Hi all,As some of you may have gleaned from my posts on other boards, we had to move my elderly father into an Assisted Living Facility about a month ago.I have sold his house, and am totally clueless on what to do with a rather large chunk of change from the sale. About $200k +Dad is alert and oriented, but for the most part, not really interested in how we invest this money, as long as there is enough to continue to cover his needs - and there will be.We are considering laddering large CDs for him IF and WHEN the interest rates go up. However, they haven't gone up yet and the money is just languishing in a checking account which is totally ridiculous.He will probably go along with any logical suggestions from us as long as we handle it and he doesn't have to be bothered (he's 93 years old).Are there any suggestions from any of you gurus????thx,tuni
A few possibilities:- As you mentioned, CDs are probably not a bad idea. Although it would be nice to wait for rates to go up, you are losing out on yield in the mean time. If it were me, I'd look for some higher yielding CDs and probably set up a 5 year ladder. Alternatively, you could park the money in INGDirect savings account at 2% until you come up with a better idea.- This would depend on your dad's needs, but you could buy an annuity with a period certain, naming his chosen heirs as contingent beneficiaries. What you dad needs is income, not capital growth, and an annuity might do the trick. If you choose a period certain, the annuity pays out for a specified number of years regardless of whether the primary beneficiary survives. If you go this route, shop around for rates and pay attention to the credit rating of the insurance company.That's about all I've got. You don't want to take risks with the money, so there's not a lot of juice available.
Tuni wrote:Dad is alert and oriented, but for the most part, not really interested in how we invest this money, as long as there is enough to continue to cover his needs - and there will be.I am currently going through this with my mother, and it's tough.Your dad may not seem interested in the way you invest his money at the moment, but if you lose any of it, and assuming he retains his faculties, I can assure you he will be very very unhappy. I have worked with several depression era people, and they all have one thing in common: do anything you want, but don't lose a penny!!Also, don't forget about your siblings (if you have any). They will be watching your every move like a hawk, toward the day they will receive their share of it. If you lose some of it, the first thing you'll hear from them will be "I told you we should have hired a professional.".This all suggests a very conservative approach; at least at first.I think CD's do exactly what you need at the moment; total safety with at least a small current return. Current rates on jumbo CDs range from 1.85% for a 1 year to 3.77% for a 5 year. I'd ladder equally over five years. Then, with the trend to higher rates, you can be pretty sure that each time one matures, you will be able to roll it over into a higher rate.This will assure that this money will continue to grow, and most importantly, that you won't lose any of it.Then, after you build up some profits and credibility, you might consider rolling into some BBB rated, 5 year maximum, corporate bonds (or maybe municipal bonds) which are still very safe and usually yield a percent or so better than CDs. There really is no reason (from your Dad's perspective) to subject this money to stock market risks, so why do it?Note: The reason I mentioned that 5 years should be the maximum maturity is that when your Dad passes away assets will probably have to be sold to settle the estate, and bonds of longer maturation than 5 years suffer much higher losses in value during periods of rising interest rates.Russ
rkmacdonald:Current rates on jumbo CDs range from 1.85% for a 1 year to 3.77% for a 5 year. Capital One and Countrywide Financial both offer 4.3% APY 5 YR CDsRegards,FMO
FMO wrote:Capital One and Countrywide Financial both offer 4.3% APY 5 YR CDsTrue.The numbers I quoted were the average 'Overnight Rates', which is a good number to check to see if your bank is better or worse than average.Russ
In the checking account leave enough to pay his expenses at the assisted living place for six months. I am assuming there is no other source of the money to pay that than the proceeds from the house. If there is, that's different. You need enough liquid for several months' expenses. Does he have expenses that aren't including in his monthly fees there? Medical bills? Drugs? Allow for those also. Then get several CDs of staggered maturities. Perfectly safe. As the first matures, get another 5 year CD. The income and principal as needed will be used to pay his expenses. What is left when he's gone and the funeral is paid goes to the heirs. I don't know that insurance companies will issue an annuity on a 93-year old man. My dad, who sold insurance, bought an annuity when he was old, in which he was the owner and I was the annuitant. It is possible to play games along that line, but in general if you study it you will find that annuities aren't that great a deal. You'll do better with the CD ladder, or short term bonds when the rates get better. Best wishes, Chris Rosenfield
many thanks to all - it seems like laddering the CDs is the way to go - will do more research this w/e.appreciate the suggestions,tuni
Is he a veteran?
or a variant.
$20,000 Share Certificates
Is he a veteran?
or a variant.
$20,000 Share Certificates
Tuni - the questions/issues are always the same. First make an assumption about expected life -- things like general health, how does he feel about the new living arrangement i.e. some elderly people get depressed with this change and go down hill. Next there is the question of is money needed from the house sale asset. If yes, time to do some arthmatic -- Dollars divided by months for starters.If the goal is preservation of capital for an estate to destribute, there is no need to stick with bond type investments -- on the other hand bonds/CDs are good way to prevent losses of capital. (but no inflation protection)There are a lot of very smart people including Warren Buffet, George Sorros and Bill Gross saying significantly higher interest rates (at least 3.5% Fed Funds, and over 5% for 10 year bonds) are in the near term future -- say 2005. Given where rates are today, I would not tie funds up for more then 12 months. By that time the election will be history and a new Congress will be dealing with some financial problems. 2006 will begin the sticker shock for the Medicare drug plan - so I don't see any way interest rates are going to be level or go down in the period 2005 through 2010. I can see reduced benifits for medicare and social security for those people with incomes about $50,000 - One thing I did not see mentioned that might be worth considering if income from the funds is needed would be an annunity. At this point the life expectancy of your father is in the range of 8 years. An annunity that pays until death while using all the funds, would provide some cushion since it guarentees some income.GordonAtlanta(PS got your propeller on today?)
He will probably go along with any logical suggestions from us as long as we handle it and he doesn't have to be bothered (he's 93 years old).Nothing new to add, but your father's age answers the question. IMHO, have 1 year of uncovered living expenses in a checking account. Then ladder the rest in CDs. Anything else has potential capital loss and at this age, your father probably doesn't buy green bananas.JLC
I don't know that insurance companies will issue an annuity on a 93-year old man.**************************Lots of them will write an annuity with a period certain on a 93 YO. Its just a scheduled payout over a specified number of years regardless of whether the 93 YO lives or croaks.Personally, I'd just go with a CD ladder and skip the BBB corporates. Too much risk and too little reward in that market.
I am glad DF is doing well in his new home. Let me ask a question, though. I understand at his age he is only really concerned with making sure his needs are met for however long he has. What then? Has he expressed any idea on inheritence? Does he have a will (please do not leave it to the state to probate)? When you have established those intentions, then your investment goals should become more clear.FuskieWho would be willing to refer you to ING if you choose that route...
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