My Dad is 86, and I've recently had to take over managing his finances, because he is suffering from Alzheimers.

 He has been with a big broker for 25 years, and his portfolio is 70% stocks, 15% bonds, and 15% cash-type investments.  They have him in a managed account that constantly trades stocks, but is just barely outperforming the market as a whole after fees but before taxes.

His portfolio is currently about $425k, down $50k over the past 6 months.  He just went into assisted living, and needs to begin drawing $50k/yr to pay for that.  Previously he only withdrew his min. IRA withdrawl.

His portfolio mix seems very risky to me, but I'd like general perspectives on what the group thinks.  I'm not fond of selling in a down market, and I won't make any changes without consulting a (different) professional, but like to get some common sense persepctive as well.

Any thoughts?

My Dad is 86, and I've recently had to take over managing his finances, because he is suffering from Alzheimers.

He has been with a big broker for 25 years, and his portfolio is 70% stocks, 15% bonds, and 15% cash-type investments.  They have him in a managed account that constantly trades stocks, but is just barely outperforming the market as a whole after fees but before taxes.

[/quote]

OMG, please, fire that broker!  That is waaaaaay too risky of a portfolio for an 86 yo.  Please don't even think twice about firing this person and don't listen to their crap about what they have done for him all these years.  Fire the broker. 

Please give us more specifics on the portfolio so you can get more specific advice.

[quote user="JimBBBBB"]

His portfolio is currently about $425k, down $50k over the past 6 months. 

[/quote]

At 86 yo, you can't risk that kind of volatility.  Fire the ahole broker.

[quote user="JimBBBBB"] 

He just went into assisted living, and needs to begin drawing $50k/yr to pay for that.  Previously he only withdrew his min. IRA withdrawl.

His portfolio mix seems very risky to me, but I'd like general perspectives on what the group thinks.  I'm not fond of selling in a down market, and I won't make any changes without consulting a (different) professional, but like to get some common sense persepctive as well.

Any thoughts?

[/quote]

Find a fee-based financial advisor to go to for advice.

Hold on a moment.  Is this portfolio too risky?  I'm not sure.  Somewhere in the mid 80's, people who have "enough" money in their eyes realize that they're not going to run out of money and invest to grow capital to leave a legacy. 

His portfolio is 70/30 and he was not withdrawing except for the RMD.  He is 86, so a 10 year time frame takes him to 96.  You say he's going to need to withdraw 50k/yr for the assisted living.  What was he living on before?  What happens to this income?  Is there a spouse?  What are you going to do with the house?  What's going to happen to the rest of his previous expenses?  How many of them go away?  His tax bill essentially goes away since the ALF is a medical expense b/c of his dementia.

This is a managed account with a lot of trading and it certainly may need to be differently invested with, possibly, someone else.  But, take your time, evaluate your options and get a better handle on your cash flow needs and options.  If and when selling, remember tax losses go away when he dies and anything you inherit gets a stepped up tax basis, although the medical expenses probably make worrying about  taxes a moot issue.  Evaluate the real needs and do some planning.

Roberta 

Hold on a moment.  Is this portfolio too risky?  I'm not sure. 

[/quote]

Really, you are not sure?  He said this:

"His portfolio is currently about $425k, down $50k over the past 6 months.  He just went into assisted living, and needs to begin drawing $50k/yr to pay for that."

He is 86 yo and has lost 10% of his portfolio in 6 months.  If his portfolio was $5M, then there still would be plenty of money left but with only $425k at 86, he can't afford losses like that.

[quote user="meyerr"]

Somewhere in the mid 80's, people who have "enough" money in their eyes realize that they're not going to run out of money and invest to grow capital to leave a legacy. 

[/quote]

If someone has $5M they have the luxury of doing riskier things with their money than someone with only $425k.  Personally, I don't know anyone who started doing risky things with their money in their mid-80's in order to leave a legacy.  If you do, fine, but I don't think that is typical.

I agree with Roberta that "risky" is not the right word.  There may be a better allocation of those funds in terms of both asset classes and diversification,  and there may be a better financial advisor, but given his age and circumstance, one can't measure risk from the few details provided.  The account may be excessively churned, but the mix may be OK. The S&P 5000 is down almost 8% over the past six moths, so 10% is not too alarming; what total return has the portfolio been  producing? What other income does he have besides SS?

I don't see how anyone can offer advice on the basis of only the information provided. I'd start by interviewing the current broker to more fully  understand his rationale and then get a second opinion from a well recommended fee based advisor, before taking any precipitous action.  Best wishes!
 

Thanks for all of your feedback and differeing perspectives.

With regard to Roberta's questions:

My mom died over 10 yrs ago.  My dad remarried, and his 2nd wife died 2 yrs ago, and left all her money to her sisters (prenup).  He owned the house independently before they were married.  His net financial situation, both income and expenses, did not change significantly when his 2nd wife died.  I've run through those calculations very carefully.

His only other source of income is social security, and the $50k that he needs to take out each year is net of social security income, and also net of the changes to his living expenses as a result of moving to assisted living.

