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Posted: 8/22/2017 10:36:36 PM EDT
My retired mother in her 70's has decided she wants me to help her invest some of her funds. She draws a very nice pension and SS which cover all her expenses and then some. She was a saver and has a nice chunk set aside in bank CD's which haven't made anything in the last 10 years. She has watched me grow my 401 and Roth ( which she helped me start when I was 18) and I guess realized she could do better.
I'm in TN which has  the Hall income tax on investments currently at 5 %, but will decrease at  a rate of 1% a year until it expires. I was leaning toward municipal bonds which are tax free and relatively low risk, drawing a decent income relative to risk. I own some now as a safe way to save my cash for a few years until we're ready to build our new home.
I would appreciate any thoughts or suggestions the hive might have.
Link Posted: 8/22/2017 10:46:31 PM EDT
[#1]
If you decide to invest in muni's, choose general obligation bonds when possible. They're safer, backed by the state.
Link Posted: 8/22/2017 11:09:00 PM EDT
[#2]
What are muni's returning presently?
Link Posted: 8/22/2017 11:52:39 PM EDT
[#3]
Just be aware of two things regarding munis:

1.  Market forces being what they are, the end up being most effective for those in the highest income tax bracket.

2.  In a rising interest rate environment (which, with interest rates close to zero, we are in), one stands to lose a significant portion of their principle unless said bonds are held to maturity.  The additional caveat is, rather than holding your now lower coupon bonds, you could be investing in newer, higher coupon bonds so the "hold to maturity" clause is only good if you're willing to settle for the lower coupon.
Link Posted: 8/23/2017 12:15:43 AM EDT
[#4]
Discussion ForumsJump to Quoted PostQuote History
Quoted:
If you decide to invest in muni's, choose general obligation bonds when possible. They're safer, backed by the state.
View Quote
Unless they're Puerto Rico bonds.
Link Posted: 8/23/2017 2:45:00 AM EDT
[#5]
I don't invest them so I may be missing something but a quick look at all of the vanguard tax free bonds show them earning less than 1% recently.

Interest rates are going to go up and bonds are going to get hammered. I wouldn't personally invest in them regardless of age.

At 70 and doing ok financially does she really need any growth?  CD's suck but at least your are not losing principle.

My retirement accounts are 100% in stocks (mutual funds -  bulk in vanguard total stock market) but as high as the market is recently I would be hesitant to dump a huge lump sum in that has been sitting on the sidelines.
Link Posted: 8/23/2017 4:57:56 AM EDT
[#6]
I'm advising my clients to put everything they've got into canned food and shotguns...
Link Posted: 8/23/2017 5:01:28 AM EDT
[#7]
It depends on what her purpose is for that money. If it's her emergency fund then just keep it simple. If you wants to invest to leave as much to her kids it grandkids, then go mutual funds.
Link Posted: 8/23/2017 7:07:32 AM EDT
[#8]
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Quoted:
It depends on what her purpose is for that money. If it's her emergency fund then just keep it simple. If you wants to invest to leave as much to her kids it grandkids, then go mutual funds.
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This^

It sounds to me like this is extra income that she is already earning from her retirement. Unless her cost of living increases so dramatically that she flips from a surplus to a deficit on her current retirement income streams, or something catastrophic happens, she may not ever need to tap into this money. If that is the case, I think putting it in some higher return investments will be more beneficial. OTOH, if it really is her emergency fund, then decide how much she needs readily accessible and keep that in cash, keep the rest diversified.
Link Posted: 8/23/2017 7:13:00 AM EDT
[#9]
She needs to be able to access cash and have it be secure at that age, don't be locking her $$$ up in anything that has maturity times or dates that are counted in years.

My Dad had SOME of his retirement in revolving CD's [they used to pay more] but he had it worked out so one was maturing every two months, if he didn't need the $$$ he let it ride but there was always another one coming to maturity in two months.
Link Posted: 8/23/2017 3:47:02 PM EDT
[#10]
What is she investing FOR?

Does she anticipate ever needing this money?  If so then she should keep it in safe, often low earning investments.
If these funds will be doled out as inheritance that changes things drastically.  She should be as aggressive as the potential heir would likely be in their own investments.
Link Posted: 8/23/2017 11:05:43 PM EDT
[#11]
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Quoted:
What is she investing FOR?

