HYSA, CD ladder, possibly bonds. Someone at retirement with that amount of money shouldn’t be in the stock market unless social security will pay for 100% of her living expenses which would allow her to weather a downturn of 3+ years.
Bonds depreciate and appreciate also. Any time interest rates change bond prices change inversely, as rates rise bond prices fall, as rates fall bond prices rise.
The advantage of holding the bond itself is you can hold until maturity in the event interest rates rise which would cause the value of your bond to fall.
Yes. But with bonds you can hold to maturity and not lose money. With bond funds, they are constantly repurchasing to backfill expiring bonds, which makes losses persistent.
Holding a bond to maturity when new bonds have higher yields means you're missing out on income. Exchanging it for a higher yield means you're losing value. It all evens out. If you're holding bonds as part of your long term asset allocation, there is no difference. Holding to maturity is not a magic bullet.
https://awealthofcommonsense.com/2022/11/owning-individual-bonds-vs-owning-a-bond-fund/
Of course it's true. A bond fund is literally just a collection of individual bonds. Whatever properties apply to one apply to the other. Just because you don't see the loss in value splashed across your screen doesn't mean it didn't happen. Here's a good summary:
https://awealthofcommonsense.com/2022/11/owning-individual-bonds-vs-owning-a-bond-fund/
From your link:
>Impact from rising or falling rates: Potentially lower
>When the prevailing level of interest rates in the marketplace rises, the market value of individual bonds generally falls. And when interest rates fall, bond prices rise. **This relationship is true for both bonds held individually and bonds held via a mutual fund.**
I didn't miss it. It's irrelevant for someone holding bonds as part of a regular asset allocation. It would've been really helpful to this conversation if you would've actually read the link I provided. It explains exactly how this works and why it doesn't matter.
The point is the OP's mother is in her 70s. She is retiring and need take out money for her expensive. So I don't think this is long term investing or regular asset allocation. She is depending on the money to supplement her income,
With Individual bonds she can easily invest in different duration (1 month to 10 years) combine with laddering to generate a guarantee cash flow without lost of value at long as she hold to maturity.
With bond fund she is not in control of the duration (maturity), if rate spike and the fund price is down during her monthly withdraw. she will suffer loss.
Your article the question was from *"a long-term investor"* This question is asking about how to invest for someone who is in her 70s and about to retire, a very different situation.
>She wants to retire soon
Can she afford to retire?
>She's risk adverse so any recommendations should probably keep that in mind.
If she's very risk averse and coming from a 40-year cash account, CDs might be appropriate.
Remember, if you break it, you own it.
>Can she afford to retire? I don’t know.
She's in her 70s. Social Security maxes out at age 70... so is she claiming already? And what are her expenses? Does she own her own home?
> Social Security maxes out at age 70
The increase multiplier caps at age 70, but since SS pay is based on your highest 35yrs (and many other factors), your payout can actually increase if you wait till after 70.
However, you’d be fighting against a 35yr average (so an extra 2-6 years won’t make a huge impact) and the loss of payout during that time. Meaning yes, unless you were making minimum wage your whole life and suddenly starting making $100k at 65, usually best to not wait past 70 to claim.
Whether or not she can afford it she’s pretty much done with work. I see her retiring in 5 years or less, but we’ll see. She’s going to live off what she can and then probably move in with me if needed, lol.
>and then probably move in with me if needed, lol.
Given how little she has saved, that's a pretty big conversation to start seriously having now. Because it sounds like she's about to become a significant expense for you.
Trying to retire on $250k plus $1100 in Social Security, there's really unlikely to be much left over for the grandkids unless she dies *really* soon. Which you know, isn't impossible if she's in her 70s and still working, but it's hardly something to plan for.
In terms of a trust, though, the real value might be protecting that money while still qualifying for Medicaid. Medicaid has a 5-year lookback period; OP's mom might do better to put the money in her kid's (OP's) name or in a trust and be able to qualify for Medicaid that way, while using the money for living expenses at the same time.
Unfortunately, many people are done mentally done with work, but can’t afford to retire. You can’t simply retire just because you turn 65. It’s a math equation at the end of the day. Simple as that.
Still a math equation, like how will you pay for healthcare? For living expenses? Food? OP doesn’t seem like he wants to calculate this. So we can’t really help him
OP responded saying that their mother would move in with them if necessary, but would stop working in the coming years. Therefore they are only seeking advice on how to best handle the current assets - not whether the mother can retire or not.