The house is worth $300k at realistic current market value, but will take a while to sell, becuase of its location and recent new construction in the area which is still on the market.  He emotionally will not sell the house anytime soon, and will be reluctant to sell it at all.  If or when he runs out of money in his investment accounts, we clearly would need to look at selling the house. 

I'm not an expert when it comes to investment strategy, but my gut feel was that his portfolio was allocated for a 30 year old, not an 86 year old.  Some of the perspectives here have agreed strongly, and I appreciate the other perspectives.

This probably gives me enough feedback to justify at least talking with a couple of other investment professionals, and getting their perspective on the situation, and then likely moving the money management to one of them.

I would appreciate any other thoughts or considerations you all have based on the additional detail I provided, but I'm not sure that it changes the situaiton at all.

One final question - at this point in his life, does he really need a professional money manager, or could we move to a conservative mix (50% cash investments, 30% bond funds, 20% stock index funds) and save the $8k per year he pays the broker.

Thanks again for your help!

To be frank, if your father has Alzheimers and you're thinking about a revised portfolio that is 50% cash equivalents and only 20% in equities, I believe he needs a professional adviser. If you really mean cash and short maturity instruments like money market accounts and CDs, they are apt not to keep up with inflation.  That $50K is only the current care cost hurdle, which is certain to grow and likely  faster than inflation.

There are lots of risks and being too conservative is one of them.  The house is a disposable asset which can best be dealt with by the trustee or POA when the time is appropriate.

 I am in your Father's age group and am convinced that a properly diversified  portfolio can achieve a risk-adjusted  annualized total return of at least 8% over time.  Given the actuarial realities, your Father's net assets should prove adequate.  Going heavy to cash will make it harder.

I think you can accomplish this ROI or better by selecting a few good equity and bond  funds, plus cash management to meet current  expenses, thereby saving the $8K in broker fees. It would certainly be worth a one-time fee to first consult a professional adviser.  JMO and good luck

Firing the broker would be too kind.  I manage my 86 years young Mother's funds.  I say toooo risky totally inappropriate for some one that age requiring nursing care.  Previous posts with conservative allocations sound good to me but IMO leave 15-20% for some equity growth.

I agree with previous posts that your $50K is a conservative annual cost for nursing care.   Tracking my Mother's annual cost of living expenses assisted living was $41K and nursing care total annual cost of living is $81K in North Florida.  If you need to purchase personal care beyond that provided in the nursing facility you could add another $20-40K per year.  The costs beyond room and board including Rx, durable medical (not covered in a skilled nursing facility under medicare part B) etc continue to increase as her health slips.

Beyond the financial issues be sure that your father will be allowed to remain in the nursing facility if he runs out of money.  Many for-profit facilities will not accept medicare payments when the individual's funds run out and the resident must go elsewhere.  Many non-profits will allow residents to remain with depleted funds (if the networth on admission is acceptable to their admission requirements).  Be sure you know the answer to that important question.  I had one administrator dance dance dance around that question at a for-profit facility! 

To make the money management as easy as possible my Mother's funds are in 1 fidelity account for which I have power of attorney right (never a joint account, too much room for possible abuse and family discord).  I sell enough mutual fund shares to pay her bills for 3-4 months and at the same time adjust her asset allocation. Proceeds from the sale automatically transfer into her Money Market fund from which I pay her bills by online bill-pay.  The account also has checking for those Dr visits that require immediate payment.  Online dowloads into Quicken and I have full reporting capabilities and COL analysis.  It also keeps siblings at bay with complete accounting. 

Good luck and work toward a simple financial management solution you will need it.  It is a tough job but someone has to do it.  Handling my Mother's late year finances has helped me with modeling and preparing for my own retirement.

FWIW

oystereater 

The house is worth $300k at realistic current market value, but will take a while to sell, becuase of its location and recent new construction in the area which is still on the market.  He emotionally will not sell the house anytime soon, and will be reluctant to sell it at all.  If or when he runs out of money in his investment accounts, we clearly would need to look at selling the house. 

[/quote]

Can you rent the house to help generate some income?

[quote user="JimBBBBB"]

I'm not an expert when it comes to investment strategy, but my gut feel was that his portfolio was allocated for a 30 year old, not an 86 year old. 

[/quote]

Absolutely more appropriate for a 30 year old.  The fact that he lost 10% of its value is proof - that is far too volatile for an 86 year old.

[quote user="JimBBBBB"] 

This probably gives me enough feedback to justify at least talking with a couple of other investment professionals, and getting their perspective on the situation, and then likely moving the money management to one of them.

[/quote]

Try to find an hourly rate financial planner to consult with so that you won't have to worry about bias toward commission based products.

[quote user="JimBBBBB"]

One final question - at this point in his life, does he really need a professional money manager, or could we move to a conservative mix (50% cash investments, 30% bond funds, 20% stock index funds) and save the $8k per year he pays the broker.

[/quote]

I take it he pays $8k per year to a broker for an assets under management arrangement where he is paying a percentage of his assets?  That is waaaaay too much money for him to be paying IMO.

