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the good, the bad, the ugly...

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  • the good, the bad, the ugly...

    So I finally saw my parents investments. I had to stop from slamming my head into the table. But they have agreed to talk but I can't do it until I go home and ask permission in person to talk with them (ie my dad) and then talk in person with their financial advisor from Raymond James.
    So the good - I saw my parents accounts. The bad - everything. The ugly - possibly lost $100k because of their previous advisor but I can't figure it out until I go home and dig through everything.

    Good - my parents don't spend much and are savers
    -they have large pensions and medical is covered
    -they are financially very frugal and conservative
    -my dad's RMD is $24k/year and he sends 25% immediately to taxes

    The bad
    -my dad has $33k in a roth ira sitting in cash
    -his $245k traditional IRA has 2 different whole life insurance policies - I can't cash it out, it's not worth it and the people managing it are idiots. They are putting money into take RMD because they don't understand you can take it from his other IRA.
    -my mom has $116k in cash in her Roth IRA
    -my mom has $40k in muni bonds in her Roth IRA
    -my parents have $50k in cash in taxable account.
    -they are overly invested in MRK, PFE, and VZ. I don't know why my parents only have a couple stocks the best guess is these advisors are trying to buy dividend paying stocks but have no idea what they are doing. Nothing in tech, nothing in insurance, nothing in banks, I'm not sure what is going on. Good thing my parents holds stocks but even some stocks have lost money after being held 5+ years.

    the ugly
    -the last advisor was fired, fined, and banned from being an advisor for investing people's money unwisely.
    -no idea if they lost money because it doens't make sense why my parents accounts are so low. My mom is now going to go back after their back from traveling to dig up every check showing contributions because she's about $100k short.

    My parents have refused until now to talk to me about money. I've been called greedy including this week when I pointed out to PLEASE just stick their cash into a Money Market at Ally earning 2.2% instead of 0.6%. PLEASE. Please do anything else. I've been called by my mom insatiable. I told her I don't want a penny but I warned her she is going to run out of money because this $1m portfolio should be more than enough to support their $24k/year without tapping a penny of principal but until now they haven't wanted to talk or show me. It's MESS.

    So you can see how difficult it is to deal with them. According to my mom (she didn't even know what a bond was), that investing money is greedy. I'm greedy for suggesting she live off the dividends and not touch principal. I'm horrible because I said nothing is structured properly and she's worried about running out of money. This is not at all reasonable.

    She's sitting on $100k checking, $200k savings cash earning 0.2% I'm hoping to get her to part with it and set it up in Ally Bank online or a bank CD. I suggested I-bonds and treasuries last year and her advisor didn't even know what they were and said she'd have to look into it.

    Yes I'd love to take over completely but I can't. Until the day my dad dies it's not going to happen. But the day it does I'll likely fire the financial advisor, open an account in my mom's name and start doing 100% myself. At that point she'll just wring her hands and cry. So it'll be easier.

    For anyone who wonders what poor people do. They do this. They can save, they can not be in debt, but it's a STRUGGLE to understand anything financial. Best thing like my mom said that happened to her was someone told her stay invested in the state pension. And so she did. She knew stay out of debt, save money, and don't touch anything once put away. My mom is a saver period. She likes to see her money in the bank. She panics with less than $100k in cash. This is not to say she doesn't have more cash in person she does in her house. I know she does.

    I'm pretty sure my aunts and uncles are the same way. I dare not say anything. I'm going to guess if I start to help manage this my mom might say something to the others and I suspect things might start to open up. Right now I'm sitting here thinking a lot about how to properly invest for them while generating $24k/year conservatively.

    I think I'm going to move $24k in stock out of IRA and into taxable. Then leave it alone and let the basis reset. Then i'll put them into munis in the taxable. Then stocks in the Roth IRAs because I don't think my mom will ever touch it. Truthfully if she needs money I told her we'd sell the condo and she'd have $400k in cash. But I don't know how else to manage her and my dad.

    Is this what most old people are like?
    LivingAlmostLarge Blog

  • #2
    Be very careful. You may do everything 100% right and when the stock market drops 50% it will be your fault and now you will be estranged for losing all of their money.

    And not all old people are like this. My MIL is 76 and has $2M in investments. I looked through her portfolio and it had a lot of issues. It is managed by her "guy" at Wells Fargo. I desperately wanted to take it over, tax loss harvest all her individual stocks, put it all in a safe 50/50 3 fund portfolio and let it run. It would save her $32k / year between the advisor's fees and the high fee funds she was in. But I knew that if I did that and the market tanked at all, she would blame me and that would be bad.

