How should my retired mom invest 40k inheritance? [Switzerland]

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andreas
Posts: 1
Joined: Tue Sep 14, 2021 2:07 am

How should my retired mom invest 40k inheritance? [Switzerland]

Post by andreas »

Hi all,

Long time lurker in this forum and now finally would need some advice for my mom.
My mom (64) lives in Switzerland and has two income sources:

1. Social Security (AHV): 2000 USD
2. Pension from my Dad: 1500 USD

She has a house which she pays 700 USD mortgage a month and is living fugally in general.
With the current income she can live comfortably.

The main risk is that if my Dad (who is 73) dies she will not get the pension anymore.
My Dad is not on the verge of dying but also not super healthy.

My mom got now 40k USD as an inheritance sitting in a bank account, which she does not need for now.
But she might need it if my Dad dies, but then it will only replace income for roughly 2 years.

My mom is very healthy and my grandma lived over 100 years, so she still might have 40 years ahead of her.

My mom has two kids, me and my sister. We are both financially well off (I make 400k, my sis + husband around 200k I guess), so we could also replace the income of my mom when my dad dies.

So what should I do?

Put everything in stocks and just replace the income of my mom should my dad die earlier but have the advantage of more gains in the future if my dad lives longer? I would then also add my mom to my life insurance in this case.

Put it into some low risk investments like bonds (maybe someone can recommend something for Switzerland).

A mix of those two?

Thank you so much!
    jg12345
    Posts: 146
    Joined: Fri Dec 11, 2020 1:03 pm

    Re: How should my retired mom invest 40k inheritance? [Switzerland]

    Post by jg12345 »

    1) just to be completely clear, in my home country (Italy) when a spouse dies the other one gets part of the social security. You are 100% sure this is not the case in Switzerland?

    2) I gather that she spends 20k per year from the fact that you say "40k will last two years", plus 8.5k for the mortgage, and has an income of 24k per year (assuming 0 effect from dad). Hence the income - CoL= - 4.5k (24 - 28.5= -4.5)
    I also assume social security is indexed to inflation

    3) I think I'd start from her. Has she ever invested? what's her risk tolerance - if she knows about it? is she comfortable at all in investing?
    Some people who do not understand the stock market would not put a penny in the stock market, regardless of whatever happens. And there's nothing wrong with it. if that's the case, then CDs or cash may be the only option available. and that's ok!

    4) if not... you can consider her social security an annuity paying 24k per year. the value of the annuity will be multiples of that. sum up the 40k to the value of the annuity. that makes her portfolio. It will likely leave a lot of room for putting a good chunk of the 40k to equity. for her age target retirement funds suggest 60-40 / 50-50 --- but that's for the entire portfolio, with the annuity (you can count that as a bond).
    https://www.vanguardinvestor.co.uk/inve ... ment-funds
    Swiss Bee
    Posts: 40
    Joined: Mon Dec 07, 2020 11:03 am

    Re: How should my retired mom invest 40k inheritance? [Switzerland]

    Post by Swiss Bee »

    Switzerland is a VHCOL area. I would pay close attention to having enough cash / emergency fund for health care costs.

    1. Does she have any debt? If yes, pay it off.
    2. Does she have an emergency fund? If not, fill it up to a level she is comfortable with, before investing. Keep high cost of healthcare in Switzerland in mind.
    3. What about the house? How much mortgage is left. In case her spouse passes away, could she sell it an move to a smaller / cheaper place?

    Just some food for thought 😉
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