My friend's in-laws have recently sold a small business and consider themselves retired. As I understand it, they have about $1000/month social security; and $300,000 in cash. They are living on their cash, and my friend is trying to figure out if there's a way to help. He can't convince his father-in-law to take a part time job; and they have no retirement of any sort other than this cas. A financial advisor, who looked at their situation, said "their money will run out in 8 years, and there's nothing we/you/I can do."Are there any ideas of how this money could be invested to help support this aging couple and ease my friend's concerns? Or are they really just doomed to run out of money in 8 years?
They are spending around 1% of the original balance a month. I could make a Ramsey comment here, but I will resist. There is no investment that can sustain a 12% withdrawl rate. If he could convince them to consider an immediate fixed annunity, at least they would not out live the annunity. If they own there home, they might be able to use a reverse mortgage to float them for awhile. Debra
My prediction: After they get some experience with the regular decline in the amount of their assets, they will modify their behavior.If they don't they'll be among the many who go back to work or live on what Social Security pays them.Seattle Pioneer
They are spending around 1% of the original balance a month. I could make a Ramsey comment here, but I will resist. There is no investment that can sustain a 12% withdrawl rate.If he could convince them to consider an immediate fixed annunity, at least they would not out live the annunity. If they own there home, they might be able to use a reverse mortgage to float them for awhile. Debra I don't see in the post where it says they're spending 1% a month.If the couple has the 300K invested in conservative investments and can live on 24K a year, ( 4% of 300k, plus 1000/month SS) then it may work.Sue
Insufficient info to draw any conclusions.You need to know how much they are taking from the $300,000 per month or per year to live on.And what their monthly expenses are. And what their age is, and othehr assets such as a home, other property, pension or other income.Without that, you can make up any scenario.If the money will be 'gone' in 8 years, it would seem that they are taking too much out. Without the details, no one else could suggest anything else.t.
I don't see in the post where it says they're spending 1% a month.If the couple has the 300K invested in conservative investments and can live on 24K a year, ( 4% of 300k, plus 1000/month SS) then it may work.Sue Working back from the numbers listed. They are expected to spend the $300,000 within 8 years (96 months). To do that they are spending approximately $3,000 of the $300,000 a month, plus the Social Secturity. It isn't an exact number, but is a good approximation. 4% of $300,000 is $12,000, which means that they would need to cut their current spending by about half for this to work. Currently, they have no interest in cutting back or increasing income. One or the other must occur or the money will be gone within 8 years. The question was if there was anyway to invest the funds to support their current lifestyle. The answer is no. Debra
Based on the little information given, the only way is a lifestyle change and move to a low cost area to live. Even that may not be enough.Calvin
Because of the housing bubble and not knowing what their local housing market is like I hesitate to mention this but you can take this as more of a brainstorming idea than a real suggestion.When my in-laws had their modest retirement home built they had an apartment designed into the back of it so they would have some retirement income. This way the house would basically generate enough income to pay for the maintenance and property taxes so that they would have their housing covered as long as they were able to live independently. The plan was that if they ever need to move to a nursing home they could then sell the house to pay for their nursing home. Your friends in-laws could do much the thing if affordable duplexes are available in their area. For what it is worth, I suspect that you haven’t gotten the whole story.Greg
Debra:4% of $300,000 is $12,000, which means that they would need to cut their current spending by about half for this to work. Currently, they have no interest in cutting back or increasing income.Well put.When I read something like this, I shake my head and smile sadly. Cut back, as you said, and they should be fine. BTW, we live on maybe $30K a year, most of that SS plus some money I take from an IRA that I actively manage myself, and have for about 10 years. We have a small mortgage, eat out most days for lunch or dinner, pay our other bills, and basically enjoy life just fine.These people lack a sense of reality, and, unless they wake up and smell the coffee, they perhaps WILL run out of money in 8 years (or so)!And that is just plain dumb.Vermonter
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