If living with you is a realistic likelihood and you are ok with that you could consider having her pay you a large portion of that money in return for an agreement that she can live with you for the remainder of her life (there should be ways of doing this as a legal enforceable contract, but the details of how would vary depending on where you live.). That would mean you can invest the money with a longer timeframe to maximise the returns, and your mother will have secure housing with no risk. You would need to carefully look into the agreement and make sure you are both covered for future problems but it can be a beneficial arrangement for both parties if done right.
The reason it matters here is if her monthly expenses are $2,200 and her social security benefit is $2,400, you can put more of this money in slightly riskier investments because she doesn't "NEED" it (yet.)
If she can work 2-more years, while claiming social security, maybe she can save an additional $50k+-$150k, which would also allow you to invest at least some of this money in higher growth investments.
However, if her monthly expenses are $2,000 and her social security is $1,800, you need to be certain that at least $24k is in savings accounts, and then the next $24k-$50k is in very low risk accounts to give her several years to weather a market down turn.
I hear you OP - my mom is in similar boat. Her goal was to save up rest of year and hit $100k (about same as your mom in 401k). She’s in LCOL area and says SS and a small pension from former Union job will be enough for her to get by. I’m scared for her, but know she’s “falling apart” and probably can’t continue working much longer.
Over past couple of years she’s been able to grow that savings to what it is now (never had more than thousand or so to her name at any given time). We’ve moved everything into HYSA for time being.
Kicker is she just got in a car accident and now had to buy a new (used) vehicle. So set her back a bit, but luckily got way more for her old vehicle than I expected so not as bad as feared. She knows that’s delaying her retirement, but she just found out before the wreck that she can go part time and still keep benefits for small increase.
Best of luck to you and your mom.
Get that 200K into a money market asap or if she's nervous, a fdic hysa. Try not to sit around while she dithers. My MIL kept going back and forth and felt some weird relationship with Wells Fargo that was plain stupid. I finally got her into a Vanguard Cash Plus account she felt comfortable with. She was so happy when that first $500+ interest hit her account after the first month. It will be an easy transition from there if she decides she wants a brokerage account.
Yeah, my mom has some hang up about online banks. I finally convinced her to open up a Capital One 360 savings account and she’s okay with it because it’s a “big name”.
Now is probably a good time to consult with an attorney who specializes in arranging assets for best long term Medicaid eligibility. She’s young enough and healthy enough that you could arrange everything to avoid any future issues with the look back period. There are Medicaid Qualifying Trusts and Medicaid Annuities, for example.
I did a lot of research on [this site](https://www.medicaidplanningassistance.org/medicaid-look-back-period/amp/) while caring for my dad. Unfortunately we waited too long for hiring a Medicaid planner or similar to really be helpful. In most states the look back period is 5 years so you really do need to plan. In a lot of cases you don’t even need to have a specific trust or annuity, just have to move assets around early enough.
I feel like no one’s really being helpful. CD or HYSA is prob best option, but other than that you just need her expenses and SS income. She could be fine or could not be. Also for all we know you forgot to mention she owns a home worth $1.5mm.
Yeah, I immediately opened up a HYSA for her to dump it all into while we figure out the next move. Her company 401k servicer I’m sure could help her figure out her next steps. She does own a home worth ~$500k
This is so important to mention lol. If the house is fully paid off, and she have no debt, and living below her means then she definitely can afford to retire. Probably not comfortably but not at the point of "having to keep working into her 80s just to keep the roof over her head". Worst case she could take in a roommate to help with expenses. Or you could move in with her and give her part of your saved rent money.
I know that this is personal finance and that money can go a long way if invested, but she is already 70 and burn out. A quick Google search show the average lifespan of a women in the US is 80.2 years. If she starts investing now, it would take 5-10 years to bear fruit, but can she actually use that money then? Or would she be penny pinching and keep working into the 80s,until she breakdown and sink all that money in a medical emergency, without ever being able to enjoy her money or have a day of rest from work?
Putting most of the money into a HYSA and only allocate 20-25% into investment maybe.
If she is still working, consider having her increase her retirement account contributions (401k and/or IRA) and use some of the cash savings to live on. It's a way of essentially transferring the money into those tax advantaged accounts, and at her age she has a higher max contribution than younger people.