I think if you consult with an hourly-rate financial advisor, you can go over the pros and cons of various asset allocations for a lot less than $8k a year.  Then once you set up the portfolio according to the asset mix, you can consult with the financial advisor as necessary for a lot less than $8k a year.

How much a year does he get in SS and how much a year will he need to live on including taxes to be paid and maintenance/taxes on the house and medicare supplement, etc? 

I can't really tell from your post if he needs $50k + SS to pay for assisted living or if that will also pay for the house since he doesn't want to sell.

[quote user="linlew"]FIRE THE BROKER. CONTACT HIS/HER COMPANY MANAGEMENT AND LET THEM KNOW OF YOUR DISPLEASURE AND POSSIBLE STEERING INTO RISKY SITUATIONS. aT HIS AGE WITH HIS PRESENT CONDITION, HE IS PROTECTED BY LAWS WHICH ARE VERY STRICT WITH SALESPEOPLE/BROKERS AND COMPANIES WHICH "ACCIDENTLY TAKE ADVANTAGE OF THE ELDERLY""  DO NOT ALLOW THEM TO SMOOTH TALK YOU, A PERSON WITH HIS CONDITION HAS TO BE PROTECTED FROM THE THOSE THAT TAKE ADVANTAGE. I KNOW I DEAL WITH ELDERLY FAMILIES AND USUALLY I ASKED THEM TO FILE COMPLAINTS AND NOTIFY THE SECY OF STATE  AND THE ELDERLY ABUSE ORGANIZATIONS IN THEIR STATE. DONT LET THEM SELL YOU AN ANNUITY!!!!!!![/quote]

I would contact whatever state agency protects the elderly.  $8k a year should at least buy you competent advice and I can't see how anyone can say putting an 86 year old with dementia and under $500k of assets in such a risky/volatile portfolio was competent advice.  That was reckless advice.  Did the broker get commissions on top of the $8k a year?

I would also contact a lawyer to see if you have any legal remedy to get back some of the $8k yearly management fees.

If you are going to sell any of those stocks, roll them over into an IRA at a discount brokerage so that you don't pay a dime more to the current broker.

More than a few people who post on these boards are brokers so keep that in mind if any posters defend what this broker did.

HUH?

If you are going to sell any of those stocks, roll them over into an IRA at a discount brokerage so that you don't pay a dime more to the current broker.

I don't disagree about rolling them over to a discount broker to save costs but if it's a managed account there well may not be any additional charges for selling the positions but how did you plan to get them into an IRA????

Roberta 

HUH?

If you are going to sell any of those stocks, roll them over into an IRA at a discount brokerage so that you don't pay a dime more to the current broker.

I don't disagree about rolling them over to a discount broker to save costs but if it's a managed account there well may not be any additional charges for selling the positions but how did you plan to get them into an IRA????

Roberta 

[/quote]

The OP said the stocks are in an IRA.  So if they are already in an IRA, you transfer them over to an IRA with another brokerage.  Why would he have to sell the positions?

I read the original post as the only WITHDRAWALS were his RMD's not that all of the money is in an IRA since he talks about performance in terms of after taxes.  We'll see what the original poster says.

Roberta 

I read the original post as the only WITHDRAWALS were his RMD's not that all of the money is in an IRA since he talks about performance in terms of after taxes.  We'll see what the original poster says.

Roberta 

[/quote]

I read it differently, but I am not sure it matters. Whether or not the stocks are in an IRA, he should transfer them to a discount brokerage before he sells them.  He should transfer them to an IRA brokerage account if they are in an IRA or to a regular brokerage account if they are not in an IRA.

I hope the OP has all the wills and trusts/power of attorney/medical power of attorney ducks in a row, too. 

Even if the current portfolio is too heavy in equities, selling them en masse at this particular time without a knowledgeable review of each position within the context of the most likely market scenario, is a good way to convert a temporary paper loss to a real one.   What are the cost bases of these holdings and what will be the tax impacts, among other considerations of importance.   Rebalancing a portfolio has a lot of moving parts and needs to be thought through to minimize unintended consequences and unforeseen probabilities.

Would you, for example, sell GE at this point?
 

Even if the current portfolio is too heavy in equities, selling them en masse at this particular time without a knowledgeable review of each position within the context of the most likely market scenario, is a good way to convert a temporary paper loss to a real one.  

[/quote]

I agree.  A meeting with a hourly-rate financial planner is in order to establish an appropriate asset allocation.  Then you need to have a plan on when to start selling and now is not a good time for many US stocks.

 Depending on the stocks, he may want to write covered calls on them to generate income.  Again, he needs the advice of someone who is not commission based.

One thing he can stop doing now is to stop paying the $8k a year to the broker by moving the account to a discount brokerage.  That will save $8k a year.

[quote user="chamois"]

Would you, for example, sell GE at this point?

[/quote]

No, but I would sell MOS and POT.

KCallie,
Welcome to the Investing During Retirement forum. It's always good to hear from new posters.