Does she anticipate ever needing this money?  If so then she should keep it in safe, often low earning investments.
If these funds will be doled out as inheritance that changes things drastically.  She should be as aggressive as the potential heir would likely be in their own investments.
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I seriously doubt she will ever need this money barring something catastrophic and crazy. She has about a 2k+ surplus every month after expenses that just go into checking accounts and then CDs when a decent sum accrues in the checking accounts.
I would only be investing about 10% of her total savings initially, but it's pretty substantial. She has been overly conservative in her investments/savings her whole life and I guess that's why I'm leaning toward muni bonds. The rationale being it was the safest investment I could come up with that was still a percent or two better than a CD and would be mostly tax free.
I put some of our house build savings fund in TNTIX in January and it's done decent. I'm leaning towards that, but wanted some ARF opinions on the matter.
Mom I really believe is doing this for me, her only heir and her new grandchild. I do hear what you are saying about going aggressive if it's for me, but It's just hard for me to do it with her money.
Link Posted: 8/23/2017 11:10:29 PM EDT
[#12]
AARP Annuities are paying pretty good right now with close to zero risk. She could get them with her lifetime Plus a minimum payout even if she died tomorrow you'd still get the cost of the annuity - what she's received back.
Link Posted: 8/24/2017 2:01:50 AM EDT
[#13]
If she doesn't need the money she should start sending it wherever she plans on putting it when she dies.  You can give 14k or so tax free to each person each year.  Contribute to college funds for grand kids, etc.  my parents have been getting oil checks from my grandparents for years now, trying to keep the estate under the death tax in case they lower it again.  I would figure that out then decide.  It's a bad time for bonds right now, you will get killed by inflation if you do well.
Link Posted: 8/24/2017 9:38:47 AM EDT
[#14]
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Quoted:
If she doesn't need the money she should start sending it wherever she plans on putting it when she dies.  You can give 14k or so tax free to each person each year.  Contribute to college funds for grand kids, etc.  my parents have been getting oil checks from my grandparents for years now, trying to keep the estate under the death tax in case they lower it again.  I would figure that out then decide.  It's a bad time for bonds right now, you will get killed by inflation if you do well.
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Just want to say +1 to this. Inheritance/death tax is a very valid concern that many don't think about until it's too late.
Link Posted: 8/24/2017 1:08:02 PM EDT
[#15]
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Quoted:
If she doesn't need the money she should start sending it wherever she plans on putting it when she dies.  You can give 14k or so tax free to each person each year.  Contribute to college funds for grand kids, etc.  my parents have been getting oil checks from my grandparents for years now, trying to keep the estate under the death tax in case they lower it again.  I would figure that out then decide.  It's a bad time for bonds right now, you will get killed by inflation if you do well.
View Quote

Good idea on her opening a 529 plan for your child.  My dad did that for all of his grandchildren.

Also how's her health now and how long did her parents live?  If they lasted into their 90's in relatively good health then she could easily live another 15 years, so she wouldn't have to be super-safe with her investments.
Link Posted: 8/24/2017 2:04:16 PM EDT
[#16]
Regarding estate tax, looks like $5.45 million is the magic number to be under. Unless I am reading the documentation wrong and had bad information from my financial advisor.

It will take many years of giving $14,000 per person to reach $5.45mil


Estate tax reading
Link Posted: 8/25/2017 9:26:49 AM EDT
[#17]
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Quoted:

Regarding estate tax, looks like $5.45 million is the magic number to be under. Unless I am reading the documentation wrong and had bad information from my financial advisor.

It will take many years of giving $14,000 per person to reach $5.45mil


Estate tax reading
View Quote
You're not trying to reach the limit, you're trying to keep assets under the limit.

The problem occurs when you count on the limit as a stationary target and it changes. As tax laws frequently do, the death tax has changed before and I'm sure it will change again.

