Mom & Dad’s cash fund

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Frednginger
Posts: 7
Joined: Thu Apr 25, 2019 10:10 am

Mom & Dad’s cash fund

Post by Frednginger » Fri Feb 14, 2020 9:29 am

Mom and Dad (age mid-80s) are sitting on a cash reserve. Their current jumbo CD is ending and they need to figure out what to do next.

As a placeholder they are probably going to take advantage of Chase’s $2000 new money offer and put $250,000 on deposit for 90 days.

Their person at their current bank (Flagstar) mentioned annuities, which seemed counter intuitive for a couple in their 80s?

Any other options or suggestions that are any better than the 1.9% to 2.1% we’re seeing on CDs.

Mr.BB
Posts: 1126
Joined: Sun May 08, 2016 10:10 am

Re: Mom & Dad’s cash fund

Post by Mr.BB » Fri Feb 14, 2020 9:34 am

Recommending an annuity for some for a couple in their '80s
I would want to report that person to FINRA.
Make sure your parents stay clear of that person.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

dbr
Posts: 31558
Joined: Sun Mar 04, 2007 9:50 am

Re: Mom & Dad’s cash fund

Post by dbr » Fri Feb 14, 2020 9:37 am

Cash is risky because the rate of interest at reinvestment varies all the time. Going to Chase possibly makes sense if the math works out. In any case they are stuck with current low interest rates and a flat yield curve. The standard response to that is short term fixed income such as savings and short CDs (except CDs might be redeemed early if rates go up).

Annuities (meaning only an SPIA) can in general be useful to retirees though past 80 you are right are probably not indicated. If annuities were not a choice ten years ago it isn't likely that makes sense now.

The ugly truth is that "their person" at the bank is no friend of theirs and is seeking an opportunity to put a slice of their money in his pocket. Why on earth do they have a "person" that they are talking to? This sounds like classic exploitation to me.

User avatar
ResearchMed
Posts: 9611
Joined: Fri Dec 26, 2008 11:25 pm

Re: Mom & Dad’s cash fund

Post by ResearchMed » Fri Feb 14, 2020 9:47 am

Frednginger wrote:
Fri Feb 14, 2020 9:29 am
Mom and Dad (age mid-80s) are sitting on a cash reserve. Their current jumbo CD is ending and they need to figure out what to do next.

As a placeholder they are probably going to take advantage of Chase’s $2000 new money offer and put $250,000 on deposit for 90 days.

Their person at their current bank (Flagstar) mentioned annuities, which seemed counter intuitive for a couple in their 80s?

Any other options or suggestions that are any better than the 1.9% to 2.1% we’re seeing on CDs.
Re the annuity...What *type* of annuity?
If it was anything other than an SPIA, then that rep does *not* have your parents' interest at heart (not even as much as a more concerned bank agent).

Whether an SPIA is even appropriate would depend upon your parents' resources and future expenses.

RM
This signature is a placebo. You are in the control group.

Topic Author
Frednginger
Posts: 7
Joined: Thu Apr 25, 2019 10:10 am

Re: Mom & Dad’s cash fund

Post by Frednginger » Fri Feb 14, 2020 9:50 am

I think it’s just their contact for their “private client” type services. Obviously, have to be wary with anyone selling a product!

dbr
Posts: 31558
Joined: Sun Mar 04, 2007 9:50 am

Re: Mom & Dad’s cash fund

Post by dbr » Fri Feb 14, 2020 9:58 am

Frednginger wrote:
Fri Feb 14, 2020 9:50 am
I think it’s just their contact for their “private client” type services. Obviously, have to be wary with anyone selling a product!
In other words a person hired by the bank to sell things.

student
Posts: 4515
Joined: Fri Apr 03, 2015 6:58 am

Re: Mom & Dad’s cash fund

Post by student » Fri Feb 14, 2020 10:09 am

No annuity. Whoever suggested is a financial predator. Don't do it. Note that Chase is offering 1.6% pa for a 6-month CD. So it may go well with the Chase promotion.

User avatar
Stinky
Posts: 3157
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Mom & Dad’s cash fund

Post by Stinky » Fri Feb 14, 2020 10:56 am

Frednginger wrote:
Fri Feb 14, 2020 9:29 am
Mom and Dad (age mid-80s) are sitting on a cash reserve. Their current jumbo CD is ending and they need to figure out what to do next.

As a placeholder they are probably going to take advantage of Chase’s $2000 new money offer and put $250,000 on deposit for 90 days.

