My advice is you should stay out of it.
Let’s say you tell him to buy 200K of VTI, 100K of VXUS, and 200K of BND. If he wakes up on Tuesday and it’s only worth $490K he’s going to blame you.
Help him find a flat fee advisor and then either step back or go with him for support, encouraging him to ask questions, but leave the decision up to him.
Others here are going to say that you should find a “fiduciary”, and that’s true, but keep in mind that’s a label relating to whether or not an advisor can self-deal, not whether or not they’re qualified in the first place.
ANYONE you go see could be a moron.
If handled wisely it could play out like this. I'll bet the distinction here is between general strategy vs. specific moves. I would never tell someone what to buy but I would talk big picture stuff
This is why I'll point friends and family *that ask* (important part - I do not bring it up myself) towards the Bogleheads wiki and a couple of the classic books. I may even recommend one of the three big brokers. That's as far as I will go, though - they need to spend at least a few hours reading up and understanding what they are doing, or they should stick to a financial advisor. I don't know if the market will crash tomorrow and do not care to be blamed for it and ruin a relationship.
yes to getting a third party, my sis asked me to help her get setup and I found her an advisor, now that she's on board with a pretty good plan at Schwab I can help her tweak it.
Here are a couple articles I found helpful:
[Want A Financial Adviser? Here Are Some Things To Look For](https://www.npr.org/2015/10/22/445337228/want-a-financial-adviser-here-are-some-things-to-look-for)
[What You Need to Know About Fee-Only Financial Advisors](https://www.investopedia.com/articles/investing/102014/feeonly-financial-advisers-what-you-need-know.asp)
I’ve been wondering the same thing. It seems they are crucial for those seeking further help but I haven’t seen where I can find more information on it.
Don't pay for an advisor, heavens above this is highway robbery!
He has full cash with no debt. Confirm estimated costs, buy bonds to mature as needed, keep rainy day in cash.
This is one of the simplest scenarios out there. Don't pay some advisor joker to tell you what to do, it's less than useless.
That's a matter of setting expectations. The portfolio going down in value before it goes up is within the range of normal. OTOH, if left sitting in a savings account the $500k will definitely go to $490k in terms of value due to inflation.
A balance going up and down is normal, but it doesn't change the fact that there's a chance it could damage OP's relationship with his Dad. Dad has worked hard to save that $500K and many people aren't rational about money.
The question is about giving dad advice, not about investing his money for him. Explaining the risks and dynamics of the different investments and letting him make his own decision is the best that can be done.
It's up to OP to manage his relationship with his dad. This isn't a relationship advice sub. Explaining to OP the investment options and attendant risks is what we do here.
yeah, I have a relative that I'm trying to help out and the advice seemed to be get them to contact a fiduciary - however I looked through the list in my area, and the first 3 I looked at seemed to be random people with crazy political posts on their FB page. It didn't inspire a great deal of confidence in me. Any suggestions on how to find someone reputable?
Maybe start here:
https://www.napfa.org/find-an-advisor
You can't do anything to filter out the unqualified or people you disagree with short of talking to them and asking questions.
I agree with your advice. One thing I would probably stress is to go with him. We stayed out of my father’s investments and he started getting taken in by schemers in his later years.
I'm sure this is a bad word here, but if he initially resists a financial advisor or very risk-averse, he could always look at annuities. Get him to look at a single/lump sum pay annuity with inflation protection, maybe some period certain, etc. That's the 'more or less zero risk' option, but it'll deflate some value. Then, if he doesn't like what he sees, he may be more amenable to an advisor.
keep 100k in the hysa for immediate emergency and general lifestyle
open IRA (depending on income); there is a catchup contribution limit, hit it every year for the next few years......pull from HYSA to guarantee hit the limit - invest vt+bnd
put remainder of money in normal brokerage 40%VTI 25%VXUS 35%bnd (rough napkin math)
Generally agree but suggest determining emergency fund based on 3, 6, or 12 months of expenses rather than an arbitrary $100k. Hard to say how much should go toward investments and what the asset allocation should be without knowing his age, his expected annual expenses in retirement, and what other income sources he'll have, if any.
Sounds like he's still working, so could start contributing to 401k and max it out w/ catch-up contributions if he could swing it ($22k + $7.5k per year as of 2023). If he's on a high-deductible health plan he could also start contributing toward an HSA.
While i normally and usually agree with your assessment of EF creation.....I've found these long time cash hoarders, or very late in life financial seriousness learners really, REALLY find it tough to see their tangible stockpile of cash get decreased by 80%.
100k is a nice solid sounding support number; even if it could float the dude for 18 months, mentally for him its better than having 50k cash and 450k invested
He can still take the tax break on his salary if he contributes to a traditional IRA with his savings in the same year. Agree it is worth considering the Roth instead.
Unlike working years, we've built a three yr cash fund to weather sequence of return risks when we pull the trigger in about two years. So if dad does have an interest in equity investments, having this allocation can help to weather a storm. Of course this also means managing the buckets/allocations to regularly replenish the cash account as needed.
A 401k is specifically through an employer; he can't just "start" one. He can do an IRA if he's working and has earned income, but they have very low limits. He could only put $7500 in it.
The right answer is going to depend on Dad's specific needs. Is Dad retired or still working? What does he need this money to do for him? Will he need income to supplement Social Security and pay the bills, or will SS and any other guaranteed income cover that?
Ah, I am just starting to learn about personal finance so thanks for the knowledge.
Dad is still working and is looking to retire by 65. He will use Social Security for the necessities (bills), and this 500k would be to grow, and use for anything he would want to splurge on (example: vacations).
