Seriously.But if you're game, my father-in-law called today. He is 87, and just sold his house (he's living with a daughter). He has a fat check and doesn't know what to do with it. He is terribly unsophisticated in finance, and will likely do whatever the nice fellow at PNC suggests.He is terrified of the market and has been for some time. A few years ago we took half of his available cash and bought him an annuity paying a little over 4%. It was the only thing that looked "guaranteed" to him except for FDIC money, which was then under 2%. It has worked out, and between that and Social Security he has sufficient income to live and help with the daughter's rent and food expenses, and occasionally go out to a restaurant.A couple months ago he took his remaining stock holdings and converted to cash. (Oh why didn't he suggest it to me?) He won't consider bonds. He certainly won't consider stocks of any type.What's left? He's not going to be a landlord, he's not going to own hard assets, he certainly won't be buying gold or commodities... He likely has between $200,000-$300,000 to put somewhere.And now he calls me and says "What do you suggest?"Well... uh... fresh out, Dad. Anybody here want to throw a nickel in barrel?
Goofyhoofy,You wrote, But if you're game, my father-in-law called today. He is 87, and just sold his house (he's living with a daughter). He has a fat check and doesn't know what to do with it. He is terribly unsophisticated in finance, and will likely do whatever the nice fellow at PNC suggests....What's left? He's not going to be a landlord, he's not going to own hard assets, he certainly won't be buying gold or commodities... He likely has between $200,000-$300,000 to put somewhere.Your father sounds a bit like mine. He hasn't sold the house - though he does have a commercial rental (his old office building) he's been trying to sell. Most of his assets are in cash. The income from the rental goes into one of those savings accounts. He does have a small S&P 500 index fund. It's worth less than 10% of his cash accounts.He's a retired insurance agent. The insurance company forced him out like 10 years ago because his business was declining and honestly he was no longer able to manage the business. They paid him a bunch of cash to transfer his clients to another agent. He also converted his Keogh account into an annuity. Between the annuity and SS, he has enough to pay all of his current expenses, but has no idea what to do with the cash.I suggested that he might want to buy some high quality munis with some of it. He wants to know why? I said because he can do better than a 1% APY (part of the money is at ING Direct). He said, "I'll never use it. You kids will eventually get it all. What do I care?" (He might not have said it exactly like that.)My girlfriend pointed out to me that: 1) we (myself and my siblings) may never get it, 2) he or his wife may need the cash to pay near end-of-life expenses, 3) worse, they may exhaust it when the first one goes so we might get stuck helping to support the other, and 4) by letting it sit, he's losing purchasing power. Of course getting my dad to think about it that way is likely to be a process. And I don't talk to him regularly, so who know if or when he might do something about it.Personally I think that at his age, a conservative, balanced fund and/or some mix of conservative investments like high quality munis makes a lot of sense. He should be positioned to preserve capital, minimize risk and maintain buying power with a little bit held aside for growth. Letting several years' worth of cash just sit in a savings account is crazy because its losing buying power - something you might need in your last few years.- Joel
Goof, Your Dad, like most investors in these uncertain times, needs to find a money manger he can trust and to let that person do the allocating and managing of what isn't insignificant chunk of cash. They're out there, maybe few and far between, but they are out there. However, if they are any good, they probably won't take your Dad as a client. Five minutes into the initial interview, they will become very polite and find a way of discouraging him from proceeding any further with them, because they'll realize he doesn't have the stomach for the risks he needs to accept if he's to beat sitting in cash. So he's dammned if he does, and damnned if he doesn't, with probably at least another eight years to live (according to the actuarial tables), and possibly as much as twice that. So it's not as if he needs to rush into a decision. Are you familiar with Justin Mamis and his book, The Nature of Risk? That's a good place for him to begin his reading, because it will provide him with a high-level framework within which the low-level advice he's now asking for will make sense. That's what he's lacking. Not specific advice (which can be found by the yard nearly anywhere), but the means of recognizing what is good advice and what isn't. A framework within which to make rational, financial decisions is what he needs most and the equanimity to accept that he's going to make some mistakes no matter what he does, because that's just in the nature of trying to best position oneself for an ultimately unknowable future. Charlie----------------- http://www.amazon.com/Nature-Publishing-Library-Contrary-Opi...
Goof,Possibly an annuity/insurance policy for long term care or in home care may be a good place for the money. It may not be the best return for him but may reduce the burden on the rest of the family down the road. One could build the policy to be paid annually and then build a CD ladder to come due in time to pay that bill. If you know a sharp and honest insurance person there may be some vehicle that could be tailored to fit those needs.That would be my best guess.jack
Goofy,perferreds.....5 to 6% return with a basket....GE, Wells, JP morgan etc.....carefully choicen perferreds.....they stay generally within a range and have a good return in this climate........with 300k his return would be around $15k to $17k.....make sure there is a decent amount of daily volume so you can easily unload them.....Dave
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