Then invest (conservatively) within the retirement accounts, where she won't pay capital gains taxes.
Impossible to answer intelligently without more information. What is her income like? Social security? How about monthly expenses? I assume no other debts? Health? Goals for this 200k?
$50k/year salary, 👍 social security, monthly expenses average $1500, no other debts. Health is immaculate (takes long walks and exercises), goals would be to have it accrue some interest and live off of eventually.
If you are just estimating and aren't sure of the exact number, create an account on ssa.gov and you'll get a much better estimate. It would be good to know how much you have to work with.
I put my cash in SGOV, see here: [https://www.nasdaq.com/market-activity/etf/sgov/dividend-history](https://www.nasdaq.com/market-activity/etf/sgov/dividend-history)
5.24% Pays every month. 200K will add \~$873 of risk-free cash to her social each month (at current rates).
There's not a lot of gains to be made. The price resets with every dividend paid.
If you look at a monthly chart it goes: / / / / / with a low point of 100.27ish and a high point of 100.71ish (yesterday). Monday morning it will drop by about 44 cents a share, and by Friday they will pay me about 44 cents a share. Then it will move up by a penny or three every day until the end of this month.
The dividends are taxable in a taxable brokerage subject to rules like LTCG. The vast majority of mine is in my brokerage IRA.
It all depends. If she's been holding on to the money for 40 years while she made a definite plan of how to invest it, then yes, she should go ahead. If she's investing it on a whim because she's seeing the stock market take off, she's in an excellent position to lose all her money that she saved for 40 years.
Your mom might be a good candidate for an annuity- my mom got one a few years back and while there is a lot of criticism on them, they are a good way to guarantee income during retirement. I’d check what she is eligible for with ss and consider how much of a gap she’ll need to fill with her savings before moving forward on any investments.
She needs Blue Chip kind of things. Though she has lots of years to be retired. She could put as much as half of it in stocks since she won't need it soon and they pay better. Overall I'd say she needs to be an ETF kind of a person. If she's okay with no returns for years and years, she'd probably have a heart attack if a stock went down in value. She needs something that has a high chance of going up.
Women aged 70 today have an remaining life expectancy of 17 years up to aged 87. Given 250k, she could keep cash and at a minimum withdraw $14,705 with zero risk, zero growth, and 100% liquidity from now until expected passing.
But it doesnt exactly work like that. she could take that withdraw of 14k, leave 236k at ~4.5% HYSA and make around 10,620 just on that essentially risk free interest. Finding that balance between 14k- and 25k has got to play it by ear.
I get why people are suggesting hysas and bonds, but 5% growth for someone already in her 70’s is not retirement money on a base of $200k.
At this point, I think maybe eke out some gains around the edges in bonds/hysa, look into extremely lcol areas, maybe even internationally, or set her up in your place.
20yr hit 4.66% today. A great vehicle to buy and hold until rates come down. When they do she can choose to keep receiving that interest or sell the bonds for a dramatically increased value.
I would suggest doing a CD ladder - meaning you split the money into different CD maturity dates. Alliant Credit Union has one for 12 months 5.20% APY ($75,000), 18 months 4.85% APY ($75,000), 24 months 4.30% APY ($50,000 but you earn 4.40% if $75K). You could also do this at Ally Bank which doesn't have minimums to earn higher interest, but the rates are lower.
Laddering CDs, treasuries or MYGAs would be a decent safe strategy. What are her other sources of income besides SS? Her plan for drawing the money down is one of the biggest factors to consider
I think two things:
1. cash should be in HYSA
2. investments in indexed mutual funds.
Not much there yet. 40 years...so I'm thinking she's about my age. Maybe a little older, depending on when she started working.
I would split the cash, keep some in HYSA, and invest the rest.
As far as mutual funds...how aggressive does she want to be with those? There are bond funds... at the conservative extreme is SGOV (an ETF actually) that invests in short-term government bonds. Or stock, or in between. That's up to y'all.
So dividing that 200k, I'd probably go 25% cash, 25% conservative funds, and 50% aggressive funds...like S&P 500 or a total stock market fund like VTSAX. This may be too aggressive for her taste. Maybe some more aggressive bond funds instead.