I note that earlier you wrote "More than a few people who post on these boards are brokers so keep that in mind if any posters defend what this broker did." Those of us who have been reading Roberta's posts for years know that she is now, I believe, dealing with her third parent requiring assisting living/nursing home care. She has dealt with their brokers and has made a few posts keeping us updated on how their portfolios have held up under the strain of  these added expenses.

Most of us here have "known" each other for quite some time. Why don't you take a few minutes to  tell us a little about yourself? Are you retired? How long have you been investing? What strategy have you settled on? I find that knowing something about those giving advice helps me determine whether or not it may be appropriate.

JimBBB, I apologize for taking your post off-topic. Good luck to you in dealing with upcoming events.

Bobbi 

I note that earlier you wrote "More than a few people who post on these boards are brokers so keep that in mind if any posters defend what this broker did." Those of us who have been reading Roberta's posts for years know that she is now, I believe, dealing with her third parent requiring assisting living/nursing home care. She has dealt with their brokers and has made a few posts keeping us updated on how their portfolios have held up under the strain of  these added expenses.

[/quote]

I am not sure how someone gets a third parent, but I guess if you meant step-parents or in-laws then your post makes sense.  I chuckled when I read the part about 3 parents.  I guess if someone was adopted that might make sense, too.

Anyhow, unless you know someone in person, all you know about them online is what they post, which may or may not be accurate.  If I come across as suspicious, it is because I am, not necessarily about any particular poster here, but in general about any poster online.  My point was directed toward the OP in general, not about any poster in particular.  Not sure why you jumped to the conclusion you did.

[quote user="bobbinm"]

Most of us here have "known" each other for quite some time. Why don't you take a few minutes to  tell us a little about yourself? Are you retired? How long have you been investing? What strategy have you settled on? I find that knowing something about those giving advice helps me determine whether or not it may be appropriate.

[/quote]

What you "know" is what people post here, which may or may not be accurate unless you know them in person.  I don't consider anything anyone says on the internet as advice.  It is simply their opinion and caveat emptor.  Please don't consider my posts as advice - they are my opinions and may be worth what you paid for them, maybe less.  I like to read others' opinions, too and presume that is why people post/read on the internet.  If they are looking for sound investment advice, they should find a competent hourly-rate financial adviser, IMO, and not rely on the opinions of anonymous internet posters.  I wouldn't rely on the advice of a commission-based broker, either - there is just too much of an inherent conflict of interest.

I don't work full time any longer, but do some part-time consulting work and actively keep up with advancements in my field.  I think of myself as retired, though, since I don't work very much now.  I haven't really settled on a strategy other than to diversify, do my research and try to make informed choices. 

If I am lucky enough to make it to 86, I will quit trying to make informed choices and settle on safe fixed income investments, which is what the OP's dad should have been in at 86 with Alzheimers IMO.

So Bob, how about you tell me a bit about yourself now?

[quote user="chamois"]I'll bow out of this conversation, but I am in my 80's and don't believe fixed income investments are necessarily safe, particularly as the only components of a portfolio. I would never let the bond component of my portfolio get above 50%, recognizing that there are other "fixed income" investments, such as senior bank loans, which move independently.  Chacun a son goût!
[/quote]

Fixed income doesn't just mean bonds.  I think CDs, high grade munis and money markets are very safe fixed income investments and that is what I said - safe fixed income investments.  Of course there are high yield bonds that are not very safe, but I wouldn't be investing in those at 86, either.

OK, I wouldn't invest more than 50% of my portfolio in  treasury and high grade muni bonds, money market accounts and CDs.   They aren't "safe" if you need (or want) a higher return on investment than they provide.  In the current environment, short term securities pay too little and long term commitments have principal risk in the event of rising rates when funds are needed before maturities. Bond funds fluctuate as well.  None do well during inflationary periods.

Having a significant portion of a well diversified portfolio in quality, dividend paying equities of varied sectors reduces many of the risks associated with an uncertain market and economy. One purpose is to reduce the correlation of one's holdings..   JMO as always.

[quote user="chamois"]

OK, I wouldn't invest more than 50% of my portfolio in  treasury and high grade muni bonds, money market accounts and CDs.   They aren't "safe" if you need (or want) a higher return on investment than they provide. 

[/quote]

Well, if that is what you mean by safe we are talking about two different things.  I am talking about capital preservation and income generation, and I agree, if your capital is eroded by inflation, that is an issue.  There are munis out there whose tax-adjusted return beat inflation.  CDs right now aren't that great, but this is an unusual time in our economic history.  Typically laddered CDs can provide income and beat inflation.

[quote user="chamois"]

In the current environment, short term securities pay too little and long term commitments have principal risk in the event of rising rates when funds are needed before maturities.

[/quote]

It is an unusual time right now with regard to short term securities.  Long term commitments do present issues if you need to get to principal.  That is why you start planning for these things years in advance so you can meet your needs.  

[quote user="chamois"]

Bond funds fluctuate as well.  None do well during inflationary periods.

