OT: Personal finance question

[LegendRider]

My in-laws have a sizeable balance in a 403(b) plan that is needed for assisted living care to the tune of $5,000 per month. The fee increase is capped at 2% for the first two years, but beyond that we don’t know. However, given the history of medical expenses, it’s fair to assume the increases will be significant in the future. The care will be needed until the end of life, so it is possible that they could outlive the savings in the 403(b), though they have other assets.

The question is about asset allocation. Equities seem too risky, especially for immediate financial needs. However, cash or cash equivalents will perform well below general and/or medical inflation. How should this money be invested?

[Gummee]

You want to talk to someone locally about this. There's things you can do but without a full background, its nigh impossible to make a recommendation.

M

[weiwentg]

My in-laws have a sizeable balance in a 403(b) plan that is needed for assisted living care to the tune of $5,000 per month. The fee increase is capped at 2% for the first two years, but beyond that we don’t know. However, given the history of medical expenses, it’s fair to assume the increases will be significant in the future. The care will be needed until the end of life, so it is possible that they could outlive the savings in the 403(b), though they have other assets.

The question is about asset allocation. Equities seem too risky, especially for immediate financial needs. However, cash or cash equivalents will perform well below general and/or medical inflation. How should this money be invested?

cash. if it's an immediate need you must invest in cash. what happens if there's another financial crisis? not likely, admittedly, but Europe could blow up. and even if the Eurozone wasn't in shambles you would not want to expose yourself to that risk.

you actually touch on a problem with long-term care. it's expensive. the costs are also unpredictable: most people won't need to go to assisted living or a nursing home, but if you do, the costs could be very expensive.

you can buy insurance. but the way the numbers work out, the insurance is just very expensive. and the companies have had problems keeping the premiums steady - I think they and their regulators have made significant headway in addressing this issue, but there could still be surprises. the future, after all, is unknowable.

but most people don't have the savings and assets to just pay out of pocket. your in laws are in a good situation savings wise, but there is the element of unpredictability.

hope things work out.

[Gummee]

cash. if it's an immediate need you must invest in cash. what happens if there's another financial crisis? not likely, admittedly, but Europe could blow up. and even if the Eurozone wasn't in shambles you would not want to expose yourself to that risk.

you actually touch on a problem with long-term care. it's expensive. the costs are also unpredictable: most people won't need to go to assisted living or a nursing home, but if you do, the costs could be very expensive.

you can buy insurance. but the way the numbers work out, the insurance is just very expensive. and the companies have had problems keeping the premiums steady - I think they and their regulators have made significant headway in addressing this issue, but there could still be surprises. the future, after all, is unknowable.

but most people don't have the savings and assets to just pay out of pocket. your in laws are in a good situation savings wise, but there is the element of unpredictability.

hope things work out.They already need LTC too late for insurance

M

[Ralph]

HA......That's a question a lot of us "older" folks have.....not just those needing assisted living care. Those of us who live off our assets....financial and otherwise...how to make them last?

I'm retired from the business....and even I don't have a convincing answer. I do know...from experience.....the things we're being told to fear about the future.....looming financial cliff, no US budget improvement ever, runaway inflation medical and otherwise, energy prices going up forever, country going to hell if candidate X gets elected, etc.....are not likely to be the things that take our assets and buying power. Because these dangers are known, (and fixable) and probably mostly already factored into current asset prices.

It's the unknown dangers I fear. Another 9-11. A dirty bomb going off somewhere in a US city. Iran situation spreading worldwide, that kind of thing. I don't think all of that is priced in. The real danger to all of our futures is probably something we're not even thinking or talking about now.

So back to your question...... Asset allocation is your friend, even if just conservative assets, and the only free "ride" in investing. Also....I don't see how you can not own SOME income producing equities.....even for the situation you describe. I also would not assume medical care inflation to continue at current increasing rate. There are some signs it's beginning to decline in some areas. Good luck.

[54ny77]

good thread. and timely for my own family situation.

i look forward to intelligent dialogue.

1centaur always has the most well-thought out postings on this kind of stuff, hopefully he weighs in.