    But, she did let me talk to her advisor and we had a good chat. And he listened to some of my suggestions. He's not perfect (in my eyes), but at least she has a good AA without individual stocks and lower cost funds now. I do like him because he could be churning her account for way more fees, but he doesn't.

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    • #3
      my parents aren't churning but they are sitting in cash losing money. I'd like to at least place them in bonds. I mean some IDIOT sold my dad whole life insurance in a IRA, makes hard to do RMDs. Don't know how that happened but it did. No way out. Muni ETF in a Roth IRA. OMG. I'd like to at least stick it into something easy like CDs, or treasuries or something better.

      I'm going to keep the advisor so my mom and dad have someone to chat with once a month. Then control all investments and that way they feel happy. I mean my parents are in c share mutual funds sold by the last advisor. Last time I saw this was 20 years ago and I told my mom not to invest in C shares. She told me the advisor told her it was best for a 5.75% fee. I threw up a bit in my mouth and shut it. Glad my parents lost a ton but at least they were happy.

      I couldn't lose all their money there's too much in the mattress.
      LivingAlmostLarge Blog

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      • #4
        Ugh, sorry you are dealing with this Living. I experienced the same with my inlaws. All I wanted was for them to go to a Certified Financial Planner. I knew better than to try and look at any of their stuff myself. I think they think I'm money hungry. They were perfectly fine with their man at H&R Block. Whatever, I had to just let it go.

        My parents are both deceased, but my mom would've loved if someone stepped in and did her investments. I took care of all her bills but at the time I was having kids and not real knowledgeable on investing. Truth be told, I don't even think now I would be comfortable handling anyone's finances, because like Corn said, I don't want them to hold me responsible for a market downturn and them losing any money.

        Good Luck!

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        • #5
          Originally posted by LivingAlmostLarge View Post
          my parents aren't churning but they are sitting in cash losing money. I'd like to at least place them in bonds. I mean some IDIOT sold my dad whole life insurance in a IRA, makes hard to do RMDs. Don't know how that happened but it did. No way out. Muni ETF in a Roth IRA. OMG. I'd like to at least stick it into something easy like CDs, or treasuries or something better.

          I'm going to keep the advisor so my mom and dad have someone to chat with once a month. Then control all investments and that way they feel happy. I mean my parents are in c share mutual funds sold by the last advisor. Last time I saw this was 20 years ago and I told my mom not to invest in C shares. She told me the advisor told her it was best for a 5.75% fee. I threw up a bit in my mouth and shut it. Glad my parents lost a ton but at least they were happy.

          I couldn't lose all their money there's too much in the mattress.
          I personally saw Raymond James advisors churn investments when I worked for a major mutual fund company, I'm not saying they all do, but some definitely did. If your parents want to understand what they are invested in better, such as different share classes, have them read and discuss with them the prospectus for each fund they have. Help teach them the why and back it up with documentation. Sounds like there is definitely room for improvement! Educate them to help them.
          My other blog is Your Organized Friend.

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          • #6
            I donít know that I have ever heard someone speak highly of an investment advisor.

            How can you have any pudding if you don't eat your meat?

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            • #7
              Originally posted by TexasHusker View Post
              I donít know that I have ever heard someone speak highly of an investment advisor.
              I've heard individuals speak highly of their personal investment advisor. I've never heard a 3rd party speak well of someone else's investment advisor. The customer who doesn't know any better and thinks their advisor is great is really the problem. People don't bother to educate themselves. Instead, they take the word of the "professional" and assume that person knows more than them and is working in their best interests which is very, very rarely true.

              Investing isn't that difficult. There is a tiny sliver of the population that might possibly benefit from professional advice and assistance because their situation is particularly complex but that just isn't the case for most people.
              Steve

              * Despite the high cost of living, it remains very popular.
              * Why should I pay for my daughter's education when she already knows everything?
              * There are no shortcuts to anywhere worth going.

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              • #8
                Originally posted by LivingAlmostLarge View Post
                She's sitting on $100k checking, $200k savings cash earning 0.2% I'm hoping to get her to part with it and set it up in Ally Bank online or a bank CD.
                I think your language here could be part of the problem. Be very careful in how you explain things to her. She wouldn't be parting with anything. I'm sure she at least understands that there are a lot of different banks. Explain to her that they all provide similar services. They are all FDIC insured. But they pay different interest rates on their accounts. The bank she's with is paying a very low rate of 0.2% while other banks are paying more than 10 times that much for the exact same service. Show her the numbers. 200K at 0.2% gets her a little over $400/year interest. 200K at 2.2% gets her over $4,400/year interest. Just by switching from one bank to another she can earn an extra $4,000/year, over $333/month, and her money is still perfectly safe and insured. That's the approach I would take at least for that piece of the puzzle.