Real life example: A distant relative of my father's was nearing the end of her life, everybody knew it. Her assets were just north of $1M. The limit in the not too distant past was $1M for state death tax but it had increased. That increase was set to expire unless it was renewed. In anticipation of the possibility of a death-tax limit change, her POA gifted the 4 listed heirs the gift limit for one calendar year and then repeated that gift again on the 1st of January the next year, which effectively brought her assets down under the limit. They didn't have to gift that limit, they only had to gift the amount that was above the limit. The limit ended up staying the same so it was a moot point, but they saw the future and prepared for it. She did pass on that 2nd year, and if the limit had changed and the POA didn't gift that amount, the estate would have been on the hook for the death tax on  ~$100k in assets
Link Posted: 8/25/2017 11:10:39 AM EDT
[#18]
Discussion ForumsJump to Quoted PostQuote History
Quoted:

Regarding estate tax, looks like $5.45 million is the magic number to be under. Unless I am reading the documentation wrong and had bad information from my financial advisor.

It will take many years of giving $14,000 per person to reach $5.45mil


Estate tax reading
View Quote
Thank goodness...
Link Posted: 8/25/2017 1:17:25 PM EDT
[#19]
at 70 I wouldn't invest in anything risky. Stick with bonds, CDs or other short term low risk investments. I know the stock market looks appealing to many right now but we are at all time highs, now is not the time to buy into the market with large sums of money, there is a high probability of a large market correction in the next few years IMO. Recessions are typically every 7 years, the last one was 08-12' so we are ready for another.

Honestly she might just want to stay with a large cash position, given the massive amount of consumer debt, record market highs, sales numbers of residential property, auto loans, student loan debt, etc... we are heading back towards 2008 bubble numbers. 70 year old women and soccer moms talking about investing is the canary in the coal mine. You want to buy when there is blood in the street, when people hear the words "wall street" and they get furious/scared s**tless that's when its time to buy.
Link Posted: 8/25/2017 2:42:10 PM EDT
[#20]
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Quoted:

great story snipped
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Great story, thanks for sharing and the perspective. For some of us, this is uncharted waters as my parents and my inlaws are all still alive. We are starting to look around and ask these types of questions.

$5.4m is a generous number by the government but as you said it used to be only $1.0m. At one time, was the number $0.0?? As a kid, i was oblivious to these types of conversations but that's understandable.

Amazing as inheritance tax swings widely based on the political climate.
Link Posted: 8/26/2017 11:03:13 AM EDT
[#21]
There are a slew of different ways to tackle your problem Op.

This is where a good advisor would help you.

Good luck finding one..lol
Link Posted: 8/26/2017 11:35:15 AM EDT
[#22]
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Quoted:
I'm advising my clients to put everything they've got into canned food and shotguns...
View Quote
Goldline...
Link Posted: 8/26/2017 7:16:20 PM EDT
[#23]
My mom lives on dividends and SS

I'd put it in some stuff like AT&T, Verizon, southern co, Exxon,  chevron etc (computershare.com) all with4-5% yields

DNP select income fund pays about 7% annually, you get a check every month (like a bond)

Also vanguard high yield corporate fund pays about 5%

There's a lot of options out there
Link Posted: 8/26/2017 11:53:42 PM EDT
[#24]
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Quoted:
There are a slew of different ways to tackle your problem Op.

This is where a good advisor would help you.

Good luck finding one..lol
View Quote
Yes that's why I started here, I have gleaned some good info on here over the years. I wanted to get some ideas rolling before I talk to anyone. I have been on the fence for several years now about going to talk to someone about my own assets. Mom is finally going to push me into doing so I believe, because I want to be cautious yet produce a little return for her. I've done ok over the years, but I'm sure someone who does it for a living could have done better.
Link Posted: 8/27/2017 6:58:13 PM EDT
[#25]
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Quoted:


Yes that's why I started here, I have gleaned some good info on here over the years. I wanted to get some ideas rolling before I talk to anyone. I have been on the fence for several years now about going to talk to someone about my own assets. Mom is finally going to push me into doing so I believe, because I want to be cautious yet produce a little return for her. I've done ok over the years, but I'm sure someone who does it for a living could have done better.
View Quote
Maybe but I doubt it. No one cares as much about your money as you do. Our investments have done much better since we pulled away from advisors and started doing it on our own. There are countless studies that show no one can consistently beat the market and you are better off investing in low cost mutual funds and not paying the fees advisors charge.

Now getting tax advice or paying a guy an hourly rate to bounce some ideas off him is a good idea but investing in loaded funds where they make a percentage off every dollar you invest isn't a good idea.
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