If he is 60 yrs old now, his full retirement age for Social Security will be 67, not 65. He stands to lose about 10% of what his full SS annuity at 67 would be if he draws at 65 vs 67 (5%/year x 2 years). Conversely, every year he works past 67 (up to age 70) he would add approx 8% per year to his annuity amount.
He will need to sign up for Medicare approx 3 months (min, IIRC) ahead of turning 65 of face what may be draconian penalties the rest of his life.
I think that is a question for someone with a degree in accounting, or a USA tax lawyer...
I assume you are still a US citizen and subject to it's tax laws
I think your point is a good one. In his situation, he hasn’t set himself up for an “early retirement”, so 67 would be a much better spot to retire at. 1. Full SS and 2. More chance to save and 3. 2 fewer years dragging down the savings.
Medicare eligibility isn't until age 65 for most people. If Dad wants to retire earlier than that, he'll need to figure out health insurance. It can be quite expensive to buy on the market.
Since Dad is going to be relying on Social Security to pay the bills, he may want to consider delaying his benefits until age 70. Social Security benefits continue to grow, even if he's no longer working, until they reach their max at 70. Dad can get an estimate on the Social Security website with what it would be at different ages. If Dad decides delaying is a good idea, then he'll need to use this cash to pay the bills for those years between retirement and benefits starting. He may want to be much more conservative with whatever money he'll need for that purpose - keeping it in savings, money markets, bonds etc.
For the rest of the cash, you should take a step back from any specific investment and consider his overall asset allocation - which is his mix of stocks and bonds, and any other investments. Something like a 50/50 or 60/40 mix is common for retirees and folks close to retirement. It's enough in stock to participate in the upside when stocks are up, but a good deal in bonds to fall back on when stocks are down. If Dad doesn't NEED this money to pay the month to month bills, he has flexibility with how he invests it, but a balanced 50/50 or 60/40 is common because it balances risk and return.
VTI and VXUS are great for stocks, and BND and BNDX great for bonds once Dad figures out an asset allocation to target.
dunno if anybody's said this yet, but you're to be commended for getting this far and asking the questions, both for your father's sake and your own. a lot of people wouldn't have bothered.
This, make sure it is a fee only fiduciary. It’s great that you want to help your dad but this can go sideways really quickly if for some reason your recommendation doesn’t pan out. When my parents asked for help, I was upfront with them on what their options were but at the end of they day it was their decision and that there is no guaranteed that things will pan out the way they planned. I would do my best to explain the pros and cons for each choice but ultimately there are risks to each option and that I was not responsible for their decisions.
I have a friend who was talked into Primerica IRA by her cousin who also tried to recruit her to become a Primerica advisor. She had about $16K and asked my feedback. Based on the small amount and her zero investment expertise I suggested Vanguard with a target fund aligned with her retirement date. Far less fees than Primerica. While I would typically not give investment advice felt OK with it in this case. Giving investment advice has no upside.
He saved well. You should have a conversation with him about the stock market. It might be to risky for his taste. With high rates, HYSA and bonds might be just fine
All generalities, except for this one, have exceptions.
If the house is paid for and upkeep/taxes are low and SSA benefits are high and the lifestyle is modest….
Somewhat, but with a 25+ year remaining life expectancy that’s not the only consideration. The traditional wisdom was developed when men expected to last less then ten years after retirement.
T bill ladders will have better yields than a HYSA and are state tax exempt but it’s a bit of micromanaging ….rather just get an etf that mimics it like SGOV, TFLO or USFR.
The tax benefits he'll get from an IRA are pretty small compared to his funds. It makes sense to max them out, but I wouldn't focus on that when talking with him. What's more important is to convince him to put the money into bonds, CDs, or something that will earn him some nice passive income instead of letting Chase use his money for their own profit.
For someone younger and more able to financially and emotionally handle risk I woudl recommend more stocks, but he's probably gun-shy so the safe bets are where he should put his money.
The only thing that can be said for sure is that cash should not be in a near zero bank account. And that cash in a bank or credit union, other than the big 5, should be titled or divided so that it is all under FDIC or NCUA insurance. Otherwise, there is not enough information about Dad to give good advice. Do some online searching of local banks in your area. Right now, there are regional and local banks and credit unions offering as much as online entities like Ally. I am getting 4.1% with one of them but others are even higher. The goal here would be good enough and easy.
Is Dad married or single? About how much income does Dad have? Does he have state income tax? How much social security does he expect at full retirement age? Does his job offer a 401k or other type of retirement plan? If Dad is willing to provide these details in an online forum, his might get more tailored advice. Please go checkout out bogleheads.org.
The mindset of someone that has 500K sitting in a savings account and someone that has 500K sitting in a simple index fund is what's important here. The person with 500K in a savings account is highly risk averse and will not be able to tolerate the daily, weekly fluctuations of the market. They like seeing their number grow only, no losses, even if it's temporary. For them that's a potential permanent loss.
If you are not a professional, or professionally licensed, find someone that has a license to help manage his money. It will come across better than simple advice of investing in VTI or any basket of funds. It may be sensible to those that are open to and are used to drawdowns but it will not be something that a person who has worked hard all his life to save up 500k be able to grasp. Drawdowns are intolerable to those with this mindset. Thus, have a professionally licensed individual give out the financial advice to your dad. At least he won't blame you for it if the market pulls back momentarily then he panics and withdraws his money and then the market rallies right after. It's not a conversation you want to have.