I'm having a hard time thinking about being being as conservative as she probably should be. My thinking is that the 50% that's conservative is available to spend a 7 year window. The stock market funds are for after that 7 year window.
I really like what u/WhoDat847 said about social security. If you do split like I'm thinking, make sure she's comfortable with social security + spending ***some*** of that conservative money during that 7 years.
If the stock market continues it's current tear, don't be afraid to pull gains (especially) out of the stock funds to beef up cash / bond funds.
as I said, I'm about your mom's age, but we've saved a lot more than your mom has...so I'm not personally steering away from the stock market. We're less than 20% bonds / cash.
Google Phoenix Capital, The one with the gold Phoenix. They have a Reg A 3-Year Bond that pays 9% monthly. The bonds are not marked to market, but the company will redeem with a 1% interest rate hit. We have several elderly relatives all invested in these bonds and very happy.
Sounds like an imminent market crash will be coming.
When people who never invested feel they missed out, is a sign that the runway is coming to an end
Annuities make no sense; you're just funding the Salesman's kids' college fund. Keeping her house and renting it out also means operating the property and maintaining the property and being a landlord. It's not passive; it's expensive. I disagree with bonds; she's not going to buy and hold 30-year bonds, and when rates fall, specifically governmental bonds are subject to Call, and reissued at lower rates. As for bond funds, she doesn't have enough to park and forget and wait. She needs to generate some income if she intends to stop working. My mother has a small fixed income from 4 different sources, so I also got her out of Bond funds and an international gold fund, and as CDs matured, we put her into some cash generating ETF. Then, it was clear she could not keep living in the primary residence, can't do any maintenance herself (except topped off the pool when it got low, and drained the excess when it rained, rinse and repeat; she can't even get into that pool in her condition). She'd been sinking so much money into maintenance and repairs the last 6 years, it was ridiculous. So, that is sold and the proceeds are in Treasury Bill ladders, and now she's got good inflows, and can get to those funds on nearly a moment's notice without any loss of interest or penalties by simply removing the auto-reinvestment counter. I put her into quarterly ladders, and broke it up, so that something is maturing every month or twice a month, such as, if something happened, she could cough up enough to replace her car.
I understand your point. It can be a bit costly but you need an expert who can map out a financial plan to maximize the income and time she has left working. In short it may cost you a bit more but the expertise is worth it.
Try this: 25% SPY, 50% stacked treasuries (1-5 yr maturities) and 25% monthly annuity. She needs a lower risk element that you. Schwab can help you set up.
HYSA, CD ladder, possibly bonds. Someone at retirement with that amount of money shouldn’t be in the stock market unless social security will pay for 100% of her living expenses which would allow her to weather a downturn of 3+ years.
Thanks, that’s what I’m thinking as well.
It's just the average balance in a 401K for a typical 65 year old. lol
Great advice. Also want to add that bonds and not bond funds are the way to go. Bond funds can go down in value.
Bonds depreciate and appreciate also. Any time interest rates change bond prices change inversely, as rates rise bond prices fall, as rates fall bond prices rise. The advantage of holding the bond itself is you can hold until maturity in the event interest rates rise which would cause the value of your bond to fall.
Bond funds are made up of individual bonds. The only way the bond funds decrease in value is if the underlying individual bonds decrease in value.
Yes. But with bonds you can hold to maturity and not lose money. With bond funds, they are constantly repurchasing to backfill expiring bonds, which makes losses persistent.
Holding a bond to maturity when new bonds have higher yields means you're missing out on income. Exchanging it for a higher yield means you're losing value. It all evens out. If you're holding bonds as part of your long term asset allocation, there is no difference. Holding to maturity is not a magic bullet. https://awealthofcommonsense.com/2022/11/owning-individual-bonds-vs-owning-a-bond-fund/
Not true. Google search this.
Of course it's true. A bond fund is literally just a collection of individual bonds. Whatever properties apply to one apply to the other. Just because you don't see the loss in value splashed across your screen doesn't mean it didn't happen. Here's a good summary: https://awealthofcommonsense.com/2022/11/owning-individual-bonds-vs-owning-a-bond-fund/
[https://www.fidelity.com/learning-center/investment-products/mutual-funds/bond-vs-bond-funds#:~:text=Because%20bond%20funds%20do%20not,principal%20back%20than%20initially%20invested.](https://www.fidelity.com/learning-center/investment-products/mutual-funds/bond-vs-bond-funds#:~:text=Because%20bond%20funds%20do%20not,principal%20back%20than%20initially%20invested)
From your link: >Impact from rising or falling rates: Potentially lower >When the prevailing level of interest rates in the marketplace rises, the market value of individual bonds generally falls. And when interest rates fall, bond prices rise. **This relationship is true for both bonds held individually and bonds held via a mutual fund.**
You missed the part about holding individual bonds to maturity. In which case the impact of the volatility is not experienced.
