My 94 year old grandmother is retired and has asked me to look after her finances, as she no longer feels up to balancing her checkbook and paying her few bills. She has also just moved into an assisted living facility. She has a monthly income from her pension and social security, which will probably not quite meet all of her expenses - She will probably need about $6,000 per year above and beyond her pension. When she needs a higher level of care in the facility, the cost goes up. She has about $60,000, which she had in safe but not lucrative investments like CD's and bond funds that were not really even keeping up with inflation. She liked the bond funds because the dividend was tax free, but in my opinion, she needs more income even if it means paying more income tax. Although she is quite frail, she is not really in poor health, and could easily live for a few more years. I would like to invest some of her money in mutual funds, and a smaller portion in stocks, while keeping perhaps a 2 year supply of cash in CD's. I want to preserve her money for as long as possible, and not just keep everything in cash and spend down until there is nothing left (by the way, whatever is left will go to me). At the same time, I don't want to make a poor investment choice and lose any of her money. Also, she lived through the crash of 1929 and has misgivings about the stock market that I do not share. If you message board members have any advice or could tell me what you would do in my situation, please do. Thanks.
Hi there, DrCatwoman,[Forgive me if you get two of this--I clicked "submit" a half hour or so ago and nothing appeared on the list.]Your grandmother has done amazingly well, to have a safe stash of $60K at age 94. Why, at her current level of care she has sufficient resources for the next ten years! You're worried that the level of care she requires will increase--entirely likely. And likely to happen sooner, not later, with very short notice. Not to be grim, but this elevated level will also very likely be short-term. Where she lives now, is the $60K (along with pension & SS) enough to cover, say, 5 more years at her current level and 2 years at the next level? 4 years and two years? 4 years and three years? If it is, then your path is clear.AT this point in a very long life, her priorities for that money are safety and accessibility. And her priorities are paramount. She is in no position to tolerate any risk at all. None. Zilch. Nor does $60K afford even one dollar for stock/mutual fund transaction fees, costs, etc.I want to preserve her money for as long as possible, and not just keep everything in cash and spend down until there is nothing left...Reconsider. You're preserving it for...when? what? Today, and the next five years or so, is what that money was saved for. Plan on spending every nickel of it on her. Move it all to the highest-yielding money market fund you can find and leave it there. Let it do what it was meant to do--protect and keep her in her final years.a stranger's unsolicited $.02kse4
DrCatwoman: I don't envy you your task, because it really can't be done without looking at "life expectancy" -- about which its hard not to become emotional.I took on a similar task about 2 years ago when my father-in-law became very ill and had to move to a board-and-care facility. Like you, his income almost--but didn't quite -- covered his current expenses and we expected those expenses to increase, not decrease. He also had a small nest egg in a CD earning around 4%. When we took over his finances, he had just renewed the CD for 2 years!I was very hesitant to do anything with his "nest egg" both because of the penalties on the CD and because this very safe investment was what he chose when he had the capacity to do so. I don't think he ever owned a share of stock in his entire life. Based on his expenses at the time, he had assets for another 8 years.Luckily, my FIL had some other assets we could liquidate. Since he would never be able to drive again, selling his car not only brought in some money, but also reduced his insurance expenses. It wasn't much cash, but it meant that he had resources for another year.Maybe your grandmother can also add to her nest egg in this way. A friend I know was able to sell his grandmother's house in the hot Bay Area market for more than $500,000 (Grandma had bought it when new for $16K) -- enough to pay grandma's living expenses in the nursing home for a long time. But even in a hot RE market, selling the house wasn't an easy decision to make. It meant that all the family members had to come to grips with the reality that grandma would never go home again. I always thought I would look at diversifying my FIL's investments when the CD came due. Sadly, he didn't live this long.While it wasn't much, he was able to pass on a small inheritance to his sons. It was always so important to him that he provide for his family, so I think this transfer of wealth would have pleased him. We, of course, would have preferred that he lived to spend it all.I am not sure that I have provided you with any practical advice in all these ramblings, but I wanted to share this with you so you would know you are not alone in making these difficult decisions.Good luck in whatever you decide. -- Suzanne
Thanks to both the people who posted. Unfortunately my grandmother sold her house in 1972 because the neighborhood was changing for the worse. She sold her car a few years back. Her only other assets are jewelry which she still wears and enjoys and won't give up yet. Please bear in mind that its only been a week since I took on this responsibility, so I am still getting used to the whole idea.
DrCatwoman, For what its worth, I completely agree with kse4 that zero risk, high yielding money market such as Vanguard Prime money market fund, or possibly that in combination with 3 and 6 month treasury bills is the best place for your grandmother's money. Don't sacrifice quality and safety in your search for more income, as it sounds like she will need to be able to count on this cash flow. BTW, my 89 yo father went through the crash of '29 and feels the same way as your grandmother about the stock market, and after all it's her money, for her benefit, isn't it? My $.02.
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