Investment questions

[crow67]

Looking Looking for some financial advice. My father passed away last month. He left my mother with some very nice life insurance policies (all of which she has gotten now). She opened a joint account with me (just in case) in two different banks. Now, she's looking for ways to increase the amounts without tying up the money for long periods of time. We've talked about some CD's, but I was just wondering if there's other things she could invest in without a long term commitment and still get the most from the monies? Any advice would be greatly appreciated. She's on vacation now (having to get away for awhile) and since she's appointed me as her "financial advisor" it would give her somethings to consider when she gets back.

[usnavy_233]

If your mother is closing in on retirement age, or is past it, a ROTH IRA will be of little value to her. There's not enough timeline to make the small investments worth while, especially if she's got a big sum of money to do something with right now.

I second the recommendation to have at least 6-months in an online savings. HSBC pays 5.05% and there are a couple other good ones as well. In her case, I might even say keep a larger sum than 6-months of expenses in savings since she doesn't need to be too aggressive with her investments since she's not very young (I'm assuming here) and won't have the benefit of compounding the interest over a very long span.

I would suggest buying some solid mutual funds, DRIPS in large well run companies, and perhaps some bonds as well. If she’s got an interest in it, perhaps she can find some decent investment properties in her local area and buy a couple rentals. Either way, if she's working with a very large sum of money, I would recommend she (or you) talk to a professional about her options. This doesn't have to cost you anything. Call your bank or credit union; 99% of them offer this service to their customers for free.

[crow67]

No, she's not young she's 76 today. In very good health as well. She' not real trusting of having things done on computers. When we gets home from vacation we are going to talk to someone at one of the banks about CD's and such. Thank you for your suggestions and I look forward to hearing more.

[poundwise]

Based on what you describe, I would think CDs, especially at a typical bank branch, would be among the worst choices. Plus, if you go into a bank looking for help with this, they will direct you to their options for you which will often not be among the best options either.

Open an online savings with either Emigrant, HSBC, or Amboy (see link in my signature for more info), linked to her checking, and you'll likely get about the same interest level as a bank will give you on a CD while keeping the funds more liquid.

If you can fund an emergency fund (nest egg for needful use) of as much as six months, then the next step would be to invest in a mutual fund.

Something like a Fidelity Freedom fund which have target dates that determine what sort of holdings they are invested in. The 2010 fund (or perhaps even the 2015) would likely be suitable. Other companies offer similar investments.

I would also add the questions: Is her house paid? Is she debt free (with the exception of the house)? If she has credit card debt or outstanding loans, you may want to pay those off with part of the money. Or perhaps pay off the house or simply construct a plan to accelerate the paying on the house. If she owns it herself now and has no debt, then putting some aside and investing the rest is likely the best scenario.

A last thought: Depending on her situation and the amount of money you have to work with, she may want to invest some funds for grandchildren's education, etc. She can set up an ESA or invest in a 529 for this purpose. You may want to look into that.

[crow67]

lShe has no payments or outstanding debts, pays the cc off in full each month when she uses it. The only big plans in the future is to purchase a car (used most likely) and take trips to visit family. She would might set up funds for grands and greats but there are already some that are out and married so I don't know how that would go. But I have a couple of weeks to come up with some options for her to think over and that's why I'm asking for opinons.

Thanks for the info poundwise

[scfr]

crow67 - I am sorry to hear about your father.
It sounds like your mother is looking for someplace to put the money short-term, off-line, and safe while she thinks about what she wants to do with the money long-term. Given that her husband died just recently, it's understandable that she'd want some time to get her feet back under her before making any big decisions.

For short-term, CDs would be fine, and this would be my suggestion: Go to Bankrate.com and find out what the highest rates are for CDs of the term you are looking at (3-mo, 6-mo, etc). Then, start calling around or visiting your local banks. Tell them the rates you have found on-line, and ask them if they will match those rates. My experience has been that the larger national banks don't have much flexibility, but the smaller (regional or local) banks often are willing to give you a better rate if you ask. If the CDs would be jumbo ($100K or more), be sure to tell them that.

Good luck to you and your mother!

