SAFE Investment

[YuccaFlatsRanch]

Other than land what kind of safe investments are there out there that pay interest that at least matches inflation. My elderly mom may be selling her home in California and coming to live with us. She wil have approx $500K to invest - SAFELY.

Any ideas and what would be the approx current interest rates.

[skruzich]

Originally Posted by YuccaFlatsRanch

Other than land what kind of safe investments are there out there that pay interest that at least matches inflation. My elderly mom may be selling her home in California and coming to live with us. She wil have approx $500K to invest - SAFELY.

Any ideas and what would be the approx current interest rates.

Stock market is probably the best investment for someone over a long term investment. 10+ years is longterm. Only two times in history has it lost money over a 10 year period. If you invest over 5 yer or even 1 year your risk goes sky high.

No load Mutual funds are also a good investment too. Look at southamerican investments in this.

She can also get into the qqq fund which spreads risk across all stocks in that group. This one is pretty safe.

But if she has 500k to invest, I would break it up into 50% moderate risk, 30% in minimal risk, and 20% in a higher risk growth fund. I know my mom uses Scwabb and the fellow there has kept her investments growing. She has lived the past 10 years off of her investments even when 9/11 hit and the market took a major hit. Goes to show that good management is worth the money and that this economy isn't that bad.

[gccrook]

You really need to talk to someone at your bank that is an investment manager. THey can help lead you to some sort of annuity that would be safer than the stock market. If your mother is elderly, then she does not need to risk even part of her savings. If she needs liquidity, she will have to find a money market type fund. THere are options, but they vary by age and need.

[palani]

I avoid the stock market. Think ENRON times 10,000. Everyone uses creative accounting these days.

The stock I purchase doubles every year. Buy a cow and throw a bull in with it and next year you have two of them ... :-)

[YuccaFlatsRanch]

Mom is 81 and in an enviable position. She will have her $500K, has a great retirement from my dad of just short of $3500.00 per month. By and large the return on the investment will be used to help my brother who is a no good BUM (52 yrs old and has never worked enough to even qualify for minimal social Security), or left in the investment to grow for her estate.

Add in to this that she will be coming to live with my wife and I virtually cost free, and she will have the best of all worlds. Our homestead is paid for free and clear except for taxes and a desire to purchase about 10-15 more acres to become more independent in pasture and hay land.

[coalroadcabin]

Professional help is needed here. DO NOT look for a financial advisor in the phone book-only go with a referral from a trusted friend. (That includes seeking advice from the investment dept at your bank-some are good & some are lousy.) While I am ususally a fan of DIYers, when it comes to investing your money, I don't think you should do it yourself - unless you can tolerate quite a bit of risk OR you really know what you're doing.

[devittjl]

DO NOT... I REPEAT DO NOT GO TO A BANK INVESTMENT "ADVISOR"!!!!

This advisor are paid on commission. The better their"advice" the better their paycheck. Same thing for most financial advisor connected to a Brand Name (Waldell Reed, Primerica, Allsate, etc.)

Your best bet is to contact a fee-only financial planner with a specialty in elder care planning. A fee-only financial planner does not have a paid relationship with the investments they recommend so do not get paid to promote one fund, stock or anuity over another. They get paid by you based on the amount under management. They also look at this as a long term relationship, not just investing your money and getting their commission.

The initial cost may be more,but probably not. They will take into consideration things such as estate planning, long term care, and asset allocation.

Check here for info and planners in your area
http://www.napfa.org/index2.htm

[Cosmic]

In her position she wants to spread the money around.

Typical candidates are

muni bonds, can get 4% toward 6%. Thing to be aware of is how volatile is the NAV. Good muni's aren't exactly cheap now. I like and have used Eaton Vance for years and years. Always had a good stable NAV range. Income is tax free from the Feds and a portion from most states.

Some bank CD's. Can get in the 3%+ range to park money. Must be aware is it insured or not for the full amount??? A good way to park some of the money as "Ready Cash" that is as liquid as a check book. Fidelity Money Market funds can be even better, fully insured and altra liquid. Very low risk, many options to choose from.

Stock index funds. Like the QQQ, etc but they must be managed well and you must know when to bail out when things get soft.

One good potential investment is to buy out some family member's mortgage and get the interest payment on that. Must be very stable person and done under well known conditions with the proper paperwork. In effect Granny becomes a banker.

Some very selected stocks. Maybe one I love. Ultra Petroleum (UPL) even at these prices. Has no where to go but UP.

Can even buy tax credits, which is a way of getting tax money usually paid back into your pocket. Can have a capital gain aspect also .

Trick is not get all the eggs in one basket. Understand the tax picture. Know how "Tied Up" the money is. Fully understand the risk assumed. Beware of everybody claiming to be a financial planner, advisor, expert. They all get their paychecks first.

[norris]

Wall Street is a crooked insiders game. Sometimes you can beat it but the odds are against you.
The SAFEST investment is silver, IMO. That means physical silver that you hold in your hand, not "paper silver" (promises). The best way to buy it is the bags of pre-1965 US 90% silver dimes, quarters and halves.

http://goldismoney.info/forums/index.php?