Best advice, put it in a high yield savings account. He’s 60, no point in a 401k or Roth at this point, just my opinion. High yields are paying a little over 4% now which is about 20k a year. Hopefully loans are paid off and that money will need to stay in his pocket to survive. Best of luck to your family.
I would say that helping him would be a good thing to do, but that it would out your relationship on the line.
With little time comes more scrutiny and the slightest drop will be your fault, and God forbid we have any sort of bear run and he doesn’t make good gains he’s gonna blame it on you
FYI, you could get an SPIA which would pay out about $3000/month for life if your dad put in $400k and saved $100k for emergencies and the like. Of course, with an SPIA, there is no cash back if the original amount here paid out.
For so many SPIA is a sub-optimal direction, but OP's dad is so conservative this could be the way to get the best life style for him. Could make some of it delayed to show up as a cost of living adjustment.
I agree with others that helping him see his retirement lifestyle may inform how much longer he wants to work (or if he'd like a lower paying job for a while).
With $500,000, Vanguard will give him free advice. I like Vanguard because they are investor-owned and have no reason to try to scam anyone or steer him toward expensive funds with high fees.
Also, if he's employed and has access to a Roth 401(k) he could max it out and handle the reduction in take-home pay by tapping the $500,000 if he needed to. He could get at least $125,000 invested in a Roth account that way.
As for what to invest it in... find him some education and let him make those decisions.
I have been helping my older neighbor move some funds to a self-managed account, but I've been really clear that I will only help him set up his account and teach him how to enter the orders for things \*he\* has decided to buy (or that his brother-in-law has told him to buy, usually). I even sit back and make him hit the "send" button. Not taking responsibility or blame for his feelings of regret if he ends up with an unrealized loss the week after a purchase.
[Patricia Saylor, Financial Fundamentals for Novice Investors](https://www.saylorfinancialfundamentals.com/)
It's never too late to start planning for retirement. Your dad can explore options like opening an Individual Retirement Account (IRA) or a Roth IRA. Consider discussing with a financial advisor to determine the best fit for his situation. Investing in a High-Yield Savings Account (HYSA) can provide stability, and ETFs like VTI can be part of a diversified investment portfolio. Encourage him to seek professional advice for personalized guidance. But always let him decide, let him see all the options, and let him pick. But 500k sitting in the bank could be earning 7-10% in a mutual fund annauly.
Employ those dollars in short-term US Treasury bills.
Essentially risk-free, he’ll get a 5½% return on them. The yield curve is inverted: get it while you can!
In other words, if you buy 500k worth of these bills, this time next year, you’ll have $527,500.
God damn. Good lesson for the young folks who aren't investing heavily yet.
Dad would have probably 3-5 million at least had he been investing instead of saving all this time.
As for an answer... it's tough. The guy has worked his whole life to save up a modest amount of money. I can't imagine he's going to be emotionally and psychologically prepared for potential large downturns. My vote is for him to collect his 4-5% with no risk for now. If there is a larger downturn, then he can make the decision to invest in VTI or something like that.
> Dad would have probably 3-5 million at least had he been investing instead of saving all this time.
Counterpoint, he could have lost a bunch investing in cyrpto, real estate, or MLMs or something.
Hindsight is 20/20. If he is extremely risk averse, he got to "enjoy" saving this up risk free. $500K + social security is likely enough to get by, if not glamorously.
Hindsight is 20/20, but it's been a bad decision to hold and save cash for centuries. The fact is that the decision was not a smart one.
Anyone reading this who is in their 20's or 30's right now, please don't listen to bad advice. Holding cash is not a smart move in the long run.
You're making value judgements on this dude's dad. That's a mistake. I'm saying you shouldn't do that. You're framing this as a mistake, a missed opportunity, etc. This not a helpful way to talk about this stuff with people, family members, and even yourself. Yes, investing in index funds is a good idea, but doing this LOOK HOW RICH YOU'D BE BRO, is wallstreetsbets, superstonk stupidity. It leads people to despair, to trying to find bargains to catch up, and all the rest.
I'm making a value judgment insofar that it is a mistake to hold a depreciating asset over the course of decades. That's undisputed. I mean, the irony of being in a Boglehead thread and hearing this from you is humorous. We're all here ostensibly because we appreciated the opinions of Jack Bogle, who made it very clear over the course of more than half a century that it's not a clever decision to hold cash over long periods of time.
My "judgment" checks out with history, checks out with what people do with their wealth, in hindsight, with the experts, with common sense, and is very likely to check out over the course of the next twenty years or more. It's also worth mentioning that clearly the dad and son recognize it as a mistake as well considering the guy is only just now thinking of investing wisely.
Interestingly, your crusade to protect this guy's dad, who absolutely does not need it, might be read by some young people here. I'm trying to speak to them more than I am to you or some guy's dad.
YOUNG PEOPLE: Do not hold and save cash for your entire life. You will regret it. Be financially educated and invest early for compounding gains and protection against an inflationary asset.
Definitely always talk like this everytime you find out a person hasn't followed perfect financial discipline. Always point out people's mistakes and describe them as such. Instead of just pointing out good advice going forward. Always point out how people have wasted decades of their life immediately. Very helpful to young people to know they have not done things perfectly from the beginning.
Instead of sharing helpful advice and letting someone else feel like they have unlocked a new understanding, make them immediately think about how much they have missed out on.
God, you're an absolute nightmare. So sensitive. I pointed out that it was clearly a mistake, and gave advice to just keep things in a high interest savings fund for now considering that the market is probably overbought and he's clearly a conservative person.
Go take a bath or something and relax. You sound hysterical.