[crownjewelwl]

there are so many high quality companies trading at really healthy dividend yields...these are companies that have plenty of dividend coverage and always increase them...companies like McDonalds, Altria, Pepsi, P&G, etc...

the market may sour, but all you care about is the absolute dollars in dividends you receive...

if 5k per month, you need 60k per year...i believe that type of account is tax advantaged??

not sure how much principal you're starting with, but to generate 60k per year you would need $2MM yielding 3%...that is pretty easy to do these days...plus you benefit from the potential of equity appreciation

this is a better route than a bond fund...i would suggest munis, but they're not paying taxes on the yield anyway...

[veloduffer]

Talk to a financial planner. A lot will depend on their life expectancy, immediate needs and size of their account. You can consider the following:


Cash for short term needs (1 yr time horizon)
Probably bonds/fixed income assets for interest income and principal safety (bonds for the 2-5 yrs). The bond maturities should be laddered so that the principal can either be used if needed, or rolled into a new bond to earn income. Plus laddering doesn't lock you into a single yield (which are at historical lows) and you can take advantage if rates move higher; plus it mitigates inflation eating away your buying power (ie, inflation rate exceeds coupon rate). Bond funds are not the same and have price movements because they are traded.
Equities possible for beyond the 5-yr horizon. Preferably large cap stocks (high quality with low default rate) and there are many with good dividend yields. The risk with equities is that the stock price may be low just when you need to liquidate the stocks.
Through some financial firms, there are principal protected securities whose return is indexed to an equity index. Your return will mirror the return of the equity index at maturity, which could be zero. But you will not lose your principal; if offered by a bank, they could be covered by the FDIC too. These instruments have various tenors that may fit your investment horizon.
Depending on the size of the account, an immediate annuity may also make sense as it would provide a stable income stream until death. The annuity will have a large upfront single premium. Annuities are often recommended last because of their costs, but did help retirees during the 2008 crash with their stable cash flow.


I hope this helps.

[weiwentg]

They already need LTC too late for insurance

M

yes. I was speaking more generally.

[dekindy]

Get quotes on an immediate annuity from insurance companies with the highest financial strength ratings.

If they have major health problems there are medically underwritten immediate annuities that have higher payout rates than standard issue non-medically underwritten annuities.

There are also immediate annuities that have inflation provisions. Plan on a minimum of 5% inflation.

http://www.immediateannuities.com/rated-age/rated-age.html

Immediateannuities.com is a great place to start but make sure that you understand the insurance company financial strength ratings and only consider companies with strong ratings.

Annuities get a bad rap and there are age issue limits because of perceived abuses. However the payouts increase with age and medically underwritten contracts can be significantly higher. I consider them appropriate for any aged person that enters into the contract with the correct information.

The problem with the investment advice above is that even though it is sound, older people lose their tolerance for investment volatility very soon into retirement. Guarantees look better and better with each passing year.

[dekindy]

Their ages and health statuses and how long their parents, aunts and uncles, and siblings lived are needed to give better advice.

[67-59]

Their ages and health statuses and how long their aunt, uncles, and siblings lived are needed to give better advice.

+1

If they're both 99 and teetering on the edge, all cash would likely be the answer. If they're both in their 60s and still relatively healthy, they should probably stay diversified. A good financial planner should help you sort through the in-betweens....

[MattTuck]

i would suggest munis, but they're not paying taxes on the yield anyway...

I would not suggest muni bonds under any conditions, towns, counties, states are in terrible fiscal shape.

This is a deeply personal choice when you have to make these decisions. Whether you attempt to 'beat the market' by actively picking individual names, or you invest in a passive portfolio through a low cost ETF, there is no guarantee.

As they say, the only free lunch in finance is diversification. Another way to put that is, you are not compensated in the form of additional return for taking on additional idiosynchratic risk (ie. holding single companies), because for very low cost you can diversify and limit that idiosynchratic risk.

Be skeptical of people trying to sell you promises and hopes. Invest in something common sense and don't put all your eggs in one basket. Invest across asset classes, regions and industries.