At todays prices it's hard to beat.

Remember that the US hardly manufactures anything anymore and the dollar is backed by nothing....thin air. Th US economy is going to "correct" in a big way, it's just a matter of time. When it does, homesteaders will have a lot of respect from the general public because not many people will be able to make it on their own without working lots of overtime.

[fordy]

....................Personally , I'd committ the maximum to CD's as they will be fully insured and set them up on maybe 6 month terms as interest rates are going to climb over time and you will beable to renew at subsequently higher rates on 6 month rollover periods . The remainder I believe I would invest in Triple "AAA" rated municipals with a proven record of REpayment . She may feel committed to susidizing your "brother" but once she is gone you can allow him to fend for himself . fordy..

[Michael W. Smith]

Well, with mom being 81 she might have a year left, or she might live another 25 years. One thing you might want to think about (if she wants to leave youi kids anything) is to start gifting. She can gift $11,000.00 / year / person. She could give you $11,000.00, your wife $11,000.00, your brother $11,000.00, each of your kids $11,000.00 etc. With selling the home, getting cash from the bank, that money from her home could just "disappear". I'm not saying that she should give $11,000.00 to everybody in the family, but if she trusts you, part of that money could be put in your name. If mom needs the money, you have it and can give it to her, but if she dies, you can split the money with the brother (or whatever arrangement your mother thinks is best). The reason I'm mentioning this, is if she ends up in a nursing home, $4000.00, $5000.00, $6000.00 / month or more could be eaten up fast. If the money is in your name, you won't have to pay inheritence taxes on it, and the nursing home can't get it (if it's hidden correctly).

If mom wants her money to with as she sees fit and doesn't want to gift it, then that is a different story.

I believe that devittjl is correct on talking only to a for fee planner. Once you have talked to the planner, you could even invest it yourself in a mutual fund company like Vanguard. And with $500,000.00 to invest, I'm sure Vanguard would have a representative able to help you invest it wisely. Going to your bank, or local investment branch, will only make commissions for that person. They will be more than happy to "help" you but will also have you move money arround all the time to create more of a commission.

Vanguard has the LOWEST mutual fund fees anywhere. They have money markets, bonds, stocks, etc. Anything you need. And their yearly mutual fund fee might only be .45%, whereas your local investment firm's mutual fund might have an annual fee of 1.5%, 2%, 3% or even higher. I'd give Vanguard a call and discuss things with them 1-800-662-6273.

[Mike in Ohio]

My first comment is that your mother doesn't need safe investments, she needs a plan. If she wants to help your brother, ensure her retirement and perhaps pass on money through her estate, she needs to plan (or have someone develop a plan for her.

I agree with Michael W Smiths comments about considering gifting. Another thing which can work well is for her to get CDs or bonds with her as the primary owner but listing others as joint owners with survivorship. This would allow her to cash in the bonds or CDs if she needs to but would give the joint owner a stepped up basis when she passes on. This also (depends on the state) is likely to allow these assets to bypass probate.

As usual, just my 2 cents.

Mike

[Cosmic]

Not mentioned before, you may be actually a little late.

500K may have taxes to be paid. Assuming she is single. Only ~250K is exempt in most cases for a single person. Usually the tax angle must be planned out at least a year in advance. You must know what California's tax bite might be too. So may not have the full 500K to play with.

The general solution is to always never have one investment that can totally kill you if it goes sour. Nothing is perfect. Most good solutions are structured around the need for ready cash, what may be needed in the future, maxed for safe income, risk involved and how you rich you want to be when you die.

If you trust your heirs to take care of you can consider gifting it out early. The part hard to do for many people is enjoy the money. I sold my olde shack, took the money and bought a lot cheaper in a better location. Free up a lot of money to have income I can not presently spend each month. So it can allow for a change in lifestyle she may not have been able to afford before.

Lot of changes for the older person to absorb and adapt too. Should not try to do everything at once. To move good amounts of money around may take time. Markets are not always "Ready" then you are. Very bad to "Buy at the Top", just because you have the money to do so. Might boil down to that pit of a question "What does she really want to do with the rest of her life???? Good to go treking in Nepal or whatever before it really is too late.

Getting a new car is always nice, even if somebody else has to drive it. Spending some of the loot is not a crime, kicking up the standard of living ain't a crime either.

[FrankTheTank]

I'd diversify.

With interest rates rising (and banks raising rates) it would probably be wise to stick some in a MMA or CD.

Gold has always been a smart, sound way to store wealth.

Energy is something that is constantly being needed by everyone of us. Plenty of choices with oil/gas/coal stocks and funds.

Thats a lot of money, so invest it wisely...i wouldn't put all grandma's eggs in one basket!