[/quote]

But bond funds fluctuate less in general than equity funds or equity-income funds.  I am not sure whether it is true or not that none do well during inflationary periods.  That depends on what you mean by do well.  If you mean beat inflation, that of course depends on the rate of inflation.

[quote user="chamois"]

Having a significant portion of a well diversified portfolio in quality, dividend paying equities of varied sectors reduces many of the risks associated with an uncertain market and economy. One purpose is to reduce the correlation of one's holdings..   JMO as always.

[/quote]

I love my dividend paying stocks and with the current QDI and long term capital gains tax treatment, they do make good investments.  But I am not so sure they beat munis without the QDI and long term capital gains tax treatment and I fear that if we get a fool like Obama in the white house along with a democratic congress, we will be saying hello to 28% long term capital gains taxes and buh bye to the current favorable QDI tax rates.

With regard to being able to access principal, though, in a down market (like now) if you need to get at principal, it is not a good time to sell most of the sectors.  So there is the risk of having to sell low and losing quite a bit of principal if you need to get at principal with dividend paying equities in a down market.  Take Citigroup, Washington Mutual and Wachovia, for instance.  They all cut their dividends and have gone down in value, too, so you would be taking quite a loss if you needed to get at the principal now but if you can wait a few years, I think they will be fine investments again.  At 86, you may not be able to wait a few years, though.

Whatever your strategy, the key is to have planned well in advance for your needs, which means anticipating your needs.  At 86 years old even if you don’t have Alzheimers, the chances someone will need some sort of assisted living soon is high.  That is expensive.  A person in that life situation can not afford to be taking the sort of risks with their portfolio that can result in a 10% loss in principal over 6 months when their portfolio is under $500k.  I don’t know if the problem with the portfolio was too many risky stocks or not enough diversification but I think there was a problem with anticipating the OP’s dad’s needs.  

I just don't see how anyone can justify putting someone who is 86 years old and has less than $500k in his portfolio in a 70/30 equities to fixed income portfolio that, whatever the asset allocation was, has lost 10% in 6 months and on top of that, add in another $8k a year loss to the portfolio in fees.  (And that assumes no commissions were paid on top of the $8k).  Not only was the asset allocation not well thought out, the OP’s dad’s needs were not anticipated well.  But I am sure the broker planned well enough to ensure that he/she got his/her $8k a year on time.

But you said:

" If I am lucky enough to make it to 86, I will quit trying to make informed choices and settle on safe fixed income investments, which is what the OP's dad should have been in at 86 with Alzheimers IMO?

That assumes, by my interpetation of your comment, that the poster's Dad will  still be the manager and therefore going to fixed income is the better choice, even if it might not have been otherwise.  Many people in their 80's are still actively managng portfolios and continue to build wealth.  Those who unfortunately become disabled should have prearranged for someone competent to manage their affairs.  That was Riberta's point, I think, that the portfolio should be managed to produce the  needed return adjusted for risk.  That will likely not include  "stopping making informed decisions and instead settling on  fixed income."

Obviously in a risk managed, well diversified portfolio, fined income has it's place; in mine it's 40%, much of which is in laddered state munis and national muni CEF.  But I also have funds in REITs, energy and pipeline MLPs, utilities, international equities, natural resources, etc etc, which provide additional  "safety" against rising rates and inflationary pressures.  Best wishes
 

But you said:

" If I am lucky enough to make it to 86, I will quit trying to make informed choices and settle on safe fixed income investments, which is what the OP's dad should have been in at 86 with Alzheimers IMO?

That assumes, by my interpetation of your comment, that the poster's Dad will  still be the manager and therefore going to fixed income is the better choice, even if it might not have been otherwise. 

[/quote]

I am not sure why you make that assumption when the OP said that he has had to take over managing his dad's investments since his dad has Alzheimers. 

[quote user="chamois"]

Many people in their 80's are still actively managng portfolios and continue to build wealth. 

[/quote]

Most people don't make it to their 80's and of those that do, many of them are not the same cognitively.  Of those who are luckier and live to their 80's and maintain their full cognitive capacity, if they choose to continue to try to build wealth, they have chosen to take risks.  Now some may feel the need to take risks at that age because they didn't plan approrpriately for their 80's and others may feel they can afford to take risks because they did plan appropriately and have a lot more money than they will need in the last few years they have on this earth. 

Regardless, as with any risk taking no matter your age, not every one is so lucky as to build wealth, some in fact lose wealth when they take risks.  If you have less than $500k saved in your 80's and need at least $50k a year for assisted living, I think you are wise to avoid taking much risk.

[quote user="chamois"] 

Those who unfortunately become disabled should have prearranged for someone competent to manage their affairs.  That was Riberta's point, I think, that the portfolio should be managed to produce the  needed return adjusted for risk.  That will likely not include  "stopping making informed decisions and instead settling on  fixed income."

[/quote]

I don't think that was Roberta's point.  As for my remark about informed choices, I was referring to my prior posts about market timing. 