                Start small. If you can get her to switch banks for her savings, even for a portion of it, then give her some time to see the benefit. After that, maybe she'll be a bit more open to diving deeper. Baby steps.
                Steve

                * Despite the high cost of living, it remains very popular.
                * Why should I pay for my daughter's education when she already knows everything?
                * There are no shortcuts to anywhere worth going.

                Comment


                • #9
                  large pensions plus medical covered = all the money you're worrying about is essentially play money, therefore not a big deal. It is also their money, not your money, and you're not supporting them financially, so if they wish to create a huge pile and set it all on fire, that's their choice.They're old, set in their ways, let them do what they want and be comfortable.

                  Now, if you're telling me that you're supporting them financially, they're living off social security, hand to mouth, etc etc. different story.

                  Comment


                  • #10
                    Originally posted by corn18 View Post
                    Be very careful. You may do everything 100% right and when the stock market drops 50% it will be your fault and now you will be estranged for losing all of their money.

                    .
                    +1
                    As someone who manages his parents money, this post is so correct. When other investments outperform the ones I chose, I hear about it too.

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                    • #11
                      Originally posted by ~bs View Post
                      large pensions plus medical covered = all the money you're worrying about is essentially play money, therefore not a big deal. It is also their money, not your money, and you're not supporting them financially, so if they wish to create a huge pile and set it all on fire, that's their choice.They're old, set in their ways, let them do what they want and be comfortable.

                      Now, if you're telling me that you're supporting them financially, they're living off social security, hand to mouth, etc etc. different story.
                      +1
                      Money is personal... where as most of us can give objective advice to strangers on the internet easily, it is MUCH different when you know the people investing with you.

                      Bogleheads touts 3 fund portfolios and I am beginning to see the value of the simplicity.

                      Comment


                      • #12
                        Originally posted by disneysteve View Post

                        I've heard individuals speak highly of their personal investment advisor. I've never heard a 3rd party speak well of someone else's investment advisor. The customer who doesn't know any better and thinks their advisor is great is really the problem. People don't bother to educate themselves. Instead, they take the word of the "professional" and assume that person knows more than them and is working in their best interests which is very, very rarely true.

                        Investing isn't that difficult. There is a tiny sliver of the population that might possibly benefit from professional advice and assistance because their situation is particularly complex but that just isn't the case for most people.
                        The investment choices are the outward value of what an investment advisor does. Input to life decisions is the value though- the research needed for college, for partial retirement, for exercising stock options. For example, in Cincinnati, one of the largest employers (think a member of the Dow), has a complex compensation/ retirement plan structure- getting advice from outside the company sponsored plan has great value because how the options get exercised can make or break retirement.

                        Here in MI, my employer had a pension, I was hired after the eligible date, but getting help with either cashing the pension out, or using the pension for living expenses is a valueable discussion not many understand the math behind.

                        An advisor is facilitating asking questions of the people in this situation, and providing information. The information has value, and the advisor needs to be paid, usually the payment is from investments.

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                        • #13
                          Originally posted by jiM_Mi View Post

                          Input to life decisions is the value though

                          An advisor is facilitating asking questions of the people in this situation, and providing information. The information has value, and the advisor needs to be paid
                          I can understand that. As someone who hires a CPA to do our taxes, I recognize and appreciate the value of his expertise. He knows the questions to ask that I might overlook if I was just plugging numbers into TurboTax. He knows how to legally and ethically manipulate things to get the maximum benefit of the tax law.

                          With financial advisors, I think the problem is that a great many people hire one simply to invest their money for them. They just want to hand over the money and let someone else take care of it. That's where the trouble comes in, especially if the advisor is paid on a commission. If someone wants to sit down with a CFP once or twice and pay a flat hourly fee to review their situation, portfolio, and goals to design a plan, that's probably fine if you can find a good person. But if you're just hiring some random guy who gave a free talk in your work's cafeteria or the social room of your independent living complex, just don't. Turn and run away.
                          Steve

                          * Despite the high cost of living, it remains very popular.
                          * Why should I pay for my daughter's education when she already knows everything?
                          * There are no shortcuts to anywhere worth going.

                          Comment


                          • #14
                            I'm pretty conservative I think. I'd put them in mostly the three fund etf with munis for taxable. I'd do a more conservative 40/60 split or even 30/70. Nothing to very risky. Just more than a 0.6% savings account.

