need a plan for my Mom

[feh]

Hi folks.

I need to come up w/ an investment plan for my Mom. She is 68 and a widow. Relevant info:

• owns her home outright (not sure of the exact value; $180-200K)
• currently working part time; about $16K gross annually
• receiving SS (don't know monthly amount offhand)
• has about $65K in cash

As long as she's working, things are ok, but I don't know if she'd be able to make ends meet on SS alone. She enjoys working, but she's on her feet a lot, and I'm not sure if that will be a problem in the future. I've got a feeling that at some point in time she'll either need to sell the house and try to live off the proceeds, or do a reverse mortgage. She's in good health.

Anyway, the immediate question is what to do w/ the cash, most of which is the result of a recent inheritance. Thoughts on what her portfolio should look like?

Thanks.

PS - some Chase advisor (must work at her bank?) sat down with her and has suggested:
50% PGBOX (bond fund)
25% ONIAX (bond fund)
25% OGIAX (balanced fund)
I'd avoid these, due to loads and expenses, but thought folks might be willing to comment on the percentages/risk.

[disneysteve]

Not enough info. We need to know her SS income and her monthly expenses. If SS covers her expenses, the answer is going to be different than if SS doesn't cover her expenses.

[kv968]

As Steve said, how much SS covers her expenses is a big factor so you'd need to find that out.

As far as those funds go, is she taking the interest payments or reinvesting them? If it's the latter, you want to get her out of them as soon as possible since it's very likely that, since they're load funds, she's paying the load on the reinvested interest also.

[feh]

As Steve said, how much SS covers her expenses is a big factor so you'd need to find that out.

As far as those funds go, is she taking the interest payments or reinvesting them? If it's the latter, you want to get her out of them as soon as possible since it's very likely that, since they're load funds, she's paying the load on the reinvested interest also.

I'll have to get back to you folks, then. We made a budget several years ago, but I no longer remember what her SS income is, or what her monthly expenses are.

Regarding the investments - as long as she's working, she would re-invest dividends. And she's not actually in those funds; those are the funds that were recommended by a Chase adviser.

[kv968]

Regarding the investments - as long as she's working, she would re-invest dividends. And she's not actually in those funds; those are the funds that were recommended by a Chase adviser.

The fund allocation may not be bad depending on her SS, but the funds themselves, with the loads, IMO are a no-go as I'm sure you realize.

[disneysteve]

I'll have to get back to you folks, then. We made a budget several years ago, but I no longer remember what her SS income is, or what her monthly expenses are.

That's really key to answering the question. If she needs her savings for current expenses, she'll need to handle that money differently than if she doesn't need it currently.

Is the 65K her only savings? Is the home her only significant financial asset?

[feh]

That's really key to answering the question. If she needs her savings for current expenses, she'll need to handle that money differently than if she doesn't need it currently.

Is the 65K her only savings? Is the home her only significant financial asset?

Yes to both those questions Steve.

Here's some more info:
monthly SS income: $1360
monthly earned income: ~$750 (that is after taxes)

She is currently able to pay the bills without using savings. So, questions I'd appreciate suggestions for:

1. How much of her cash should remain in cash for emergencies?
2. How should the remainder be invested (allocations and even specific funds, if you'd like)?
3. Which company to use? Vanguard? Fidelity? Other?

Thanks everybody!

[kv968]

Yes to both those questions Steve.

Here's some more info:
monthly SS income: $1360
monthly earned income: ~$750 (that is after taxes)

She is currently able to pay the bills without using savings.

We're getting there Ok, she can pay her bill without dipping into savings, but can she cover her expenses with JUST SS or does she need the earned income also?

The easiest question would just be what are her monthly expenses?

[feh]

We're getting there Ok, she can pay her bill without dipping into savings, but can she cover her expenses with JUST SS or does she need the earned income also?

The easiest question would just be what are her monthly expenses?

I don't have her monthly expenses, but from prior conversations, I don't think SS would cover them.

[disneysteve]

I don't have her monthly expenses, but from prior conversations, I don't think SS would cover them.

Once you know her expenses and know by how much they exceed her SS, you can work out a plan for the 65K.

How much of her cash should remain in cash for emergencies?