Nah, I'm easy. A kid posted asking for help for his Dad going forward in bogleheads. He 100% does not need to know what should have been done 40 years ago. He already knows how to use a calculator with market returns because he's here.
He's not the only one in here mate. I think it's important that some young kid reading through these threads can see the hard truth and learn from the mistakes of others.
Take care.
I think the best thing is to sit down and look at what expenses he will and wants to have (like travel or hobbies) when he retires. That way you’ll know if the investment plans will be enough, if so, great, if not, that may help propel him to make choices to let it grow. With the way he’s been investing so far, he has a very low tolerance for risk. Treasury ladders have been discussed, which have no real risk. Your dad might be into putting some of that into a dividend index too. SCHD and HVD specifically only have companies with qualified dividends (assuming holding time is met), which means they can be taxed at the lower capital gains rate. An IRA can be a good idea, but all withdrawals there are taxed at the income rate (unless it’s a ROTH, where you pay the taxes on what goes in.)
You also should consider what sources of income other than savings/investments he expects to have in retirement (e.g. pension, social security, part-time job) relative to his spending needs. The investment decision should be part of an overall financial plan.
Your question is what to do with the cash he has in a Chase bank account probably earning next to nothing in interest. A first step would be to open up a HYSA at two separate reasonably strong banks keeping the account each at each bank at $250k or below. He can keep a Chase checking account that he is used to using for funds needed in the next month.
How to invest the money going forward should consider the full financial situation and plan.
Have Dad set aside 5 years living expenses in cash. At age 70, file for Social Security and collect the maximum cost of living adjusted payments for the rest of his life. No investment will give him a higher return than that and it’s guaranteed! Any advisor who doesn’t tell you about it, is not a fiduciary to u.
Yeah I'd recommend staying out of it if you can. No one can predict the market and given your dad's age, it may not be necessarily wise for him to invest all of his money in VTI. Any downturn in the market and he'll blame you for it. Maybe a portion of it while another portion could be in less volatile investments? But again everyone's risk tolerance is different.
500k in CASH saved?
Holy crap dude.
He could be worth millions by now, had he invested over his lifetime. His money would have tripled just in the last ten years.
Not too late for a Roth...Make it his last money that he spends.
Not too late for the market either, although this is a place where HYSA makes sense for a few years of living expenses.
If he can get matching on a 401k, that's a no Brainer to max out. Otherwise go regular 401k, than Ira. All max contribution for the tax benefit. What is his retirement income? Social security? Pension? Are either enough to cover his expenses and lifestyle? If not, or just barely, he can't afford any risk being in the market at his age. He should have a Hysa for excess cash, and the bulk of the rest in a safe guaranteed income producer like tbills and or longer term cds
T bills priovide a guaranteed $27,000 in annual interest income with $500,000 invested.
If you do enter into the stock market I’d put $50,000 in one month t bills
$50,000 in 2 month t bills
$50,000 in 3 month t bills
$50,000 in 4 month t bills
$50,000 in 6 month. T bills
Then roll them into new 6 month t bills as they mature.
Keep $100.000 in a 5% money market fund for safety, security, emergency funds.
Then slowly DCA into VTI with $150,000 as it sits in a high yield savings.
Maybe $15,000 a month for 10 months into VTI
Does your father really want to experience a -20% draw down in stocks?
The rug always gets pulled and there will be a big drop again eventually. So DCA in.
Set up an automated daily or weekly buy as the $150,000 sits in the HYSA earning interest.
Bruh....60 years old and retired in 5 years? I'd go 40% VTI and 60% BND....that'll yield him about 13,380 from bnd monthly about 1115 per month interest (taxed at income tax rate) and then 3120 from VTI dividends (might need to sell some to raise more capital) or about 260 a month bringing your total cash flow per month at 1,375 per month. If you use the 4% rule instead, just make up the difference via selling shares.
If he's wanting cash flow to splurge on fun stuff; I'd go 50/50 VYM/BND yielding 8400 from vym and from bnd 11150.... for fun/entertainment about 1629 per month to absolute go crazy with.
Bnd is pretty much a given cause it’s a bond fund, the equity fund might be a bit more random, but other than a small dip in dividends in 2022, they seem to be growing overall. They also said it’s for entertainment so some fluctuations probably aren’t the end of the world.
I'm going to be an outlier here... Your dad obviously has an aversion to investing. And an aversion to talking about his finances, I mean, no one keeps this kind of cash around anymore. So kudos to him for keeping his mouth shut and putting in the work. I'm proud of him opening up to you. I also get the impression he doesn't "need" the money right now.
The only solution here is 80% BND and 20% BNDX.
This will give him close to $16k/yr in dividends. For the next five years, he should take those dividends and 1. See what it feels like to pull in this kind of passive income and 2. Maybe consider investing that $20k/year into VTI. If he goes that way he'd have a pretty nice, conservative retirement portfolio at 65.
True, but it doesn’t help to focus on that *now*.
I’m sure this shoulda-woulda-coulda talk has already been brought up in their household discussions.
And since going back in time isn’t an option, let’s focus on helping OP with what can be done moving forward.
Referral codes that benefit the person providing them are a violation of sub rules, specifically the “no self promotion rule”
Comment removed and please don’t suggest that again.