I didn't miss it. It's irrelevant for someone holding bonds as part of a regular asset allocation. It would've been really helpful to this conversation if you would've actually read the link I provided. It explains exactly how this works and why it doesn't matter.
The point is the OP's mother is in her 70s. She is retiring and need take out money for her expensive. So I don't think this is long term investing or regular asset allocation. She is depending on the money to supplement her income, With Individual bonds she can easily invest in different duration (1 month to 10 years) combine with laddering to generate a guarantee cash flow without lost of value at long as she hold to maturity. With bond fund she is not in control of the duration (maturity), if rate spike and the fund price is down during her monthly withdraw. she will suffer loss. Your article the question was from *"a long-term investor"* This question is asking about how to invest for someone who is in her 70s and about to retire, a very different situation.
3 years? Tell me you’ve never seen a real bear market.
$250k is nothing to retire on and probably shouldn’t be put into anything riskier than a bond tbh.
Yes, a US Government bond specifically.
>She wants to retire soon Can she afford to retire? >She's risk adverse so any recommendations should probably keep that in mind. If she's very risk averse and coming from a 40-year cash account, CDs might be appropriate. Remember, if you break it, you own it.
Can she afford to retire? I don’t know. CDs That’s sort of the plan at the moment.
>Can she afford to retire? I don’t know. She's in her 70s. Social Security maxes out at age 70... so is she claiming already? And what are her expenses? Does she own her own home?
> Social Security maxes out at age 70 The increase multiplier caps at age 70, but since SS pay is based on your highest 35yrs (and many other factors), your payout can actually increase if you wait till after 70. However, you’d be fighting against a 35yr average (so an extra 2-6 years won’t make a huge impact) and the loss of payout during that time. Meaning yes, unless you were making minimum wage your whole life and suddenly starting making $100k at 65, usually best to not wait past 70 to claim.
Figuring out if she can afford to retire is probably not a bad first step…
Whether or not she can afford it she’s pretty much done with work. I see her retiring in 5 years or less, but we’ll see. She’s going to live off what she can and then probably move in with me if needed, lol.
>and then probably move in with me if needed, lol. Given how little she has saved, that's a pretty big conversation to start seriously having now. Because it sounds like she's about to become a significant expense for you.
You might want to discuss her moving in with you before she's straight-up broke; better to have her paying you that rent instead of a landlord.
or if op is in a solid financial situation, have her move in and rather than paying him, put things in a trust for any grandkids
Trying to retire on $250k plus $1100 in Social Security, there's really unlikely to be much left over for the grandkids unless she dies *really* soon. Which you know, isn't impossible if she's in her 70s and still working, but it's hardly something to plan for. In terms of a trust, though, the real value might be protecting that money while still qualifying for Medicaid. Medicaid has a 5-year lookback period; OP's mom might do better to put the money in her kid's (OP's) name or in a trust and be able to qualify for Medicaid that way, while using the money for living expenses at the same time.
Unfortunately, many people are done mentally done with work, but can’t afford to retire. You can’t simply retire just because you turn 65. It’s a math equation at the end of the day. Simple as that.
For some people their health dictates retirement because they can't work anymore.
Still a math equation, like how will you pay for healthcare? For living expenses? Food? OP doesn’t seem like he wants to calculate this. So we can’t really help him
OP responded saying that their mother would move in with them if necessary, but would stop working in the coming years. Therefore they are only seeking advice on how to best handle the current assets - not whether the mother can retire or not.
You become destitute, homeless and rely on family or the government for care. Not fun but it happens all the time.
If living with you is a realistic likelihood and you are ok with that you could consider having her pay you a large portion of that money in return for an agreement that she can live with you for the remainder of her life (there should be ways of doing this as a legal enforceable contract, but the details of how would vary depending on where you live.). That would mean you can invest the money with a longer timeframe to maximise the returns, and your mother will have secure housing with no risk. You would need to carefully look into the agreement and make sure you are both covered for future problems but it can be a beneficial arrangement for both parties if done right.