This will depend on the above. If her expenses exceed her income by $300/month, for example, she'll need to draw that from principle so I'd say a year's worth of that money should be in cash. At least another year's worth should probably be in something with no principle risk, like a CD (or high-yield account along with the 1st year money). The rest can get invested somewhere along the lines of what that adviser suggested, perhaps 80% bonds, 20% stocks.

[kork13]

If her expenses exceed her income by $300/month, for example, she'll need to draw that from principle so I'd say a year's worth of that money should be in cash. At least another year's worth should probably be in something with no principle risk, like a CD (or high-yield account along with the 1st year money). The rest can get invested somewhere along the lines of what that adviser suggested, perhaps 80% bonds, 20% stocks.

Also understand that realistically, $65k (invested conservatively, as it should be) will only provide about $100-$150/mo in income (estimating 2-3% return above inflation). So if she truly needs $750/mo to cover all of her expenses, she'll eat significantly into the principle, and it'll only last 7-8 years. Obviously, if it's only, say, $400/mo needed, it'll last her much longer... along the lines of 15 or 16 years.

What possibility is there for her to sell her home and either buy something smaller/less expensive, or rent a small place that meets her needs? If this is the plan, sooner is probably better. It allows you to invest the sale proceeds and start generating additional income. If she could raise her investable funds to $120k (for example), it could produce $200-$300/mo in income, and extend the lifetime of her savings to over 25 years if necessary.

[feh]

Concerning the amount that will get invested - does an 80/20 split (bonds/stocks) make sense? Any suggestions as to a company or specific funds?

Thanks.

[snafu]

Anyone thinking about buying Bond Funds needs to understand there is RISK in the inverse relationship of Bonds to interest rates. As interest rates go down, Bond fund value goes up. When interest rates go up, Bond fund value goes down. Do you believe interest rates will continue to fall? What is the likelihood of interest rates increasing? Saving rates at present are extremely low. What do you expect to garner from a Bond Fund? Bonds pay interest which is taxed at the same rate as income. It is not given 'special' status. Only if you are able to sell your Bond Fund at a net profit will it generate Capital Gains. If you sell the fund at a loss, you are reducing the sum of the inheritance.

I think your mom needs to start writing out a 5 yr. plan. Where does she see herself living in May 2017? Does she wish to sell the house and buy or rent a condo to eliminate yard work and reduce utilities? Does she see herself working another year, 2, 3? What new expenses might be anticipated? Whatever Mutual Funds are chosen, stay aware of the Management Expense Ratio [MER] and sales fee/commission. You could track Vanguard or Fidelity Funds and examine their top ten holdings easily available on-line.

[luckyzimmy]

your momo

Your mom needs to make sure there is no loss to principal. That means she needs to ask any advisor what results can be guaranteed. Few advisors will give that guarantee, but it is. From my experience, I can tell you that if she is willing to let the money grow a few years on a guaranteed basis, she can guarantee an income of approximately $500 monthly in the form of a personal pension.

That is a lock - it does not depend on performance of any stock market and will last as long as she is alive.

Hi folks.

I need to come up w/ an investment plan for my Mom. She is 68 and a widow. Relevant info:

• owns her home outright (not sure of the exact value; $180-200K)
• currently working part time; about $16K gross annually
  
• receiving SS (don't know monthly amount offhand)
• has about $65K in cash

As long as she's working, things are ok, but I don't know if she'd be able to make ends meet on SS alone. She enjoys working, but she's on her feet a lot, and I'm not sure if that will be a problem in the future. I've got a feeling that at some point in time she'll either need to sell the house and try to live off the proceeds, or do a reverse mortgage. She's in good health.

Anyway, the immediate question is what to do w/ the cash, most of which is the result of a recent inheritance. Thoughts on what her portfolio should look like?

Thanks.

PS - some Chase advisor (must work at her bank?) sat down with her and has suggested:
50% PGBOX (bond fund)
25% ONIAX (bond fund)
25% OGIAX (balanced fund)
I'd avoid these, due to loads and expenses, but thought folks might be willing to comment on the percentages/risk.

[disneysteve]

she can guarantee an income of approximately $500 monthly in the form of a personal pension.

That would be over a 9% return. There isn't anybody anywhere who can give you that kind of guarantee.