3 years until retirement...how to invest?

[dops05]

My parents are looking to retire in 2-3 years. They have 16K in a savings account, 32K in a CD and they have budgeted 2,000-2,500 a month savings to do something with. What advice would you give them to invest in with these monies right now. Knowing that they will need to be able to start using it at retirement.

I appreciate your time and information.

[disneysteve]

What does their nest egg look like? How much is in their retirement accounts? Do they have pensions? What will their monthly expenses be in retirement? How old are they? When will they start collecting Social Security and how much will they get?

[Petunia 100]

My parents are looking to retire in 2-3 years. They have 16K in a savings account, 32K in a CD and they have budgeted 2,000-2,500 a month savings to do something with. What advice would you give them to invest in with these monies right now. Knowing that they will need to be able to start using it at retirement.

I appreciate your time and information.

Nowhere near enough info to have any sort of opinion.

[jIM_Ohio]

The guideline is to spend 4% of assets per year and assets should last for a full 30+ year retirement for two people.

That one sentence has so many assumptions built in, and its tough to match these assumptions to the original post...

Here is a 3 pronged problem solving approach:

1) Income statement- have your parents list money going in and money going out right now. This is a budget (list of expenses) and salaries (current income).

2) Balance sheet- have your parents list all their assets and liabilities. Assets like investment accounts, houses, cars and other high prices items of value (coins, equipment etc). Liabilities like mortgages and car loans.

3) Investment/ Liquid assets- this is the 4% part mentioned in post. If someone skips doing #1 and #2 and only focuses on #3, run, and run away fast.

Each prong shows a different part of your financial picture.

[dops05]

Thank you for your information and time Jim and Steve. My parents have done #1 and #2. They have an income of around 5200 a month and 2700 in expenses a month. They have no debt and own their home.

My parents spent their entire life paying for things for our family up front and did not think about themself and retirement. They had their individual retirements through work, but never looked at it or understood it. My dad had it in bonds where he didn't make or lose any money in his entire working lifetime. He mine as well have put it in a savings account at a bank.

Combined they have 141K in the market and 107K in retirement but are on path to save 2000 to 2500 a month and do not know how to invest it. I know they want it to be safe and not risky. I also know to invest you should keep your money in and not touch it for at least five years, so I wasn't to confident about telling them to put it in diversified mutual funds. I am not up on annuities, bonds or anything else that might be a more conservative but yet have small returned investment.

They would like to retire in two to three years or earlier. They are 59 and 60 years old right now. My mom will recieve 980 a month at 62 in social securiy and my dad is not sure. They both will get a pension for an income of around 2500 a month. Their monthly expenses of 2700 should not change much if they can stick to their budget and not over spend during retirement.

I hope I was more clear this time (I apologize) and gave you a better picture to recieve more accurate advice.

[disneysteve]

My mom will recieve 980 a month at 62 in social securiy and my dad is not sure. They both will get a pension for an income of around 2500 a month. Their monthly expenses of 2700 should not change much

Just to clarify, is that $2,500 income from just the pensions and SS is on top of that? Or is it $2,500 total including SS and pensions?

If it is $2,500 plus SS then they are in great shape since their expenses are only $2,700.

If their total predicted income is $2,500, that's a little more complicated as they need to make their savings make up the difference.

[jIM_Ohio]

Thank you for your information and time Jim and Steve. My parents have done #1 and #2. They have an income of around 5200 a month and 2700 in expenses a month. They have no debt and own their home.

My parents spent their entire life paying for things for our family up front and did not think about themself and retirement. They had their individual retirements through work, but never looked at it or understood it. My dad had it in bonds where he didn't make or lose any money in his entire working lifetime. He mine as well have put it in a savings account at a bank.

Combined they have 141K in the market and 107K in retirement but are on path to save 2000 to 2500 a month and do not know how to invest it. I know they want it to be safe and not risky. I also know to invest you should keep your money in and not touch it for at least five years, so I wasn't to confident about telling them to put it in diversified mutual funds. I am not up on annuities, bonds or anything else that might be a more conservative but yet have small returned investment.

They would like to retire in two to three years or earlier. They are 59 and 60 years old right now. My mom will recieve 980 a month at 62 in social securiy and my dad is not sure. They both will get a pension for an income of around 2500 a month. Their monthly expenses of 2700 should not change much if they can stick to their budget and not over spend during retirement.

I hope I was more clear this time (I apologize) and gave you a better picture to recieve more accurate advice.

You need to see the forest through the trees...

Just because retirement is in 3 years does not mean 100% of money is needed in 3 years... some of money will be needed in 33 years, correct?

I would suggest a conservative allocation of 25% stocks 75% bonds and cash, and make sure most of the bonds are inflation hedged and short term or corporate (avoid long term government bonds).

I would still like to see #1 and #2 in detail (income and expenses, balance sheet). I am confident 25-75 will give good results over 33 years, which is how long money needs to last.

They should plan to only withdraw 4-5% of investment accounts per year, unless they have a plan for money not listed.

Another forest through trees example, you are focused on what to do with their money, but have not stated a clear goal or objective. In that case, its not clear to me what you need help with, and even if that is clear, its still not clear if that is what you want, or that is what your parents want (and there is a difference...)

[snafu]

"My parents...did not think about themselves and retirement. They had their individual retirements through work, but never looked at it or understood it. My dad had it in bonds where he didn't make or lose any money in his entire working lifetime. He mine as well have put it in a savings account at a bank."

How sad that mom and dad have only started to look at retirement needs and assets now that they desire to retire in 3 years. Decades of inflation have silently used up the spending power of sums saved in CDs or bank savings accounts. Like jIM I think they need to increase the risk factor by splitting savings between equity and bonds but I suspect they will be even more risk adverse with the new savings. Personally I'd suggest new savings at 60/40 ratio as most retirees spend 80% of pre retirement take home pay the 1st 10 years. Spending slows down in subsequent years unless they require assisted living which is very expensive.

You haven't mentioned their retirement goals/plans. Do they have a bucket list of things to do? Do they plan to live in the existing house or move to a retirement community in Florida for example? What is anticipated for upkeep and maintenance? What is their health like? Will they have medical coverage until Medicare coverage starts? Will there be major expenses like a newer car? Do they have skill sets that would allow them to earn sums doing work they love?

Wishing your parents well and hope their assets are sufficient.