[Aleta]

I also am sorry to hear of your father's passing. I have read that it's a good idea to wait for a year to make any major decisions now. A lot of things can change and she needs the time to adjust. It's good that she has you to help her at this time.

I would say any time that you are looking at an investment time; I would say that you would have to look at the next 20 years for your mom. When you have IRA's, 401's, etc., you're looking at taking your lump sum money in 20 years. Looking at it like that; your Mom would be 96 years old. You have to determine how much she needs to live on yearly and divide that by 20. This is also considering that your funds will be making interest.

I think for her to risk any money now would not be a good idea, if she never did it before. At 76, she needs to keep her money safe. If the market would take a downturn, she would not have time to come back. As far as an emergency fund, she really doesn't need one. She needs about 3 - 6 months espenses handy when her bills come due. For the long term, she could ladder some CD's, buy Treasury bills or notes.

[LuxLiving]

crow67, so sorry to hear about your father's passing.

You can go online to some of the bigger investment houses like Fidelity and I'm assuming Vanguard, T.Rowe Price and others and play with their retirement planning calculators and input some of your mother's information. They will come up w/some investment suggestions for her based on her age, her assets and her risk/investing style profile. If you believe her to be very conservative then the suggestions will come up w/conservative options, etc.

Is she healthy?

Active mentally and socially?

Still working?

Depending on her lifestyle, her genetics and outlook on life she may be looking to preserve her assets for a good portion of time yet. I like the offering that Fidelity has with their Income Management Account...which allows you one statement that helps you balance all of your income against your outflows. It includes things like SS, MM accounts, her investments, her pensions, etc into one cohesive unit that will tell her as she goes forward where her finances are and where she may be overspending her assets and when she needs to pull back and in what proportions. They are advising her only (it's a free service), not doing the investment work for her - she'd still be in firm control and it would give the two of you a realistic & factual look at all the bases in a paper statement that you could go over together monthly, quarterly or yearly and discuss her ongoing options.

The name is Fidelity's 'Income Management Account' - and it's what I am advising my own parents to pursue. It isn't an investment vehicle but more of a method of corraling all the info into one place. You might want to watch their online demo.

Good luck - and you'll both be wise to hold off for a portion of time making any grand decisions that tie her money up long-term. Many will advise annuities at this time frame in her life and it could be a decent option IF lots and lots of research was done and the right annuity vehicle was purchased. Does she have a favorite charity that she'd like to support after her passing and/or does she intend to leave it to you and your children as a legacy?

Does she have long-term care insurance????????

[Ima saver]

I think she should keep her funds pretty liquid. I would not start with mutual funds at her age. She can easily find a money market checking account paying 5% or more. I have a local bank in my town that pays 5.25% for money market accounts over $50,000. I have another bank that pays 5.75 for a jumbo certificate of deposit of $100,000. These are both in my home town, so look around and see who will give you the best rate.

[disneysteve]

I think an important question is if she anticipates needing the principal of these funds or if she is looking to invest them for income and collect the interest. If it is interest she is looking for, CDs are one option. Another option that we rarely discuss is CMOs, collateralized mortgage obligations - Fannie Maes and Freddie Macs. These are pooled mortgage bonds sold by brokers. My mom (who is also 76) has a substantial amount in those through a discount broker. They typically pay 1-2% higher than CDs which makes a big difference when you are talking about a large sum of money (6 figures in her case). They are not guaranteed in the strictest sense, but they are indirectly government obligations and I think if they fail, we've all got bigger problems to worry about.

[crow67]

Thanks for the input...

LuxLiving to answer your questions. Her health is good (had cancer 3 yrs ago but is free now)

Active mentally and socially? oh yea, she'll talk ya a blue streak to anyone that will listen and has quite a few friends

Still working? volunteers twice a week. One day at local thrift store for hosptial, other day at hospital as a volunteer in the ER

Does she have long-term care insurance???????? dad was retired military so she has benefits from that and also supplemental

Her income is his SS and only bills are necessities...Elec, food, gas, misc.


Does she have a favorite charity that she'd like to support after her passing and/or does she intend to leave it to you and your children as a legacy? everything goes to us kids (I have three older brothers) But we've all told her to spend what she wants and do what she wants...her and dad made the money, they should be the ones to spend it not us.