[quote user="chamois"]

Obviously in a risk managed, well diversified portfolio, fined income has it's place; in mine it's 40%, much of which is in laddered state munis and national muni CEF.  But I also have funds in REITs, energy and pipeline MLPs, utilities, international equities, natural resources, etc etc, which provide additional  "safety" against rising rates and inflationary pressures. 

[/quote]

So in your 80's you don't have 70% in stocks as the OP said his dad's broker put his dad in.  Good for you, that is smart. 

Dear KCallie,

As Bobbie alluded to, over the past 20 years, I have handled and advised b/c they were handling, the portfolios of our parents, all of whom had assets in the 400-600k range and all of whom ended up in assisted living and/or nursing homes. I have shared the actual numbers of the costs and how and from where they were paid.  A lot of the other expenses go away. They died in their 90's. My mother spent 10 years with alzheimers which began, in her early 70's, in a nursing home.  And as the remaining "children" in the community we grew up in, we have become a resource and help for the people we have known since pre-school in handling their parent's affairs.  I, have discovered, the hard way, that there is a big difference between actually living through and paying for these things than the massive, overwhelming blow of the price tag.  With a portfolio of 450k and expenses of 50k/yr the portfolio will last for 10 years bringing the OP's father to 96 despite the recent flucuations in portfolio value b/c of the current market situation which has impacted everyone including those totally in CD'S who are receiving lower rates.  The majority of people spend less than 3 years in a nursing home particularly amongst the elderly.

Bill has tried to give you his opinion as someone actually in their 80's

Your perception of risk and willingness to take risk is something that no one but you can appreciate.  I know that when the child who will eventually take over our finances if and/or when there is a need will immediately redo our portfolio b/c he doesn't have the risk tolerance we do.  I thought he would throttle me when he asked for investment advice recently and I suggested financials.

As you say, the advice you receive on a board like this is worth exactly what you pay for it and everyone needs to judge for themselves, based on their needs and perceptions, which advice they wish to heed.  Most people only hear what they want to hear anyway.  Hopefully good boards will provide a variety of opinions and rationales which posters can then evaluate and choose amongst.  But then I don't believe there is one size fits all, programmed answers.

Roberta 

As you say, the advice you receive on a board like this is worth exactly what you pay for it and everyone needs to judge for themselves, based on their needs and perceptions, which advice they wish to heed.  Most people only hear what they want to hear anyway.  Hopefully good boards will provide a variety of opinions and rationales which posters can then evaluate and choose amongst.  But then I don't believe there is one size fits all, programmed answers.

[/quote]

I couldn't agree more.  That is why I chime in with my thoughts. Take them or leave them, it makes no difference to me (unless I have to support you with my tax dollars that is).

With a portfolio of 450k and expenses of 50k/yr the portfolio will last for 10 years bringing the OP's father to 96 despite the recent flucuations in portfolio value b/c of the current market situation which has impacted everyone including those totally in CD'S who are receiving lower rates. 

[/quote]

First of all, you didn't deduct the $8k a year loss from expenses paid to a broker and then maybe commissions on top of that.  Second of all, you assume there will be no further losses to the portfolio, an assumption that the OP simply did not give us enough information to make.

[quote user="meyerr"] 

The majority of people spend less than 3 years in a nursing home particularly amongst the elderly.

[/quote]

That sounds about right to me, but if the OP's dad has a healthy heart, he can live a lot longer than 3 years.

[quote user="meyerr"] 

Bill has tried to give you his opinion as someone actually in their 80's

[/quote]

Yes, that point came across to me, but Bill doesn't sound typical to me at all.  First of all, in his 80's he still has his wits about him, which makes him not at all analogous to the OP's dad.

[quote user="meyerr"] 

Your perception of risk and willingness to take risk is something that no one but you can appreciate.  I know that when the child who will eventually take over our finances if and/or when there is a need will immediately redo our portfolio b/c he doesn't have the risk tolerance we do.  I thought he would throttle me when he asked for investment advice recently and I suggested financials.

[/quote]

I would never, ever treat my parents like that and if your child would do that to you, I suggest you find an attorney who can structure things so that a child can't redo your portfolio.

Dear KCallie,

As Bobbie alluded to, over the past 20 years, I have handled and advised b/c they were handling, the portfolios of our parents, all of whom had assets in the 400-600k range and all of whom ended up in assisted living and/or nursing homes. I have shared the actual numbers of the costs and how and from where they were paid.  A lot of the other expenses go away. They died in their 90's. My mother spent 10 years with alzheimers which began, in her early 70's, in a nursing home.  And as the remaining "children" in the community we grew up in, we have become a resource and help for the people we have known since pre-school in handling their parent's affairs. 

[/quote]

I eagerly await news of your canonization.

Seriously, the OP did not give us enough information to know whether his situation is all that analogous to yours.  You could live in a dirt poor state and he could live in a high cost of living area, which would make your experience not all that relevant to his.  And you have said that "a lot of the other expenses go away" whereas the OP said his dad would not allow him to sell the home.  Well that is a huge expense for most people - property taxes, home owners insurance, maintenance, etc.  So it doesn't sound like the situation with your parents is all that relevant to the OPs.  But go on tooting your own horn.  Doesn't bother me.  I will, however, call you on it when I care to.