I read something recently that only a small percentage of hedge funds are currently beating the stock market... and these guys are professionals.

[crownjewelwl]

i said i wouldnt buy munis...

but all munis aint created equal either...you can buy columbia university bonds at a decent yield if youre a new york resident...stanford university if youre in cali etc...

I would not suggest muni bonds under any conditions, towns, counties, states are in terrible fiscal shape.

This is a deeply personal choice when you have to make these decisions. Whether you attempt to 'beat the market' by actively picking individual names, or you invest in a passive portfolio through a low cost ETF, there is no guarantee.

As they say, the only free lunch in finance is diversification. Another way to put that is, you are not compensated in the form of additional return for taking on additional idiosynchratic risk (ie. holding single companies), because for very low cost you can diversify and limit that idiosynchratic risk.

Be skeptical of people trying to sell you promises and hopes. Invest in something common sense and don't put all your eggs in one basket. Invest across asset classes, regions and industries.

I read something recently that only a small percentage of hedge funds are currently beating the stock market... and these guys are professionals.

[LegendRider]

I appreciate everyone's thoughtful replies.

Since the funds are currently sitting in a tax deferred account, wouldn't the purchase of an annuity involve taking a big tax hit? That is, does one withdraw the funds, pay taxes and invest the net proceeds. Or, is there some sort of tax deferred annuity where taxes are paid on the monthly (?) payments like regular income?

[crownjewelwl]

just buy some shimano stock and call it a day...

[veloduffer]

i said i wouldnt buy munis...

but all munis aint created equal either...you can buy columbia university bonds at a decent yield if youre a new york resident...stanford university if youre in cali etc...

From a credit risk standpoint, munis have lots of idiosynchratic risks due to structure and revenue sources. For example, I have seen a few NY Port Authority bonds that I would deem to be more like a NY State general obligation bond.

[LegendRider]

just buy some shimano stock and call it a day...

LegendRider
Shimano Board of Directors and Product Tester

[54ny77]

"There's a great future in carbon fiber, son."

http://cenblog.org/iyc-2011/files/2011/10/One-Word-Plastics.jpg

[Ralph]

If you purchased an annuity, you would hold it inside the retirement account, so taxes only apply when you withdraw from the account, just like any other investment.

Of course...there are arguments for and against annuities inside tax advantaged accounts.

[Tony T]

The question is about asset allocation. Equities seem too risky, especially for immediate financial needs. However, cash or cash equivalents will perform well below general and/or medical inflation. How should this money be invested?

Have you looked at the information available at the major firms (Fidelity, Ameritrade, etc). There is a lot of useful info available. For example: Fidelity Investment Planning and Retirement Guidance (https://guidance.fidelity.com/retirement-guidance)

[dekindy]

I appreciate everyone's thoughtful replies.

Since the funds are currently sitting in a tax deferred account, wouldn't the purchase of an annuity involve taking a big tax hit? That is, does one withdraw the funds, pay taxes and invest the net proceeds. Or, is there some sort of tax deferred annuity where taxes are paid on the monthly (?) payments like regular income?

From your question and the fact that this is not your retirement account it occurs to me you are not aware of the 403(b) account.

Most historical 403(b) investor accounts are in the form of an individual annuity contract referred to as a qualified annuity. Modern 403(b)'s do come in group 403(b) plans in the same form as a traditional 401k that you may know about but there are probably many new 403(b) plans that are still implemented with individual contracts. I am not sure since I have been out of the business for awhile. If they have an individual contract there are built in immediate annuity options. Take a look at those but they are probably not competitive as they are guaranteed amounts that have to be conservative as they may be exercised many years or decades after the contract has been issued so the insurance companies have to protect themselves. You will find this out when you get competitive quotes.

This explanation should help. You can transfer the 403(b) to an immediate annuity in the form of a qualified annuity, same as transferring it into an IRA mutual fund or brokerage account.