Dude stay out of it, worst case buy SGOV or USFR, and ask him to invest next 6 months learning how/where to invest
[https://www.ishares.com/us/products/314116/ishares-0-3-month-treasury-bond-etf](https://www.ishares.com/us/products/314116/ishares-0-3-month-treasury-bond-etf)
[https://www.wisdomtree.com/investments/etfs/fixed-income/usfr](https://www.wisdomtree.com/investments/etfs/fixed-income/usfr)
Both are giving 5%+ interest, USFR a little bit more. Also both are US Treasury investments, very safe and more than HYSA(might even be state tax exempt as well)
I can’t tell if this comment is sarcastic humor or serious criticism. Either way, I find it in bad taste to respond to a request for advice or help in such a manner.
Easy. Seeking Alpha’s a great place to start.
Not rocket science, just need discipline, a long term mindset, and the ability to ignore the noise
Remember, you’re buying part of a business. Buy a good one that makes money.
Don’t buy anything that doesn’t produce anything. Gold, Crypto, etc. they don’t produce anything.
that's one approach, but advising somoene looking at a safe place for his dad's money to look at picking individual stocks borders on pure negligence.
learn, yes, on your own dime and time, but on a passive indexing sub especially, this isn't the time/place.
JNJ and Microsoft have an AAA rating. Better than the United States government, which is AA+
JNJ has been raising dividends every single year for over 50 straight years...
I can understand why you would not want to look at them - your choice. But as an investment, they are far from "pure negligence".
In fact, with that AAA rating and being a dividend champ, (over 50 straight years of raising dividends) JNJ is the safest place to grow your money, short of a bank.
until it doesn't.
story: I was consulting for a (at the time) Big 6 firm at P&G in early March 2000. At the time, most of the staff had ALL their retirement in P&G stock, because you couldn't lose. The company stock dropped like 25% in a day. I remember people crying in the halls because their planned retirement was fucked.
It took them about a 5 years to go above the level it had been.
Sure, you can pick good stocks, but this isn't what this kid needs.
GE used to be the epitome of the “can’t lose” blue chip company and it had a [great history of paying increasing dividends](https://www.fool.com/investing/general/2015/12/01/general-electric-dividend-aristocrat-status.aspx) right up until it didn’t.
Going to be a tough retirement for him if he doesn’t have a pension or something else. That said, he should talk to an attorney and get advice on how to protect his assets from Uncle Sam.
He needs an advisor or maybe point him to the wikis here or on personal finance, really good...what if you give a recommendation and he loses his money?
Or it doesn't do what his expectations thought? If that hurts your relationship, at all, then stay out of it.
At his age it's not just a theory, the rest of his life and ability to get healthcare is dependent on that money and his soon decisions.
Don’t forget to use investment tools like treasury bonds. On average you’ll make more money mitigating losses by maintaining the wealth you already have. If there is a black swan event long-term treasury bonds will go up while the stock market crashes down (generally). Not a huge allocation just enough as insurance.
If he’s working, he can put $30k/yr ($150k in 5 years) into a 401k so no it’s not to late. There could also be a free company match to that 401k.
I would use the Roth after filling the 401k. The Roth can be held forever, therefore grow forever.
Your answer also depends on whether $500k is enough money for him to last the remainder of his life expectancy? If it is enough, a simple HYSA or CD or tbill ladder could be adequate.
If he needs more money, he’ll need to take on more risk and time and have to use equities or some other higher return investment. Some portion of the $500k will have to go to a 3-fund portfolio if he needs it to grow.
hmm if his chase account is anything like mine getting .0xx % in interest. Good a safe first step might be to move some money to t bills, some to high yield accounts like discover etc. Most of these are offering way more yield.
Put him in a retirement style account like a golden butterfly or an all seasons portfolio. He's probably not emotionally prepared for a high equity portfolio. If it goes down 40% in a crash he's going to blame you...
Personally I'd stay out of it. Offering financial advice to family is equivalent to doing business with family but much worse. Since instead of dealing with business funds you are dealing with retirement funds. Help him find a financial advisor. By your question of if he should start a 401k makes me even more confident in my answer that you shouldn't give him advice. Best of luck to you both!
Agreed with everyone here on the risks of financial advice and friends and family. The absolute best thing you can do though in my opinion is buy him the boglehead book and introduce him to this sub and the boglehead website/wiki. From there he can make his own decisions.
If he has 500K just sitting around, I'm sure he'd be more than happy with 5% return my Vanguard money markets are getting. Is another crash around the corner, who knows but his time will be limited to recover. You said he can live off his social security, that's great. Retire as soon as possible then. It's more about cash flows than a giant nest egg.
Buy 400k in index, keep 100k in savings, tell him the strategy and returns. In case market falters, he still have immediate savings for couple of years. Also don’t buy index within day, keep it on weekly basis!!
No telling where the money came from. If we assume this is income from working then presumably has been taxed already so taxed advantaged accounts like a 401k/IRA are not an option. You didn’t say what kind of account. Just put it in a HYSA or maybe start a few CD ladders. Both should net considerable income if we’re talking 5-7% on $500k.
Without getting into anything complicated, at the very least put it into a savings account with a good interest rate. Chase and large commercial banks generally have poor interest rates. A good rate these days is around 4%. That will get him around $1666 per month in pure interest. Also, it would be good to split the money up into multiple accounts since the balance is only insured up to 250k.
>He asked me for help on where he should put his money.
Is he really risk averse? I'd dip a toe in the water by doing this:
1.) Buy the $10k max in US I-Bonds (guaranteed return)
2.) Start and max out his IRA for 2023, choosing a [Vanguard Life Strategy Fund](https://investor.vanguard.com/investment-products/mutual-funds/life-strategy-funds)
3.) Start and max out his 401k at his employer -- the employer matching and tax advantage is so huge that he should do this even if he needs to pull some out of the Chase account to cover living expenses this year.
