No. of Recommendations: 2
Gus, I recently helped my parents w/ their retirement and these are some of the steps I followed:
1. find out how much your mom needs in annual income to live comfortably.
2. find out what other sources of income she has, such as social security, pension, etc.
3. if you subtract her guaranteed income (step 2) from her required income (step 1) you know how much she must derive from her 130,000 principal investment. (investment income) Consider increases in the cost of living also.
Her investment income requirement will determine which type of investment you should make. For example if she only needs $10,000/yr. you could purchase a fixed income investment such as a prime rate trust or individual bonds (municipal, high grade corporate or US govt. bonds) and derive the required income. (I advise that you avoid bond funds.) However, if she needs significantly more investment income than can be derived from a fixed income investment, you must do one of the following:
1. Create a larger principal investment. This could be via the sale of her principal residence in addition to the rental property.
2. Live on less money in retirement.
3. Postpone retirement until she has grown her $130K principal into a larger amount.
4. Invest in securities to increase the income derived from her principal. I know that this is contrary to Fooldom. Typically you would not invest money that will be needed shortly in the stock market because of the risk caused by short term volitility in the market. However, your mother's not in a typical situation. You would have to determine you mom's tolerance for risk and consider the other options before doing this, because her stress level, ability to sleep at night and health is more important than anything.
A couple of other things to consider:
1. Purchasing a long term health care policy is a good way to protect your mother's assets in the event of a protracted illness.
2. If your mother is against leaving her home, she might consider a reverse mortgage. In this case she can remain in the home and receive a lump sum, line of credit, or monthly income for signing the house over to a financial institution. Beware though, the home belongs to the institution when your mother dies and they are expensive. Therefore, they are not for most people. Shop around because there is a big difference in the amount that various institutions will offer.
Good Luck, Scott
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