I said:

Obviously in a risk managed, well diversified portfolio, fined income has it's place; in mine it's 40%, much of which is in laddered state munis and national muni CEF.  But I also have funds in REITs, energy and pipeline MLPs, utilities, international equities, natural resources, etc etc, which provide additional  "safety" against rising rates and inflationary pressures. 

You said:

So in your 80's you don't have 70% in stocks as the OP said his dad's broker put his dad in.  Good for you, that is smart. 

I have roughly  60% in stocks, which is not so different.  i think we have gotten to the semantic, hairsplitting stage of this thread.  The Father has more assets than his investment portfolio (eg home), which any able person should become able to manage effectively.  Presumably that is the son who initiated this conversation.

My objection is the thought that a person in their 80's or their trustee should necessarily go to an entirely fixed income investmen portfolio, as the least risk option.  An all fixed-income portfolio isn't the least risk option, whether the parent survives only three years (actuarial number for nursing care) or another ten..   As you said, no one here knows enough about this person to offer specific advice; what we are doing is debating retirement  theory and appropriate practice, which is largely one of risk-adjusted total return.  The son's decision is not likely to be the same as mine, nor hopefully as yours.  Best wishes,  Bill

[quote user="chamois"] The Father has more assets than his investment portfolio (eg home), which any able person should become able to manage effectively. [/quote]

 Did you read the son's post about the home?

[quote user="chamois"]

The Father has more assets than his investment portfolio (eg home), which any able person should become able to manage effectively. 

[/quote]

Doesn't sound like this broker who got paid $8k a year did such a stellar job.  Do you pay $8k a year to a broker to manage your accounts that then lose 10% in 6 months?

Well, to be Frank? I've done this for Both Father and 2 Aunts and I don't envy you..It's a very Immontional time of your life..espeicially if have Siblings to contend with too..

1. With having this Terrible Disease? Ave life expectancy? try 3 yrs and maybe even less at his age of 86. Hope & Plan for the Best, but also for the worse..

2. Keep it simple..Get a 2nd Opinion on details to do from ChFP, FP or like kind.

3. Head towards Balanced Fund> Be it VWELX, VWINX or More Active ones like OAKBX, like others have mentioned > making 8-10% in Bull and Not loosing $ in Bear Is the key..

4. As for His Home? I would Look into Renting it out ... and for Inheritance purposes in the future..( my Dad's old 3 bedroom place was worth about $300k when he had to go into a Nursing home , we rented it out and 3 yrs later, when he died? It was Worth $450k as a Tear down.)  We also got a HELOC to use in the event we needed it..on the place...but didn't. If you sell now, in a down Market? Probaby really get $250 vs the est $300k realtors tell you..They Lie like a Rug , just to get the Listing...

and I hope he has all these assets in a trust... if not? Expect 10-20% in probate/lawyer fees ..

and of course work with his Lawyer and keep him informed and for opinions..You'll be doing more work with him in the future..and It will also give you some insight on how to handle "your affairs" when this same time comes..

the Best of luck in these trying times..

"Why don't you take a few minutes to  tell us a little about yourself? Are you retired? How long have you been investing? What strategy have you settled on? I find that knowing something about those giving advice helps me determine whether or not it may be appropriate."

RE: You're Right Bobbi and would be nice to start with just filling out their profiles and  with more detailed information than just generalities..

leet alone be honest as well..

Vanguard has 3 new Managed Payout funds.  Annual yields are 3, 5 or 7%.

They do all the allocation.

Hi Relmhill and Jimbbbbbb-

I agree with Remhill, that the Vanguard Managed Payout funds, may be the ideal vehicles/ the 5 or 7% payouts, to manage an 86yo Alzheimer's investor.And, they manage allocation for 0.58%/annually(or about $2600+/yr). The other option could be a SPIA/Single Premium Immediate Annuity with a guaranteed payout of 10-15 years, for investor and designated beneficiary. Either way you eliminate the broker/advisor, whom you have been paying $8,000/annually, and who's advice has not seemed to bring confidence or profits to his client....

Again, just one of multiple opinions,  hoping they have given you some options.

Curanderotk

           JimBBB wrote My Dad is 86, and I've recently had to take over managing his finances, because he is suffering from Alzheimers.

I am 78, my wife is 72, we each have a few new aches and pains each year and our doctors are constantly finding new medications for us. I manage our finances (using Bud Hebner's excell program  www.analyzenow.com) with a new plan every year.

You should hire a good financial planner, experienced with assets and withdrawals. That will help you, your siblings and other interested parties understand and support your decisions.

He has been with a big broker for 25 years, and his portfolio is 70% stocks, 15% bonds, and 15% cash-type investments.  They have him in a managed account that constantly trades stocks, but is just barely outperforming the market as a whole after fees but before taxes.  

His portfolio is currently about $425k, down $50k over the past 6 months.  He just went into assisted living, and needs to begin drawing $50k/yr to pay for that.  Previously he only withdrew his min. IRA withdrawl.