"Source of Funds - Qualified vs. Non-Qualified

The term Qualified (when applied to Immediate Annuities) refers to the tax status of the source of funds used for purchasing the annuity. These are premium dollars which until now have "qualified" for IRS exemption from income taxes. The whole payment received each month from a qualified annuity is taxable as income (since income taxes have not yet been paid on these funds). Qualified annuities may either come from corporate-sponsored retirement plans (such as Defined Benefit or Defined Contribution Plans), Lump Sum distributions from such retirement plans, or from such individual retirement arrangements as IRAs, SEPs, and Section 403(b) tax-sheltered annuities, or Section 1035 annuity or life insurance exchanges. Generally speaking, insurance companies use male/female (sex-distinct) rates to price qualified annuities in situations where the purchaser and/or owner is a corporation. When the annuity is being purchased by an individual, annuity rates are generally unisex. Some states, however, require that unisex rates be used for all qualified annuities.

Non-qualified immediate annuities are purchased with monies which have not enjoyed any tax-sheltered status and for which taxes have already been paid. A part of each monthly payment is considered a return of previously taxed principal and therefore excluded from taxation. The amount excluded from taxes is calculated by an Exclusion Ratio, which appears on most annuity quotation sheets. Non-qualified annuities may be purchased by employers for situations such as deferred compensation or supplemental income programs, or by individuals investing their after-tax savings accounts or money market accounts, CD’s, proceeds from the sale of a house, business, mutual funds, other investments, or from an inheritance or proceeds from a life insurance settlement. While most insurance companies apply their male/female (sex-distinct) tables to non-qualified annuities, some states require the use of unisex rates for both males and females."

[1centaur]

Taken collectively, I think the waterfront has been fairly well covered by the responses so far. I have a few thoughts around the edges.

We really do not know enough to give our armchair opinions because we don't know if this is 2 years or 10 years or 25 years. "Sizeable" means different things to different people, but most people with 403(b)s don't have $2MM in them and I'm guessing we're not talking 2 years or there would not be a question of medical inflation beyond that time. So for discussion purposes let's say $300k. $60k with 2% bumps and then real inflation will kill that off in under 5 years if the money is invested in cash. If life expectancy is 7-10 years (and could always be longer) there'd be a real need for investment return beyond money markets or Treasuries; i.e., risks would have to be taken. Looked at coolly, this question is: how do I generate X dollars annually growing to Y dollars by the end of Z years starting with P of principal and assuming no taxes or contributions are made?

If realistically the only way to hit those targets is 7% annual returns then it's going to be tough - every pension fund in the country is trying to hit that number and can't use investment grade bonds much to do so unless they assume big equity returns in a world of very slow growth and many dangers. Many investments are converging towards 1-4% return prospects annually, assuming things go fairly well. Thanks Ben Bernanke for helping provide enough liquidity to bid things up to low prospective return numbers, now what? Should we expect big equity returns in a country where consumers generate most of the GDP and their houses are under water and they can't borrow and their wages aren't rising? How 'bout Europe? Nope. How 'bout China? Tricky. Where does actual economic growth come from? The people who see and exploit opportunities, but in a slow growth world (with massive fiscal drag) that's not a huge opportunity set. The Apples of the world will take dollars away from other uses, but the rising tide that lifts all boats is not to be seen. Wrapping things in an annuity does not change that, but it costs fees, and in a low return world fees are both not falling and a large part of potential return.

What to do, if this 403(b) is really an open-ended chance to asset allocate tax free? As previously stated, dividend paying stocks, bonds with good yields (including high yield bonds, absolutely), maybe some laddered investment grade bonds to extract a little yield from the short end of the curve, diversification...all good and appropriate ideas. But here's the overarching reality - unless you get very lucky, you won't generate a diversified but kinda safe with reliable cash flow 7% after tax in this world over the next several years (unless there's inflation, in which case medical inflation will still probably be greater than general inflation due to demographic pressures and already low profitability in much of the sector). So the biggest suggestion I have is to assume you will fail and plan for what that means. Be reasonable and you'll do better than cash; swing for the fences and you might get lucky and you might crash and burn. Get a great hedge fund manager and the world's your oyster, but really, expect to swim in a sea of mediocre returns and control your risk of big losses. I suspect you will lessen the consequences of this expense but not really eliminate it (and that's assuming no plague or terrorism that changes the world). And yes, a good fee-only financial planner to really solve that X,Y,Z,P problem is great advice; just watch for the product fees that you'll pay in a 4% world.