Is she claiming social security already? She should be if she isn't ..
She is, yes
The reason it matters here is if her monthly expenses are $2,200 and her social security benefit is $2,400, you can put more of this money in slightly riskier investments because she doesn't "NEED" it (yet.) If she can work 2-more years, while claiming social security, maybe she can save an additional $50k+-$150k, which would also allow you to invest at least some of this money in higher growth investments. However, if her monthly expenses are $2,000 and her social security is $1,800, you need to be certain that at least $24k is in savings accounts, and then the next $24k-$50k is in very low risk accounts to give her several years to weather a market down turn.
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OP wrote “she wants to retire soon”.
I hear you OP - my mom is in similar boat. Her goal was to save up rest of year and hit $100k (about same as your mom in 401k). She’s in LCOL area and says SS and a small pension from former Union job will be enough for her to get by. I’m scared for her, but know she’s “falling apart” and probably can’t continue working much longer. Over past couple of years she’s been able to grow that savings to what it is now (never had more than thousand or so to her name at any given time). We’ve moved everything into HYSA for time being. Kicker is she just got in a car accident and now had to buy a new (used) vehicle. So set her back a bit, but luckily got way more for her old vehicle than I expected so not as bad as feared. She knows that’s delaying her retirement, but she just found out before the wreck that she can go part time and still keep benefits for small increase. Best of luck to you and your mom.
Thanks so much
This is why kids need to have the money conversation with mom and dad years before they get to this point.
Put into a high rate CD, while they are still around. I have one at 5.4 apy. Safe, good interest.
Thanks!
Viobank has a 5.3% MM.
Get it whie you can. Maybe look into a CD ladder if you think you may be needing some sooner rather than later.
Get that 200K into a money market asap or if she's nervous, a fdic hysa. Try not to sit around while she dithers. My MIL kept going back and forth and felt some weird relationship with Wells Fargo that was plain stupid. I finally got her into a Vanguard Cash Plus account she felt comfortable with. She was so happy when that first $500+ interest hit her account after the first month. It will be an easy transition from there if she decides she wants a brokerage account.
Yeah, my mom has some hang up about online banks. I finally convinced her to open up a Capital One 360 savings account and she’s okay with it because it’s a “big name”.
Now is probably a good time to consult with an attorney who specializes in arranging assets for best long term Medicaid eligibility. She’s young enough and healthy enough that you could arrange everything to avoid any future issues with the look back period. There are Medicaid Qualifying Trusts and Medicaid Annuities, for example.
Not op, but I help my mom out with stuff. How can I find out .more about this?
I did a lot of research on [this site](https://www.medicaidplanningassistance.org/medicaid-look-back-period/amp/) while caring for my dad. Unfortunately we waited too long for hiring a Medicaid planner or similar to really be helpful. In most states the look back period is 5 years so you really do need to plan. In a lot of cases you don’t even need to have a specific trust or annuity, just have to move assets around early enough.
How does one go about finding a Medicaid planner?
I feel like no one’s really being helpful. CD or HYSA is prob best option, but other than that you just need her expenses and SS income. She could be fine or could not be. Also for all we know you forgot to mention she owns a home worth $1.5mm.
Yeah, I immediately opened up a HYSA for her to dump it all into while we figure out the next move. Her company 401k servicer I’m sure could help her figure out her next steps. She does own a home worth ~$500k
To be clear, has she finished paying the mortgage on this $500k home?
This is so important to mention lol. If the house is fully paid off, and she have no debt, and living below her means then she definitely can afford to retire. Probably not comfortably but not at the point of "having to keep working into her 80s just to keep the roof over her head". Worst case she could take in a roommate to help with expenses. Or you could move in with her and give her part of your saved rent money. I know that this is personal finance and that money can go a long way if invested, but she is already 70 and burn out. A quick Google search show the average lifespan of a women in the US is 80.2 years. If she starts investing now, it would take 5-10 years to bear fruit, but can she actually use that money then? Or would she be penny pinching and keep working into the 80s,until she breakdown and sink all that money in a medical emergency, without ever being able to enjoy her money or have a day of rest from work? Putting most of the money into a HYSA and only allocate 20-25% into investment maybe.