A three bucket allocation from an FA might be 450K/250K/100K equities/bonds/ cash. The cash is to cover two years of expenses, the bonds are to replace the cash (cover 5 years expenses) and the equities - assumes 375K for the house - are to provide an inflation hedge. Redo the expense estimates and the asset allocations every year.    

His portfolio mix seems very risky to me, but I'd like general perspectives on what the group thinks.  I'm not fond of selling in a down market, and I won't make any changes without consulting a (different) professional, but like to get some common sense persepctive as well.

If you read the Trinity* study yourself and study their tables, you will discover that, contrary to what  many say about preserving "safe" withdrawal rates - SWRs - they explain that "...Most retirees would likely benefit from allocating at least 50% to common stocks...For short payout periods (15 years or less) withdrawal rates of 8% or 9% from stock dominated portfolios appear to be sustainable... By definition you have a 50% chance of living beyond your actuarially determined life expectancy..."

70% equities is a bit more than the 56% I would compute, but not enough to be very concerned. The bigger risks for us elderly investors are:

1) variable, increasing medical costs. These could increase 5-20% from additional illness and/or additional costs.

2) life expectancies. You dad's is 5 more years but, of course, he could live for 10 or more. Inflation can be 2-7% per year.

Your dad needs inflation protection. His home, stocks, TIPs bonds and or annunities should provide some.

You need to hire an experienced FA, not only for sibling support but also for the expense planning dealing with reverse cost averaging, variable allocations, and other weird effects of financial planning for the aged.

Pay attention to chamois' posts, it's clear to me he speaks from experience

good luck

john     

[quote user="lovemoney1"]I agree -I had to take over my Dads when he got Alz as well.Safe is better.At 86 do you really care about growth ? maybe for your goals not his. [/quote]

I think lots of brokers are thinking about managing an elderly person's money more for those who will inherit it because they will be their next customers.

Managing a portfolio for an elderly person's needs and managing for the interests of h/her heirs are not mutually exclusive challenges; the fiduciary cannot provide an inheritance to the survivors without first meeting the more immediate needs of the aged.  The goal in either case should be to maximize the risk-adjusted total return of the assets assigned, with emphasis on risk management. The interests of parent and heir are thereby substantially aligned.

Professional risk management, even by geriatric and elder specialists, will provide for some diversification among asset classes to best assure a future uncertain  in terms of market conditions, healthcare requirements and life expectancy.  Going to all cash or all fixed income and hunkering down is, in most cases, not the best course of action in meeting needs of the aged, nor is it in the best interest of the heirs.  JMO as always
 

the fiduciary cannot provide an inheritance to the survivors without first meeting the more immediate needs of the aged. 

[/quote]

If they behave as a fiduciary to the account holder, sure.  That is not what I was talking about.  I was talking abou the case where the financial advisor has his eye on the future business of the survivors.

Thanks; I had assumed that the account fiduciary's first responsibility by law is to the account holder. Beyond that I do not believe it inappropriate for the fiduciary to be also mindful of the heir's interests and the reality that doing a good job with the account will promote future relationships.  As my own fiduciary trustee, I am certainly planning my investments to benefit my heirs as well as myself.

My point was simply that there is not necessarily an ethical or financial conflict of interest in including estate planning as part of financial advice and account management. I would insist on it if needing a successor trustee, because such considerations beyond my lifetime bear significantly on decisions made during it, relating to the sale of securities, tax planning, selection of maturities, etc.  In fact, an heir will assume that role when it becomes necessary. Best wishes!

'Doesn't sound like this broker who got paid $8k a year did such a stellar job.  Do you pay $8k a year to a broker to manage your accounts that then lose 10% in 6 months?"

RE:  Gee KC! You have to think in the Looonnnnng Term...LOL

ie: this Guys Port will do  well in about another 20+ yrs!  Like maybe as well as the S&P 500 Index..which they all try to Brain wash us to only follow..

And don't blame the Broker, if he works for a firm..It's the firm that tells him what to buy for the Investor/Client, that makes the Firm the Most $( higher commision stocks/Load Funds, etc )..LOL

many hire Older Guys and gals just to target the Image to Older clients..

Just like the Insurance & Used car Business...

I interviewed 8 Asset manage and 5 broker houses on managing a $1 Million to open account for a Retirement Port... all but 1 advocated nothing more than Index type Rtns, but invest the money in alot of High commission/Fee Funds & stocks!

and when I gave them a Port of AMBF's ( ActiveManagedBalFunds)? They either Got (a) Very Defensive  or (b) Passive and with-drew their wanting to take care of my $..( Admitting those AMBF's did just as good , if not did a better job ) and Only 2 said they would manage such a Port for me..

Before hiring a Broker / split the $ up and give them 25%( or whatever their Min. Requirement is ) and you invest the other 75%+ into AMBF's and see how each does for the next 5 yrs+...

and after Fees and if they rtn + 2% apy or more? Go with them, otherwise, expose them and close the account..

Hulbert services does this all the time..and rates Asset Mgmnt. firms and Brokerage houses...