[anojones]

I agree with others who suggest coming up with a plan, using a fee based recommended financial planner would be a good place to start. In the meantime- if the goal is to keep the money safe then CDs or a bank based Money Market account might be best. Both CDs and money markets are paying reasonable interest rates if you shop around- she's not going to get rich but will protect her money and will likely beat inflation for the time being. With safety in mind, a bank based money market account (not fund) and CDs will be FDIC insured up to 100K- so she should spread the money around to at least five accounts to make sure it is completly insured. The money market is more liquid, but you can make up a CD "ladder" to take advantage of the likliehood of future increasing interest rates. Right now bonds don't seem to be making a lot more than a CD or MMA and regardless or what experts will tell you, the stock market (including mutual funds) and precious metals markets can't be predicted and tend to have some volitility you may not want to deal with.

[rambler]

I assume you will get real help, & are just looking for ideas so you can carry a conversation with a pro.

I should think not all eggs in one basket is a real good idea.

Municipal tax-free bonds are a cool segment. You can get them either bonded by the city issuing them; or insured. So if they go bad, either the insurance or he taxpayer base is required to pay them off. They are fairly liquid, as you can buy & sell them on the market. Most run 25 years or so. They are paying about 4% now, but the cool part is they are tax free income for the most part - lthat keeps you in a lower tax bracket; makes their pay-out look like about 6%. Any pro can get you hooked up with the finer details of these. Generally sell in 5-25k chunks.

--->Paul

[whodunit]

What about one of those reverse mortgages where you take out a loan on your home that does not have to be paid back until you die or sell the home? Do all those programs require you to live in the home or could it be rented out?

If the above were possible, it would be a large return since you would have a large amount of cash up front, then a monthly amount from the rental payment. Also, since you own the home, it still goes up in value as long as real estate does, which seems to be a given in California.

[Michael W. Smith]

Originally Posted by 65284

YuccaFlatsRanch, this is a generic rant and not aimed at you, this isn't the kind of advice that you asked for. But, I do have some very strong opinions on this subject, it is the entitlement mentality that has become all too prevalent. If a person has to go to a nursing home, the nursing home WILL be paid. If someone with substantial assets, or their agent, has hidden those assets, guess who will have pay for that care....yep the already overburdened taxpayers. Medicaid in Missouri, and I suspect most states, is a huge budget item. It should be restricted to folks who can't pay for needed care, not well heeled folks that conspire to avoid paying for their own care. I'm not advocating stripping a surviving spouse of everything, but the public coffers shouldn't be emptied to preserve money for children or other heirs. I know of several instances where greedy adult children with power of attorney for their parents cashed out the assets and hid the proceeds. They soon dumped the old folk in a nursing home at public expense. In my opinion this is akin to theft and anyone caught perpetrating or participating in these scams should be dealt with severely. Stiff fines, jail time, and forfeiture of assets at least up to the amount of the ill gotten gains. End of rant.

65284, I can understand your "rant" in that whoever hides their money, the hospital or nursing home ends up getting it from the state which is using money from YOU the taxpayer.

However, when a couple has worked hard their whole life, scrimping & saving so they have a good-sized nest egg, only to have failing health in their later years, and ending up in the nursing home where their life savings is quickly taken away from them, that doesn't seem quite "fair" to me either. Especially when the state has taxed that money every year.

Why should someone who has saved their whole life simply give it all up to the nursing home, when they could let their children (or whomever they chose to give it to) get it?

Yes, one could argue that if the children are so interested in getting an inheritance, why don't they take care of their ailing parents?

I can see your point of view, I hope you can also see mine.

[65284]

Originally Posted by Michael W. Smith

65284, I can understand your "rant" in that whoever hides their money, the hospital or nursing home ends up getting it from the state which is using money from YOU the taxpayer.

However, when a couple has worked hard their whole life, scrimping & saving so they have a good-sized nest egg, only to have failing health in their later years, and ending up in the nursing home where their life savings is quickly taken away from them, that doesn't seem quite "fair" to me either. Especially when the state has taxed that money every year.

Why should someone who has saved their whole life simply give it all up to the nursing home, when they could let their children (or whomever they chose to give it to) get it?

Yes, one could argue that if the children are so interested in getting an inheritance, why don't they take care of their ailing parents?

I can see your point of view, I hope you can also see mine.

Well, I suppose we will just have to agree to disagree on this. I have worked hard all of my life, and still do to. I also scrimp and save to acquire a nest egg. Every year at tax time a good sized chunk of that nest egg is quickly taken away from me by the state, and a lot of that chunk is for Medicare. Why should they take MY money, that I earned, and would prefer to spend for things I need or leave to MY children, to simply give it all up to the nursing home to pay for someone else’s care so they can keep THEIR money to leave to THEIR children (or whomever they chose to give it to) ????????? In a very real sense they are taking my earnings/savings to give to someone else's children or heirs. Where is the "fairness" in that? If that is fair I suppose I must have a distorted idea of what fair means. Because in my warped view that epitomizes what unfairness really is.

[Wolf mom]

Nobody promised anybody 'Fair'.