                            Now yes they have medical and pension covered. Problem? I prefer to not have to liquidate and take care of it when my dad needs in home private nursing care. When with what they have we can easily cash flow everything. I told my mom this and she was very interested. Right now she's panicked because she thinks if that happens how will she get money? She doesn't want to hear that it will take 3 days to get cash. She worries about it. I already said it could be there the next day by wire. Further i don't think liquidating stocks is the answer or pulling money and then owing a ton in taxes.

                            Instead some planning they can easily through off enough in just dividends and interest that they would never have to worry. My mom understands that in principal, but who on a portfolio of 1.2M needs to be touching principal? Explain how that is at all possible? It's next to impossible when ally is paying out 2.2% and that is more than they take out now.

                            I just pointed out they would be doing better with just a online savings account. And my mom sort of freaked when i said this. So they are setting their cash on fire. Even my mom understands that much and it worries her more. Personally I'd like to her to be able to tap principal but feel okay doing it. Right now it's just going down and so she's panicking more because they have $24k/year RMD and yet it seems like they should be able to generate that. But like i said it's terribly invested
                            LivingAlmostLarge Blog

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                            • #15
                              Account Investment Date Aquired Quantity Price Value
                              Joint Taxable Goldman Sachs 33376 $1.00 $33,376.00
                              DIS 3/6/14 200 $132.23 $26,446.00
                              HD 2/9/12 1 $206.58 $206.58
                              MRK 2/9/12 200 $72.98 $14,596.00
                              VZ 12/27/13 200 $58.12 $11,624.00
                              KIM.PRI 3/18/14 130 $25.38 $3,299.40
                              subtotal $89,547.98
                              Mom IRA GS 5378 $1.00 $5,378.00
                              Nextera 1/7/15 200 $23.05 $4,610.00
                              Public Storage 1/7150 185 $25.26 $4,673.10
                              subtotal $14,661.10
                              Dad IRA GS 156 $1.00 $156.00
                              Axa 1 $106,513.00 $106,513.00
                              Axa 1 $213,112.00 $213,112.00
                              subtotal $319,781.00
                              Dad RIRA gs 33391 $1.00 $33,391.00
                              Mom RIRA GS 29711 $1.00 $29,711.00
                              khc 66 $32.94 $2,174.04
                              MDLZ 4/27/2009 200 $47.16 $9,432.00
                              PFE 3/6/12 250 $39.12 $9,780.00
                              VZ 2/24/14 52 $58.12 $3,022.24
                              FIICX 1134.531 $16.18 $18,356.71
                              FEGX 434.969 $54.74 $23,810.20
                              GFAFX 487.86 $49.28 $24,041.74
                              MEIAX 475.753 $40.65 $19,339.36
                              BBN 3/27/12 1000 $22.55 $22,550.00
                              kim.pri 2/12/14 130 $25.38 $3,299.40
                              subtotal $0.00 $165,516.69
                              Mom RIRA GS 116937 $1.00 $116,937.00
                              ATT 3/4/2016 100 $32.04 $3,204.00
                              MO 3/4/2016 100 $54.75 $5,475.00
                              AEP 5/12/2016 100 $83.28 $8,328.00
                              GPRE 1 8/21/2014 50 $17.07 $853.50
                              GPRE 2 10/21/2014 50 $17.07 $853.50
                              HE 2/4/2013 175 $41.15 $7,201.25
                              KHC 11/15/2016 100 $32.94 $3,294.00
                              VZ 2/11/2013 50 $58.12 $2,906.00
                              walgreens 8/6/2014 150 $54.94 $8,241.00
                              Subtotal $0.00 $157,293.25
                              Dad IRA GS 8463 $1.00 $8,463.00
                              AEP 5/12/16 $83.28 $0.00
                              BA 3/13/12 5 $381.01 $1,905.05
                              HE 2/4/13 175 $41.15 $7,201.25
                              Mrk 1 1/25/12 100 $72.98 $7,298.00
                              Mrk 2 1/31/12 200 $72.98 $14,596.00
                              pfe 3/2/09 400 $39.12 $15,648.00
                              ups 1/31/12 200 $114.25 $22,850.00
                              vz 2/2/11 300 $58.12 $17,436.00
                              viscx 1583.388 $9.88 $15,643.87
                              cgiix 1524.193 $30.84 $47,006.11
                              gfffx 357.584 $49.50 $17,700.41
                              Subtotal $0.00 $175,747.69

                              Plus they have $300-400k cash in checking/savings and then 2 paid for homes and pension and medical free (basically supplemental) medicare and SS.

                              My mom was so worried about money my dad was still working and at 62 she took SS reduced because she panicked. She is 67 and could easily have made it to 70 for SS but she refused to listen and instead took SS and it's taxed and raised their income. She said I need it because what if it goes away?
                              LivingAlmostLarge Blog

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