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Author: davidcaruso Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75794  
Subject: investing for income at 77 Date: 9/17/2003 11:48 AM
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So my mother-in-law (age 77) just came into some ca$h after her cousin died. She would like to invest some ($120,000) to suppliment her monthly income. What would be the best vehicle to do this?

Individual bonds? How would the interest be delivered to her?

Will this process require a bank and a banker or can I do this for her through a discount online broker?

DC
--Always helpful, just ask.
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Author: PolymerMom Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37218 of 75794
Subject: Re: investing for income at 77 Date: 9/17/2003 10:06 PM
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In general, the bonds can be held at a broker or a trust account at a financial institution (bank) and the proceeds can be set up to go into a "sweep account".

Check out Jane Bryant Quinn's book on investing - either from your friendly local library or buy your own copy. She does a decent job of looking at all the options.



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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37220 of 75794
Subject: Re: investing for income at 77 Date: 9/18/2003 9:49 AM
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She would like to invest some ($120,000) to suppliment her monthly income. What would be the best vehicle to do this?

Individual bonds? How would the interest be delivered to her?


IMHO, the best way is a laddered CD portfolio. I used to think individual bonds were a good idea, then the Enron/WorldCom fiasco hit. Bonds are only as good as the company behind them so you can lose your principle just as if you were holding stock. CDs are FDIC insured and you could manage them at any bank or through your online broker.

JLC


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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37221 of 75794
Subject: Re: investing for income at 77 Date: 9/18/2003 12:49 PM
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I would suggest one of the low cost Vanguard bond index funds. It is much simpler to manage than individual bonds and much more diversified. I believe that she can just set it up to automatically deposit the dividends into her checking account.

She may be thinking of bonds as a safe investment but make sure that she knows how badly she will get clobbered if she is holding long term bonds and interest rates go up. Long-term bonds aren't necessarily bad, you just need to know the risks and invest accordingly

If she does not need all the income from the bonds right now you might have her look at putting part of the money in iBonds(a type of savings bond). see;

http://www.publicdebt.treas.gov/sav/sav.htm

You will need to read up on the restrictions on these (can't be cashed for 6 or 12 months after purchase and there is an interest penalty if cashed in five years, can only buy $30,000 per year(?))

A possible plan could involve something like buying number of $500 or $1000 bonds and holding on to these for several years then cashing them as needed. The current iBond rate is 4.66% which isn't bad for what you get.

Greg


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Author: drnonlinear Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37226 of 75794
Subject: Re: investing for income at 77 Date: 9/18/2003 4:59 PM
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I'd check out annuities issued by charitable and educational institutions. At her age the payout is over 10%, it's an annuity so it keeps paying until her death (unless she wants to pass on assets to her heirs) and there are some tax benefits too. So if there is a cause she is into, she can do good for both.

-dr.nonlinear-


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Author: davidcaruso Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37230 of 75794
Subject: Re: investing for income at 77 Date: 9/19/2003 9:44 AM
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I'd check out annuities issued by charitable and educational institutions. At her age the payout is over 10%, it's an annuity so it keeps paying until her death (unless she wants to pass on assets to her heirs) and there are some tax benefits too. So if there is a cause she is into, she can do good for both.



Is there a financial website that can provide this information or should I contact a financial planner? I would like to be as informed as possible before paying for advice?

Maybe I can combine iBonds, CD ladder and this possibility (charity annuity)...any more thoughts?

DC


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Author: wcfenton Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37231 of 75794
Subject: Re: investing for income at 77 Date: 9/19/2003 10:29 AM
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I think that Real Estate Investment Trusts (REITs) might be worth checking into as another income type investment. The following site provides a great deal of information about REITs:

http://www.investinreits.com/

Also, the Real Estate & REITs Board would gladly provide their perspective on the subject:

http://boards.fool.com/Messages.asp?mid=19601612&bid=100061

REITs can be invested in as individual companies/stocks or in an index fund that covers many of them. They are available from Vanguard in the form of an index fund (VGSIX) and are also available as Exchange Traded Funds (ETFs). In the way of personal disclosure, I invest in iShares Dow Jones U.S. Real Estate Index (IYR) which is an Exchange Traded Fund. It has done rather well during this last year.

As you can see...there are a host of possibilities that are classified as "income producing investments". I'm sure that you will find what is best for your particular situation.

Best regards,
Bill


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Author: drnonlinear Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37232 of 75794
Subject: Re: investing for income at 77 Date: 9/19/2003 1:58 PM
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Hi DC,

I did a search on Google for "charitable annuity" and got many hits, e.g.,

http://www.clarku.edu/alumni/giving/plannedgiving/options/lifeinsurance/channuity.shtml

I am pretty sure most universities and big churches etc. offer annuities like these. I did not find one master list.

HTH,
-dr.nonlinear-


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Author: familyceo Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37233 of 75794
Subject: Re: investing for income at 77 Date: 9/19/2003 6:41 PM
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I just went thru some of this for my mom. This is what worked for us.
3 $10,000 IBonds 4.66% (maximum $30,000 per yr per ssn)
1 yr CD 1.7% $30,000
2 yr CD 2.5% $20,000
3 yr CD 3.0% $20,000
Money market fund 1.1% $25,000
I got the forms from the bank for the IBonds. After the first of the yr you have to go thru the internet for purchases.
She also has $$ in a life insurance policy paying over 4% and quite a few shares of stock in the hometown bank.
She is 84 and I have her money projected to last 12-15 yrs, maybe longer.
Oh...and she has health/nursing home insurance.
And don't forget POA for finances and/or health.

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Author: PosFCF Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37234 of 75794
Subject: Re: investing for income at 77 Date: 9/19/2003 8:22 PM
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davidcaruso

So my mother-in-law (age 77) just came into some ca$h after her cousin died. She would like to invest some ($120,000) to suppliment her monthly income. What would be the best vehicle to do this?

Not nearly enough information here to give a good answer. What level of supplemental income is needed/desired? What is your mother-in-law's experience level vis-a-vis stocks and bonds? What is her tolerance for risk? Does she have an existing relationship with a financial advisor? What role will you play in all of this? What is her taxable income situation now (i.e. will added income change her tax brackets?) Is the added income necessary for expenses or will it just be accumulated? What is her health status? How will whatever securities are eventually gotten be titled (probate and estate considerations here) etc., etc.

Many good financial advisors will give free consultations on the chance of getting her account.

The above questions don't have to be answered in a public forum, but they should be addressed as a matter of course with any good financial advisor as part of the "know your client" process.

PosFCF


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