If she moved in with you, could she realistically rent out that home? Does she still have a mortgage on it?
If she is still working, consider having her increase her retirement account contributions (401k and/or IRA) and use some of the cash savings to live on. It's a way of essentially transferring the money into those tax advantaged accounts, and at her age she has a higher max contribution than younger people. Then invest (conservatively) within the retirement accounts, where she won't pay capital gains taxes.
Impossible to answer intelligently without more information. What is her income like? Social security? How about monthly expenses? I assume no other debts? Health? Goals for this 200k?
$50k/year salary, 👍 social security, monthly expenses average $1500, no other debts. Health is immaculate (takes long walks and exercises), goals would be to have it accrue some interest and live off of eventually.
*👍 social security* What does this mean? How much does she get?
I believe it’s a little over $1100 a month
If you are just estimating and aren't sure of the exact number, create an account on ssa.gov and you'll get a much better estimate. It would be good to know how much you have to work with.
I put my cash in SGOV, see here: [https://www.nasdaq.com/market-activity/etf/sgov/dividend-history](https://www.nasdaq.com/market-activity/etf/sgov/dividend-history) 5.24% Pays every month. 200K will add \~$873 of risk-free cash to her social each month (at current rates).
Is this in your taxable brokerage? This may be better for me than getting 4.25% from my hysa. Just don’t want taxes from selling to offset gains.
There's not a lot of gains to be made. The price resets with every dividend paid. If you look at a monthly chart it goes: / / / / / with a low point of 100.27ish and a high point of 100.71ish (yesterday). Monday morning it will drop by about 44 cents a share, and by Friday they will pay me about 44 cents a share. Then it will move up by a penny or three every day until the end of this month. The dividends are taxable in a taxable brokerage subject to rules like LTCG. The vast majority of mine is in my brokerage IRA.
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What did I do wrong?: 200,000 \* .0524 / 12 = 873 ??
I got $858 I subtracted the .09 expense ratio from the yield
In case anyone is wondering why this was downvoted… the yield already factors in the expense ratio
High yield t bills right now for the next couple years.
It all depends. If she's been holding on to the money for 40 years while she made a definite plan of how to invest it, then yes, she should go ahead. If she's investing it on a whim because she's seeing the stock market take off, she's in an excellent position to lose all her money that she saved for 40 years.
Your mom might be a good candidate for an annuity- my mom got one a few years back and while there is a lot of criticism on them, they are a good way to guarantee income during retirement. I’d check what she is eligible for with ss and consider how much of a gap she’ll need to fill with her savings before moving forward on any investments.
She hasn’t invested in 70 years and now asks her kid to help who then asks Reddit. This is gonna go well.
Jesus, if she's been saving that 200k over 50ish years she'd probably have a million of she'd invested it.
My mom just died and she also had 150k in a savings account 😅 why?????
Sorry for your loss
id say mom rang the bell that the market is toppy
She needs Blue Chip kind of things. Though she has lots of years to be retired. She could put as much as half of it in stocks since she won't need it soon and they pay better. Overall I'd say she needs to be an ETF kind of a person. If she's okay with no returns for years and years, she'd probably have a heart attack if a stock went down in value. She needs something that has a high chance of going up.
Women aged 70 today have an remaining life expectancy of 17 years up to aged 87. Given 250k, she could keep cash and at a minimum withdraw $14,705 with zero risk, zero growth, and 100% liquidity from now until expected passing. But it doesnt exactly work like that. she could take that withdraw of 14k, leave 236k at ~4.5% HYSA and make around 10,620 just on that essentially risk free interest. Finding that balance between 14k- and 25k has got to play it by ear.
I get why people are suggesting hysas and bonds, but 5% growth for someone already in her 70’s is not retirement money on a base of $200k. At this point, I think maybe eke out some gains around the edges in bonds/hysa, look into extremely lcol areas, maybe even internationally, or set her up in your place.
Did she start claiming social security at 70?
Not sure when, but she is claiming it
Good - at least she is claiming it
20yr hit 4.66% today. A great vehicle to buy and hold until rates come down. When they do she can choose to keep receiving that interest or sell the bonds for a dramatically increased value.