This is the real consequence of the debt binge and subsequent chasm of the 2000s.

[LegendRider]

From your question and the fact that this is not your retirement account it occurs to me you are not aware of the 403(b) account.

Most historical 403(b) investor accounts are in the form of an individual annuity contract referred to as a qualified annuity. Modern 403(b)'s do come in group 403(b) plans in the same form as a traditional 401k that you may know about but there are probably many new 403(b) plans that are still implemented with individual contracts. I am not sure since I have been out of the business for awhile. If they have an individual contract there are built in immediate annuity options. Take a look at those but they are probably not competitive as they are guaranteed amounts that have to be conservative as they may be exercised many years or decades after the contract has been issued so the insurance companies have to protect themselves. You will find this out when you get competitive quotes.

This explanation should help. You can transfer the 403(b) to an immediate annuity in the form of a qualified annuity, same as transferring it into an IRA mutual fund or brokerage account.



"Source of Funds - Qualified vs. Non-Qualified

The term Qualified (when applied to Immediate Annuities) refers to the tax status of the source of funds used for purchasing the annuity. These are premium dollars which until now have "qualified" for IRS exemption from income taxes. The whole payment received each month from a qualified annuity is taxable as income (since income taxes have not yet been paid on these funds). Qualified annuities may either come from corporate-sponsored retirement plans (such as Defined Benefit or Defined Contribution Plans), Lump Sum distributions from such retirement plans, or from such individual retirement arrangements as IRAs, SEPs, and Section 403(b) tax-sheltered annuities, or Section 1035 annuity or life insurance exchanges. Generally speaking, insurance companies use male/female (sex-distinct) rates to price qualified annuities in situations where the purchaser and/or owner is a corporation. When the annuity is being purchased by an individual, annuity rates are generally unisex. Some states, however, require that unisex rates be used for all qualified annuities.

Non-qualified immediate annuities are purchased with monies which have not enjoyed any tax-sheltered status and for which taxes have already been paid. A part of each monthly payment is considered a return of previously taxed principal and therefore excluded from taxation. The amount excluded from taxes is calculated by an Exclusion Ratio, which appears on most annuity quotation sheets. Non-qualified annuities may be purchased by employers for situations such as deferred compensation or supplemental income programs, or by individuals investing their after-tax savings accounts or money market accounts, CD’s, proceeds from the sale of a house, business, mutual funds, other investments, or from an inheritance or proceeds from a life insurance settlement. While most insurance companies apply their male/female (sex-distinct) tables to non-qualified annuities, some states require the use of unisex rates for both males and females."


Thanks. You're correct that I have no first-hand knowledge of 403(b) plans. I had assumed they were nearly equivalent to a private sector 401(k) with various investment options, but I think it may, in fact, be the annuity type.

[jlyon]

Taken collectively, I think the waterfront has been fairly well covered by the responses so far. I have a few thoughts around the edges.

We really do not know enough to give our armchair opinions because we don't know if this is 2 years or 10 years or 25 years. "Sizeable" means different things to different people, but most people with 403(b)s don't have $2MM in them and I'm guessing we're not talking 2 years or there would not be a question of medical inflation beyond that time. So for discussion purposes let's say $300k. $60k with 2% bumps and then real inflation will kill that off in under 5 years if the money is invested in cash. If life expectancy is 7-10 years (and could always be longer) there'd be a real need for investment return beyond money markets or Treasuries; i.e., risks would have to be taken. Looked at coolly, this question is: how do I generate X dollars annually growing to Y dollars by the end of Z years starting with P of principal and assuming no taxes or contributions are made?