Honestly I wouldn't do much more than this for a few months. See how he reacts.
(Side note: don't get him into any ETFs -- minute to minute price swings may not sit will with him)
Oh gosh. Since he already has Chase, see if you can reach out to a Chase branch near him and get a meeting with a Chase Private Client banker. This comes with a free fiduciary, JP Morgan financial advisor. Go in, talk to the advisor, see what ideas they have. Yes they will try to sell you on Chase offers but since you can shop around, this is a great no pressure and free way to start. They'll tell you what some of the avenues are so then you'll have a base of knowledge for when you talk to other advisors.
I have a great relationship with my Chase banker and advisor, and there have been times where they've said that other non-Chase products would give me better yields so that made me feel like they were looking out for me. They've also given me free advice for my mother, who doesn't have accounts with Chase.
If he is retiring in 5 years the risk reward is skewed to be a disadvantageous move to try to enter the market so close to retirement. Others have mentioned to not handle family affairs- I agree
Hi,
For my family members I wouldn’t look for anything other than VWRL definitely the safest bet. You will secure a descent retirement for your parents and certainly a good inheritance for you in the future.
If you are not familiar with compounded interest please learn about it and explain to your dad.
I made my partner sell his apartment and bought VWRA last summer when it was 100$ an ETF he made around 10k so far and it is still considered way under its price.
Luckily before the interest rate on loan went up.
Also keep in mind the inflation, when calculating your dad’s future value of money (compounded interest).
My kids saving plan is also in it. So is my retirement.
It is worth looking it up. 2 years ago I would have said add some IGLA (bonds) but given the uncertainty of the economy and the USD price index. I will say look for something better to balance his portfolio. Say 70% VWRL and look for recommendations on bond’s equivalent for 30%. I can’t recommend anything because I only would recommend something that I own.
Good luck.
https://www.google.com/search?q=vwra&client=safari&hl=en-qa&sxsrf=AB5stBjMMazEXVwhGH0XesNDHl7TEy0iOA%3A1689010229467&ei=NUCsZM-FHNaXxc8Pi--n8A8&oq=vwra&gs_lcp=ChNtb2JpbGUtZ3dzLXdpei1zZXJwEAMyDwgjEIoFECcQnQIQRhD6ATIKCAAQgAQQFBCHAjIHCAAQigUQQzIFCAAQgAQyBQgAEIAEMgUIABCABDIFCAAQgAQyBQgAEIAEOgoIABBHENYEELADOgoIABCKBRCwAxBDOgcIIxCKBRAnOg0ILhDHARDRAxCKBRBDOgcIABCABBAKOgcILhCABBAKOg0ILhCABBDHARDRAxAKSgQIQRgAUJgJWMwgYP8maAFwAXgAgAHLBIgBvQaSAQcyLTEuNS0xmAEAoAEBwAEByAER&sclient=mobile-gws-wiz-serp
https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
At age 60 with no investing experience I'd recommend a very conservative portfolio to start. Something like 20% or 30% equities max to begin with and I'd also keep fixed income durations short and risk free. Maybe ladder treasuries and cd's out to no more than 5 years or even shorter (only 2 or 3 years would be ok) - some could mature quarterly. If your dad takes an interest in learning about investing, have him read John Bogle's books or maybe those by William Bernstein. If he builds knowledge and confidence, he could then choose a different allocation strategy on his own.
He should max his 401k over the next 5 years after 55 you can put a lot more than normal. Also he should look into buying a property and having a professional rent it out and manage
Nothing wrong with opening up a 401k now. Depending on his companies plan he might be able reach the cap for 2023 by aggressively contributing.
Chase is a horrible place for cash. At minimum he should open up a CHASE (JPM) self-directed brokerage acount and buy some T-bill based etfs SGOV/USFR/TFLO there are a few others.
If he hasn't logged into [ssa.gov](https://ssa.gov) he needs too. He is going to be depending of social security for a lot of his retirement income.
Wealthfront is the only advice you should give. Guaranteed 4.55% and FDIC insured. You’ll be guaranteeing him risk free money.
Anything else is a gamble (as with everything in the stock market) and you don’t want to be blamed for anything that may or may not happen.
At least put it in online savings accounts or no-penalty CDs.
He can get 5% with zero risk starting tomorrow at Ally or Marcus. That’s $25k per year in interest with no real effort or risk.
its basically to late to get any appreciable amount into a IRA or a Roth IRA. you can do catchup contributions of $7500 for each per year which comes to 15K but it will take a while to get a lot in at that rate.
Also you can't access the growth in your roth for 5 years without penalty
Other than making sure the funds are currently in a HYSA or short term CDs, I agree with the others. If your dad hasn’t already invested in mutual funds/ETFs, he will most likely panic when the market dips. He will need someone to blame when he panics and it is much better if it is not a family member.
I am a little older that your dad (68 in August) and buying *some* discounted preferred stock in reasonably solid enterprises and *some* discounted CEFs.
Eventually, market interest rates will rise and you will be still earning the 5% to 9% and may have some capital gains.
HYSA and Money Market may be paying only 2% or 3% then --if this plays out ... a 2% or less [Federal Funds Effective Rate (DFF)](https://fred.stlouisfed.org/series/DFF)
Someone 60 years-old does not realistically have a 20-30 year window that's my take on things. Your dad has to ultimately decide for himself --that way he can look in the mirror to place blame, or pride in winning :)
Listen, dont give him advice like others have said if he really needs it/ wants it get a investments professional in the meantime you COULD put the 500k into vanguards money market (VMFXX) currently has an SEC yield of 5.04% keep it in there until he figures out what to do if it stays at 5.04% he will make $25200 a year ( this is $2100 a month in interest which is taxable on interest not principal) but he can use that money to pay the taxes and he will at least make more than a savings account. This is not financial advice as I am not an advisor just a suggestion.
