find out qualifications for rent subsidies or other housing questions, MediCare and MedicAid, and other assistance for seniors.
Pu239
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Re: Help for a relative

Post by Pu239 »

If she eventually decides to go the SPIA route, I'd suggest setting aside a portion for emergencies and not invest all into the annuity. She is fortunate indeed to have the inheritance and your help with making it last.
Between the idea And the reality...Between the motion And the act...Falls the Shadow - T. S. Eliot
Katietsu
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Re: Help for a relative

Post by Katietsu »

I do understand your concern for her future. But, I am not sure how much “low income” assistance will be available to her though if this is managed well. Maybe the limits are higher for her HCOL area. But, generally speaking, her social security plus the income on inheritance will likely put her above the median income for an individual over 65 and thousands of dollars over most low income definitions.
Topic Author
Dinosaur Dad
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Re: Help for a relative

Post by Dinosaur Dad »

BL wrote: Wed Jul 31, 2019 2:53 pm I think you have received some good suggestions to think over. Setting it aside for 6-12 months in CDs, Money Market, or high yield savings accounts (on-line banks are more likely to have decent CDs.) Vanguard Money Market should be secure even if not FDIC insured. Read the Wiki on the subject of Windfalls.

Delaying SS is good, but only if she can do it. There is probably a good tradeoff with using some of her inheritance to delay it, assuming she is in good health with likely good longevity.

The SPIA sounds like it could be a good solution. There is no rush to decide on this permanent decision. The ideal time to buy is age 70 +. It would guarantee income for a long life. It might also eliminate restrictions otherwise made on savings amounts, since the amount put into the SPIA would no longer be available to her, just the regular income from it would. The income would be greater than the suggested safe withdrawal rate, but there would be nothing left at death.
It may be important to check with experts on this, such as calling Senior Linkage Line, contacting county services or other local senior centers, etc., to try to find out qualifications for rent subsidies or other housing questions, MediCare and MedicAid, and other assistance for seniors.
Excellent suggestions, thank you. I have some homework to do here.
"Take calculated risks - that is quite different from being rash." | General George S. Patton
Topic Author
Dinosaur Dad
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Re: Help for a relative

Post by Dinosaur Dad »

Katietsu wrote: Wed Jul 31, 2019 10:42 pm I do understand your concern for her future. But, I am not sure how much “low income” assistance will be available to her though if this is managed well. Maybe the limits are higher for her HCOL area. But, generally speaking, her social security plus the income on inheritance will likely put her above the median income for an individual over 65 and thousands of dollars over most low income definitions.
thank you for your reply Katietsu. Exactly what I'm thinking about. Seems that basically you have to be below the poverty line, with few if any assets, to qualify for most forms of assistance.
"Take calculated risks - that is quite different from being rash." | General George S. Patton
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