If realistically the only way to hit those targets is 7% annual returns then it's going to be tough - every pension fund in the country is trying to hit that number and can't use investment grade bonds much to do so unless they assume big equity returns in a world of very slow growth and many dangers. Many investments are converging towards 1-4% return prospects annually, assuming things go fairly well. Thanks Ben Bernanke for helping provide enough liquidity to bid things up to low prospective return numbers, now what? Should we expect big equity returns in a country where consumers generate most of the GDP and their houses are under water and they can't borrow and their wages aren't rising? How 'bout Europe? Nope. How 'bout China? Tricky. Where does actual economic growth come from? The people who see and exploit opportunities, but in a slow growth world (with massive fiscal drag) that's not a huge opportunity set. The Apples of the world will take dollars away from other uses, but the rising tide that lifts all boats is not to be seen. Wrapping things in an annuity does not change that, but it costs fees, and in a low return world fees are both not falling and a large part of potential return.

What to do, if this 403(b) is really an open-ended chance to asset allocate tax free? As previously stated, dividend paying stocks, bonds with good yields (including high yield bonds, absolutely), maybe some laddered investment grade bonds to extract a little yield from the short end of the curve, diversification...all good and appropriate ideas. But here's the overarching reality - unless you get very lucky, you won't generate a diversified but kinda safe with reliable cash flow 7% after tax in this world over the next several years (unless there's inflation, in which case medical inflation will still probably be greater than general inflation due to demographic pressures and already low profitability in much of the sector). So the biggest suggestion I have is to assume you will fail and plan for what that means. Be reasonable and you'll do better than cash; swing for the fences and you might get lucky and you might crash and burn. Get a great hedge fund manager and the world's your oyster, but really, expect to swim in a sea of mediocre returns and control your risk of big losses. I suspect you will lessen the consequences of this expense but not really eliminate it (and that's assuming no plague or terrorism that changes the world). And yes, a good fee-only financial planner to really solve that X,Y,Z,P problem is great advice; just watch for the product fees that you'll pay in a 4% world.

This is a the real consequence of the debt binge and subsequent chasm of the 2000s.

There is a huge amount of wisdom in this post.
Have you ever considered writing a personal finance column ala Scott Burns?
I really enjoy reading and thinking about your outlook.

[54ny77]

That's what I said earlier--wait for 1centaur to weigh in.

More wisdom and well-reasoned thought than anything I come across on the subject.

If he writes a book or newsletter, I'm buying or subscribing to it.

There is a huge amount of wisdom in this post.
Have you ever considered writing a personal finance column ala Scott Burns?
I really enjoy reading and thinking about your outlook.

[froze]

My in-laws have a sizeable balance in a 403(b) plan that is needed for assisted living care to the tune of $5,000 per month. The fee increase is capped at 2% for the first two years, but beyond that we don’t know. However, given the history of medical expenses, it’s fair to assume the increases will be significant in the future. The care will be needed until the end of life, so it is possible that they could outlive the savings in the 403(b), though they have other assets.

The question is about asset allocation. Equities seem too risky, especially for immediate financial needs. However, cash or cash equivalents will perform well below general and/or medical inflation. How should this money be invested?

Sorry to hear about your in-laws.

First off I'm not a financial guru, I recommend you get several opinions from local professionals and then weigh out your options and see which one fits. Also the average annual assisted living increase has been right about 5.6% not 2%, and assisted living communities are a bit less averaging 4%, that's what you need to plan for not 2%.

Problem with stocks and bonds is the uncertaintity of the future of the America economy, it could go great, it could get worse. I'm leaning toward the worst end of the scale due to the national debt exceeding 100 GNP with no plans to stem the bleeding. But I could be wrong.

So you have choices, but those choices have to be able to keep up with inflation and not take away from the principle if at all possible, that usually means using about 4% of the principle for income with a 1% margin for emergency, plus another 3% added in parts over a long period of time to cover increased medical cost. However that is in an ideal world of 8% plus gains, if the economy tanks then the whole thing could spiral into virtually nothingless. You could increase even more in the far later years if the principle is still there to allow it if you need to due to medical costs.