Their person at their current bank (Flagstar) mentioned annuities, which seemed counter intuitive for a couple in their 80s?

Any other options or suggestions that are any better than the 1.9% to 2.1% we’re seeing on CDs.
$2k for a $250k deposit sounds great. That’s an additional 0.8% interest.

On the other hand, the Flagstar person is offering an annuity. If it’s a SPIA, that’s a plausible thing to consider (but shop immediateannuities.com for other quotes). If it’s anything else, realize that the financial advisor salesman stands to rake off a $10k commission on a $250k sale. Don’t do it.
It's a GREAT day to be alive - Travis Tritt

22twain
Posts: 2234
Joined: Thu May 10, 2012 5:42 pm

Re: Mom & Dad’s cash fund

Post by 22twain » Fri Feb 14, 2020 11:12 am

More information about their expenses and their income streams (Social Security, pension, etc.) and other investments (if any) would be helpful. If their expenses are adequately covered by those sources and they don't need to dip into this "cash fund", at least for now, then I agree there's no need to consider an annuity.
My investing princiPLEs do not include absolutely preserving princiPAL.

Topic Author
Frednginger
Posts: 7
Joined: Thu Apr 25, 2019 10:10 am

Re: Mom & Dad’s cash fund

Post by Frednginger » Fri Feb 14, 2020 11:37 am

Yes - they do not dip into this cash fund (was in a CD).
My understanding is that they are living solely off of social security and investment income and not dipping into principal. They have also started to access Mom’s long term care policies as
they just moved into an assisted living facility.

They are in the process of selling their home. They are expecting about $500,000 in proceeds which we will need to figure out what to do with. I’ll have to pull together all the data and make a post.

They haven’t been in the facility for a month yet, so we are really not yet fully understanding their new cost of living. Dad has great data for costs from before but this is new territory.

NewMoneyMustBeSmart
Posts: 153
Joined: Sat Jun 01, 2019 10:28 pm

Re: Mom & Dad’s cash fund

Post by NewMoneyMustBeSmart » Fri Feb 14, 2020 2:30 pm

Mr.BB wrote:
Fri Feb 14, 2020 9:34 am
Recommending an annuity for some for a couple in their '80s
I would want to report that person to FINRA.
Make sure your parents stay clear of that person.
This is what we get when the law allows "suitability" not "fiduciary."

Vote your conscience - we need fiduary requirement for all brokerage/investment firms.

Mail your congresscritters: https://www.govtrack.us/congress/members

User avatar
Wiggums
Posts: 2741
Joined: Thu Jan 31, 2019 8:02 am

Re: Mom & Dad’s cash fund

Post by Wiggums » Fri Feb 14, 2020 2:43 pm

I don’t understand how the bank person can recommend an annuity without reviewing the customers financials and goals. Yes, I get it. They are a salesman who stands to make a big commission.

Grt2bOutdoors
Posts: 21976
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Mom & Dad’s cash fund

Post by Grt2bOutdoors » Fri Feb 14, 2020 3:03 pm

dbr wrote:
Fri Feb 14, 2020 9:58 am
Frednginger wrote:
Fri Feb 14, 2020 9:50 am
I think it’s just their contact for their “private client” type services. Obviously, have to be wary with anyone selling a product!
In other words a person hired by the bank to sell things.
My folks were advised to put their money in a loaded tax free fund from Franklin. I put the kibosh on that! The banks used to be a friendly neighborhood place, not so much anymore.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

mega317
Posts: 3260
Joined: Tue Apr 19, 2016 10:55 am

Re: Mom & Dad’s cash fund

Post by mega317 » Fri Feb 14, 2020 3:17 pm

Frednginger wrote:
Fri Feb 14, 2020 11:37 am
I’ll have to pull together all the data and make a post.
Yes I think this is a great idea.

How capable are they? They should probably be the ones to write the post if possible. Otherwise they should at least be sitting with you when you write it and read the replies.
https://www.bogleheads.org/forum/viewtopic.php?t=6212

Topic Author
Frednginger
Posts: 7
Joined: Thu Apr 25, 2019 10:10 am

Re: Mom & Dad’s cash fund

Post by Frednginger » Fri Feb 14, 2020 4:41 pm

My mom has fairly advanced ALZ but Dad is very very capable. He will definitely need to be looking over my shoulder as we do this!

The house proceeds will be a big chunk of their total portfolio (a bit less than a third of the total) so it will be very important to get that right.

Post Reply