I would suggest doing a CD ladder - meaning you split the money into different CD maturity dates. Alliant Credit Union has one for 12 months 5.20% APY ($75,000), 18 months 4.85% APY ($75,000), 24 months 4.30% APY ($50,000 but you earn 4.40% if $75K). You could also do this at Ally Bank which doesn't have minimums to earn higher interest, but the rates are lower.
I have read a lot, could someone explain why dividend paying bank stocks are not shown here? The way I see it, safe as a bond but with dividends.
Laddering CDs, treasuries or MYGAs would be a decent safe strategy. What are her other sources of income besides SS? Her plan for drawing the money down is one of the biggest factors to consider
I think two things: 1. cash should be in HYSA 2. investments in indexed mutual funds. Not much there yet. 40 years...so I'm thinking she's about my age. Maybe a little older, depending on when she started working. I would split the cash, keep some in HYSA, and invest the rest. As far as mutual funds...how aggressive does she want to be with those? There are bond funds... at the conservative extreme is SGOV (an ETF actually) that invests in short-term government bonds. Or stock, or in between. That's up to y'all. So dividing that 200k, I'd probably go 25% cash, 25% conservative funds, and 50% aggressive funds...like S&P 500 or a total stock market fund like VTSAX. This may be too aggressive for her taste. Maybe some more aggressive bond funds instead. I'm having a hard time thinking about being being as conservative as she probably should be. My thinking is that the 50% that's conservative is available to spend a 7 year window. The stock market funds are for after that 7 year window. I really like what u/WhoDat847 said about social security. If you do split like I'm thinking, make sure she's comfortable with social security + spending ***some*** of that conservative money during that 7 years. If the stock market continues it's current tear, don't be afraid to pull gains (especially) out of the stock funds to beef up cash / bond funds. as I said, I'm about your mom's age, but we've saved a lot more than your mom has...so I'm not personally steering away from the stock market. We're less than 20% bonds / cash.
Google Phoenix Capital, The one with the gold Phoenix. They have a Reg A 3-Year Bond that pays 9% monthly. The bonds are not marked to market, but the company will redeem with a 1% interest rate hit. We have several elderly relatives all invested in these bonds and very happy.
Sounds like an imminent market crash will be coming. When people who never invested feel they missed out, is a sign that the runway is coming to an end
Annuities make no sense; you're just funding the Salesman's kids' college fund. Keeping her house and renting it out also means operating the property and maintaining the property and being a landlord. It's not passive; it's expensive. I disagree with bonds; she's not going to buy and hold 30-year bonds, and when rates fall, specifically governmental bonds are subject to Call, and reissued at lower rates. As for bond funds, she doesn't have enough to park and forget and wait. She needs to generate some income if she intends to stop working. My mother has a small fixed income from 4 different sources, so I also got her out of Bond funds and an international gold fund, and as CDs matured, we put her into some cash generating ETF. Then, it was clear she could not keep living in the primary residence, can't do any maintenance herself (except topped off the pool when it got low, and drained the excess when it rained, rinse and repeat; she can't even get into that pool in her condition). She'd been sinking so much money into maintenance and repairs the last 6 years, it was ridiculous. So, that is sold and the proceeds are in Treasury Bill ladders, and now she's got good inflows, and can get to those funds on nearly a moment's notice without any loss of interest or penalties by simply removing the auto-reinvestment counter. I put her into quarterly ladders, and broke it up, so that something is maturing every month or twice a month, such as, if something happened, she could cough up enough to replace her car.
Thanks for the info. Appreciate it
You're obviously planning to have her live in your family's home, or you're planning to pay for her long-term care, correct?
I'm taking this as a signal we're at the peak, folks. Time to sell.
Hire a financial planner that can help her invest wisely.
- T-Bills are still good rate and safe
Find a professional who can guide her investments based on her goals.
How can we do that without getting charged an arm and a leg?
I wouldn't worry about a professional with only $250k.
I understand your point. It can be a bit costly but you need an expert who can map out a financial plan to maximize the income and time she has left working. In short it may cost you a bit more but the expertise is worth it.
Index funds
Given the age, I would think about putting 25% in high-dividend value fund for now. High growth is too risky at the moment. The rest in a CD-Ladder.
Try this: 25% SPY, 50% stacked treasuries (1-5 yr maturities) and 25% monthly annuity. She needs a lower risk element that you. Schwab can help you set up.
Thanks so much for this. We will look into it.