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Retirement Planning – General Question

Q: I enjoy the radio show & try to listen whenever I’m in town. May I ask you for some advice on what to do with my Mother’s excess cash. My Mother is 88 and has a good monthly income; in fact, the $ going into her checking account accumulate and we (my brothers and I) have to find somewhere to put it in order to get it out of her non-interest checking account. That time has come again and we are looking for somewhere to put between $50,000  and $75,000 (it accumulates every couple of years).

A little background: my mother gets a good retirement from the State of GA, Social Security, spousal army retirement from my deceased father’s army retirement, dividends from Southern Co., income from a mutual fund called Income Fund of America, small amount from farm activities and a few miscellaneous sources & very little monthly expenses. Years ago, I convinced my Depression-era parents to invest some of their money in the stock market, but they were still suspicious, so I bought them shares of Southern Company with its regulated monopoly electric companies and that seemed to satisfy – those shares are now worth several hundred thousand dollars.

Could you offer any advice on what to do with the $50 – $75K of excess cash mentioned above. These funds are not needed for her support, but I was hoping for something beyond a CD or a bond fund. Any advice would be appreciated.

 

A: Thanks for reaching out and thanks for listening to the show!

It sounds like your mother is in a great spot with plenty of income to cover her monthly expenses, that’s very fortunate. Without going through a full consultation, it’s difficult to make specific recommendations but you (and your family) first need to determine what these monies are purposed for? It sounds like she’s not planning on using them so are they more likely to be inherited? The goal is to develop a general time frame for the use of the money. Then, once we have an idea of when/for what the money is used, take into account the tax treatment of these dollars. It sounds like they are accumulating after-tax, in other words, will they be subject to capital gains only? 

Next, take into account the risk tolerance of whomever will be using these funds. If it’s your mother, at 88, I would presume she is more conservative than aggressive. You can then use this to develop an asset allocation (70/30 – 70% stocks/growth oriented investments and 30% bond/income oriented investments, or 50/50, 30/70, etc.) that will act as the guide rails for the portfolio to re-allocate back to.

I’m sure you’re familiar with ETFs but they are great, low-cost tools to build a portfolio with. You’ll need to do further research but I would suggest looking into ETFs that track particular indexes or market sectors that you want to own. Be sure to take into account dividend payers for the bond/income oriented side of the pie.

We hope this helps answer your question and please don’t hesitate to reach out with further inquiries. 

 


 

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