My mom is 65 years old and is starting from zero with savings after the death of my dad (less than zero really, but I have helped with that and am getting her started saving with a 6 month emergency fund). She has a very limited income and now not many expenses, so that 6 month emergency fund is much less than it would be for you or I, and I will encourage her to continue adding any of her spare dollars to it. Where would you save this money? High yield savings? Would you consider investing any of it if it gets to a certain level? What is enough of a cushion to do that? Is her age such that we should plan to always keep everything liquid and in high yield savings and cope with her not getting much of a return? It's hard to contemplate starting at zero at age 65, and I want to think it through carefully. Thanks! Any input welcome.
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Where to put money if starting saving at age 65?
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The EF should be in an online savings account like Ally.
if she has money beyond that, I would consider something that incorporates a bit of growth. Vanguard has some good funds but you need $3,000. I’m sure there are ETFs that do the same. Look for a 20/80 allocation.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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Originally posted by disneysteve View PostThe EF should be in an online savings account like Ally.
if she has money beyond that, I would consider something that incorporates a bit of growth. Vanguard has some good funds but you need $3,000. I’m sure there are ETFs that do the same. Look for a 20/80 allocation.
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If she has zero savings, then the emergency fund is the priority. If she has limited income, I doubt there is much to do beyond that. She might consider some type of health care savings account or an Index mutual fund. I think that a good evaluation of her living arrangements is in order. Is she in a house? Owning a home is very expensive. She might be better off in an apartment or condo.
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Originally posted by HundredK View Post
Do you think 6 months is enough of an EF and that anything beyond that would be ok going into investments (at whatever point we accumulate enough)? I know bonds are very safe, but even if we did a 100% total bond ETF, there is always some risk, and at her age I get nervous. Easier to make the decision to invest when you have decades ahead and more resources... not so easy when you have maybe 1-2 decades max and starting at zero. It makes my stomach churn, lol.
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Originally posted by bjl584 View Postwhere is her income coming from? A job or SS, or a combination?
what is her monthly income and expenses?
it may be worth putting at least some of her extra money into something that will get her a return.
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Originally posted by Petunia 100 View Post
How is she going to feel about investing in something and one day she receives a statement and her principal has declined? If it is going to upset her, then just stick with online savings accounts.
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Originally posted by Snicks View PostIf she has zero savings, then the emergency fund is the priority. If she has limited income, I doubt there is much to do beyond that. She might consider some type of health care savings account or an Index mutual fund. I think that a good evaluation of her living arrangements is in order. Is she in a house? Owning a home is very expensive. She might be better off in an apartment or condo.
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Originally posted by HundredK View Post
Do you think 6 months is enough of an EF and that anything beyond that would be ok going into investments (at whatever point we accumulate enough)? I know bonds are very safe, but even if we did a 100% total bond ETF, there is always some risk, and at her age I get nervous. Easier to make the decision to invest when you have decades ahead and more resources... not so easy when you have maybe 1-2 decades max and starting at zero.Her income is a small SS check of about $900 and a job that pays $13 an hour which she currently is able to work 24 hours a week (but as with all PT jobs that pay practically nothing, that could always change at a moment's notice and be less). She is quite frugal, so she can pay her rent and expenses with a few bucks left
2. Can she cover all of her expenses on her SS check or does she depend on that job income? If she needs the job income to live, what happens if the job goes away or she becomes unable to work for some reason?
As for her potentially getting upset seeing her balance fluctuate, I'd really focus on educating her on that point. Show her some charts illustrating long term returns of stocks, bonds, and cash, so she can visualize why even a tiny bit of equity exposure is so beneficial over the years.
The great thing today is that there are zero commission ETFs so she can invest in them one share at a time if that's all she has the money for.Last edited by disneysteve; 02-22-2021, 06:22 PM.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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I just wanted to also emphasize that 100% cash is also risky. Inflation erodes purchasing power every year. For someone on a super tight budget, that’s particularly hazardous. That’s why you need at least some equities to buffer that.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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I'd personally suggest a very healthy EF/cash account (eventually getting to 12 months of expenses would not be excessive), paired with a balanced fund of some sort to provide growth over time... Vanguard's Wellington (VWELX) as an example -- healthy & relatively stable growth, low cost, and well managed. But even though it's got less than half the volatility of the overall market, it does & will fluctuate -- your mom needs to learn not to worry about day-to-day gains/losses, but rather year-to-year gains."Praestantia per minutus" ... "Acta non verba"
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Originally posted by kork13 View PostI'd personally suggest a very healthy EF/cash account (eventually getting to 12 months of expenses would not be excessive)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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Originally posted by disneysteve View Post
1. I think EVERYONE needs to have some money in the market to offset inflation. At 65, she may live another 25-35 years assuming she's in good health. I think 30% in stocks is a good number but if she's super conservative or risk averse, less is fine too. As I said, an 20/80 fund or ETF would be good.
2. Can she cover all of her expenses on her SS check or does she depend on that job income? If she needs the job income to live, what happens if the job goes away or she becomes unable to work for some reason?
Hmm, another question, with her EF calculation, should I just go ahead and assume she will be getting SS for the remainder of her life and deduct that from the amount needed for each month of EF? Seems like a fairly safe bet to do that? My current calculation, I didn't include SS at all in her EF needs.
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