If you take the safe haven route and stick all the money into money market funds then you will be forced to dip into the principle sooner rather then later, because the interest earned in a money market account paying about 1% won't keep up with inflation which is now about 3% and raising. Historically money markets or CD's have never kept up with the rate of inflation. Those vehicles are short term, less the 12 months type of accounts you may need to pay bills with...not long tern you need to live on.

So what do you need then to grow on for a long term run? Assuming the economy does not tank you need a solid low management fee stock growth fund initially. Speaking of low fee funds you need only to look at mutual funds in the bottom 10% to 20% of the expense ratio, anything higher then that forget it, that's because for every $1 you spend on management fee is $1 less working for you, and that $1 dollar less working for you effects your dividends, interest income, and capital gains. In other words pay LESS then 1.0% for a management fee. Also going hand in hand with the fee you NEVER pay a sales load. Also look for a fund with a low turnover rate, the 20% range is idea, but for sure less then 45% a year. Once you locate low fee funds then start looking at the long term history of their performance.

I know I will buck the trend on this but I would stay away from large cap funds, those will take a huge hit if the economy tanks and they don't really pump enough in when their winning due to the fact their already over valued. A small cap index fund is idea. Vanguard and Fidelity have the best low cost index funds on the market. If you feel all small caps are too risky then add in a blend of S & P 500 low cost index fund like the Wilshire 5000. But stay away from international funds, there's enough risk in the American sector without making worse by going into the foreign sector!! But I know I'm the odd one out being against foreign stocks. A good conservative portofolo mix for retirees would be 45% Domestic Stocks with a blend as mentioned earlier, followed up with a 45% bonds, and the rest in short term; this blend should...that's a key word...should return an averge of roughly 8%.

I showed you a conservative investment approach, I'm not conservative in my own portfolio, for the entire year mine has averaged 12% with this last quarter at 14.25%. But instead of foreign investments at 21% most people do, I have that entirely in medical, risky but Principle has a fantastic medical fund and it's been by far the big winner ever since I got into it over 15 years ago, even during the 08 crash it still performed. I don't mind that risk but I do mind foreign money risk. And my bond ratio is real low at 0%, that will go up when I retire in 10 to 15 years. So the remaining balance of my funds are half and half in small and mid cap.

All of what I said is subject to opinion, and no one is ever right when it comes to this sort of stuff. In fact there has been actual test done using money managers vs monkeys in one test and blind kids throwing darts in another test, and every time the monkeys and the blind kids beat the money managers.

The best thing to do is not to have all your eggs in one basket as it appears to be now with you in-laws. I have my stuff split between a 401k and rental property, I'm trying to get them both so that by the time I retire and will get about 1/2 of my investment income from rentals and half from the 401K, and either will keep me going by themselves combined with social security; so if both are doing well so will I! But any and all investments have risks, you must know that.

All of this blah blah didn't help you the least bit did it? LOL!!

[GuyGadois]

Yikes, lots of good advice and advice to skip here. The best advice is to talk to a pro that can listen to your situation and present their ideas. There are so many moving parts.

GG

[froze]

Yikes, lots of good advice and advice to skip here. The best advice is to talk to a pro that can listen to your situation and present their ideas. There are so many moving parts.

GG


That's exactly right.

[Gummee]

Yikes, lots of good advice and advice to skip here. The best advice is to talk to a pro that can listen to your situation and present their ideas. There are so many moving parts.

GG

There an echo in here?

You're going to run into a few different kinds of advisors: ones who are out selling products, ones who are out looking for $ to get under their management, and ones that are trying to find the best thing for their clients. These basic categories aren't mutually exclusive, but there's differing recommendations as to what kind of advisor you end up talking to.

For example: there's advisors out there that don't like annuities. There's advisors out there that don't like life insurance. There's advisors out there that can't help you with securities so all they can talk about are annuities and life insurance.

The OP's parents are behind the 8-ball. Time to think about 'how best to proceed. Could be selling the house and using that $ to fund an immediate annuity. Could be a reverse mortgage if one/both of em are living in the home. Could be use the 403(b) to offset a portion of the costs and have family members help with the rest. Could be a few things.

Regardless, the sooner you start fixing the problem, the smaller the problem you need to fix is.

M