"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

You say he needs $50,000 a yr "now" from his portfolio to live on. What if next month you are told he needs extra care and that price has gone up to $100,000 yr? I think you need to convert 100% of his portfolio to cash now. Don't take a chance. The market is up substantially from its lows now and who knows what happens next.

           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     

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. At 86 and imparied you should invest very short term - I would dump the big broker and get a planner who is familiar with aging issues.I got one from the PBS special "and thou shalt honor" just called him in boston.No ones fault just the big houses are not geared for this late late late life managing of finances.Good luck to you and your family.

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.

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
 

chamois:

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

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..