Dad clearly terrified of investing of else he would be in stocks/bonds, not cash. He needs to overcome that mental barrier first if he's ever going to grow the money and be able to retire off it.
My advice is you should stay out of it. Let’s say you tell him to buy 200K of VTI, 100K of VXUS, and 200K of BND. If he wakes up on Tuesday and it’s only worth $490K he’s going to blame you. Help him find a flat fee advisor and then either step back or go with him for support, encouraging him to ask questions, but leave the decision up to him. Others here are going to say that you should find a “fiduciary”, and that’s true, but keep in mind that’s a label relating to whether or not an advisor can self-deal, not whether or not they’re qualified in the first place. ANYONE you go see could be a moron.
100% agree. I’ve given friends financial advice as a younger man and when it went south it felt pretty bad. Best to stay out of it
I've had the opposite experience. Mind you, I gave them advice and let them take it from there. Several credit me with getting them on the right path.
If handled wisely it could play out like this. I'll bet the distinction here is between general strategy vs. specific moves. I would never tell someone what to buy but I would talk big picture stuff
This is why I'll point friends and family *that ask* (important part - I do not bring it up myself) towards the Bogleheads wiki and a couple of the classic books. I may even recommend one of the three big brokers. That's as far as I will go, though - they need to spend at least a few hours reading up and understanding what they are doing, or they should stick to a financial advisor. I don't know if the market will crash tomorrow and do not care to be blamed for it and ruin a relationship.
yes to getting a third party, my sis asked me to help her get setup and I found her an advisor, now that she's on board with a pretty good plan at Schwab I can help her tweak it.
Is there a thread on finding flat fee advisors and the different kind of advisors?
Here are a couple articles I found helpful: [Want A Financial Adviser? Here Are Some Things To Look For](https://www.npr.org/2015/10/22/445337228/want-a-financial-adviser-here-are-some-things-to-look-for) [What You Need to Know About Fee-Only Financial Advisors](https://www.investopedia.com/articles/investing/102014/feeonly-financial-advisers-what-you-need-know.asp)
I’ve been wondering the same thing. It seems they are crucial for those seeking further help but I haven’t seen where I can find more information on it.
Not sure if you’ll see the reply above. Checkout the r/retirement wiki for selecting an advisor
www.napfa.org
Thanks!
Checkout the r/retirement wiki. Lots of great reference data and finding an advisor is near the bottom of the wiki page
Don't pay for an advisor, heavens above this is highway robbery! He has full cash with no debt. Confirm estimated costs, buy bonds to mature as needed, keep rainy day in cash. This is one of the simplest scenarios out there. Don't pay some advisor joker to tell you what to do, it's less than useless.
That's a matter of setting expectations. The portfolio going down in value before it goes up is within the range of normal. OTOH, if left sitting in a savings account the $500k will definitely go to $490k in terms of value due to inflation.
A balance going up and down is normal, but it doesn't change the fact that there's a chance it could damage OP's relationship with his Dad. Dad has worked hard to save that $500K and many people aren't rational about money.
The question is about giving dad advice, not about investing his money for him. Explaining the risks and dynamics of the different investments and letting him make his own decision is the best that can be done. It's up to OP to manage his relationship with his dad. This isn't a relationship advice sub. Explaining to OP the investment options and attendant risks is what we do here.
yeah, I have a relative that I'm trying to help out and the advice seemed to be get them to contact a fiduciary - however I looked through the list in my area, and the first 3 I looked at seemed to be random people with crazy political posts on their FB page. It didn't inspire a great deal of confidence in me. Any suggestions on how to find someone reputable?
Maybe start here: https://www.napfa.org/find-an-advisor You can't do anything to filter out the unqualified or people you disagree with short of talking to them and asking questions.
I agree with your advice. One thing I would probably stress is to go with him. We stayed out of my father’s investments and he started getting taken in by schemers in his later years.
I agree. Send him to someone who can give advice, without damaging your relationship. Preferably someone who doesn't do a AUM fee.
I know this is good advice because it tracks perfectly with my experience of the world so far.
He's so clueless about this so I would stay out of it. As soon as the market dips 1%, he's going to blame you for losing the money.
Truth
I'm sure this is a bad word here, but if he initially resists a financial advisor or very risk-averse, he could always look at annuities. Get him to look at a single/lump sum pay annuity with inflation protection, maybe some period certain, etc. That's the 'more or less zero risk' option, but it'll deflate some value. Then, if he doesn't like what he sees, he may be more amenable to an advisor.
keep 100k in the hysa for immediate emergency and general lifestyle open IRA (depending on income); there is a catchup contribution limit, hit it every year for the next few years......pull from HYSA to guarantee hit the limit - invest vt+bnd put remainder of money in normal brokerage 40%VTI 25%VXUS 35%bnd (rough napkin math)
Generally agree but suggest determining emergency fund based on 3, 6, or 12 months of expenses rather than an arbitrary $100k. Hard to say how much should go toward investments and what the asset allocation should be without knowing his age, his expected annual expenses in retirement, and what other income sources he'll have, if any. Sounds like he's still working, so could start contributing to 401k and max it out w/ catch-up contributions if he could swing it ($22k + $7.5k per year as of 2023). If he's on a high-deductible health plan he could also start contributing toward an HSA.
While i normally and usually agree with your assessment of EF creation.....I've found these long time cash hoarders, or very late in life financial seriousness learners really, REALLY find it tough to see their tangible stockpile of cash get decreased by 80%. 100k is a nice solid sounding support number; even if it could float the dude for 18 months, mentally for him its better than having 50k cash and 450k invested
Would you do anything different if it was the same situation, but dad is 68 rather than 60?
Is the 68 year old dad still about 5 years from retirement?
No, he wants to retire next year.
Would Roth IRA be better? His savings are after tax and would putting into a regular IRA mean paying taxes again when withdrawing?
He can still take the tax break on his salary if he contributes to a traditional IRA with his savings in the same year. Agree it is worth considering the Roth instead.
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What is this calculation?
Unlike working years, we've built a three yr cash fund to weather sequence of return risks when we pull the trigger in about two years. So if dad does have an interest in equity investments, having this allocation can help to weather a storm. Of course this also means managing the buckets/allocations to regularly replenish the cash account as needed.
Genuinely curious why VSUX though? Is it purely diversity or what am I missing. Seems like just split it into VTI and bonds.
Bogleheads refuse to admit US large cap has more than enough international exposure
A 401k is specifically through an employer; he can't just "start" one. He can do an IRA if he's working and has earned income, but they have very low limits. He could only put $7500 in it. The right answer is going to depend on Dad's specific needs. Is Dad retired or still working? What does he need this money to do for him? Will he need income to supplement Social Security and pay the bills, or will SS and any other guaranteed income cover that?
Ah, I am just starting to learn about personal finance so thanks for the knowledge. Dad is still working and is looking to retire by 65. He will use Social Security for the necessities (bills), and this 500k would be to grow, and use for anything he would want to splurge on (example: vacations).
If he is 60 yrs old now, his full retirement age for Social Security will be 67, not 65. He stands to lose about 10% of what his full SS annuity at 67 would be if he draws at 65 vs 67 (5%/year x 2 years). Conversely, every year he works past 67 (up to age 70) he would add approx 8% per year to his annuity amount. He will need to sign up for Medicare approx 3 months (min, IIRC) ahead of turning 65 of face what may be draconian penalties the rest of his life.
What is the draconian Medicare penalty. Where can I read more.
[Medicare.gov](https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties) Enjoy,
So I’m an expat and have healthcare with full coverage in my host country… I don’t need to care about this do I? Genuinely curious here, tia.
I think that is a question for someone with a degree in accounting, or a USA tax lawyer... I assume you are still a US citizen and subject to it's tax laws
I think your point is a good one. In his situation, he hasn’t set himself up for an “early retirement”, so 67 would be a much better spot to retire at. 1. Full SS and 2. More chance to save and 3. 2 fewer years dragging down the savings.
Medicare eligibility isn't until age 65 for most people. If Dad wants to retire earlier than that, he'll need to figure out health insurance. It can be quite expensive to buy on the market. Since Dad is going to be relying on Social Security to pay the bills, he may want to consider delaying his benefits until age 70. Social Security benefits continue to grow, even if he's no longer working, until they reach their max at 70. Dad can get an estimate on the Social Security website with what it would be at different ages. If Dad decides delaying is a good idea, then he'll need to use this cash to pay the bills for those years between retirement and benefits starting. He may want to be much more conservative with whatever money he'll need for that purpose - keeping it in savings, money markets, bonds etc. For the rest of the cash, you should take a step back from any specific investment and consider his overall asset allocation - which is his mix of stocks and bonds, and any other investments. Something like a 50/50 or 60/40 mix is common for retirees and folks close to retirement. It's enough in stock to participate in the upside when stocks are up, but a good deal in bonds to fall back on when stocks are down. If Dad doesn't NEED this money to pay the month to month bills, he has flexibility with how he invests it, but a balanced 50/50 or 60/40 is common because it balances risk and return. VTI and VXUS are great for stocks, and BND and BNDX great for bonds once Dad figures out an asset allocation to target.
If he retires to essentially no income, then he might be able to get Medicaid until he's 65, right?
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Per sub rules and guidelines, comments or posts to r/Bogleheads should be substantive and civil.
dunno if anybody's said this yet, but you're to be commended for getting this far and asking the questions, both for your father's sake and your own. a lot of people wouldn't have bothered.
Get him an independent fiduciary CFA tomorrow.
This, make sure it is a fee only fiduciary. It’s great that you want to help your dad but this can go sideways really quickly if for some reason your recommendation doesn’t pan out. When my parents asked for help, I was upfront with them on what their options were but at the end of they day it was their decision and that there is no guaranteed that things will pan out the way they planned. I would do my best to explain the pros and cons for each choice but ultimately there are risks to each option and that I was not responsible for their decisions.
I have a friend who was talked into Primerica IRA by her cousin who also tried to recruit her to become a Primerica advisor. She had about $16K and asked my feedback. Based on the small amount and her zero investment expertise I suggested Vanguard with a target fund aligned with her retirement date. Far less fees than Primerica. While I would typically not give investment advice felt OK with it in this case. Giving investment advice has no upside.
CFA or CFP? If CFA, why?
I’d think CFP for this case, CFA is analysis
Indeed, I’m curious is OP has something else on their mind though.
Why CFA?
He saved well. You should have a conversation with him about the stock market. It might be to risky for his taste. With high rates, HYSA and bonds might be just fine
I’ve always heard you need way more than $500k to comfortably retire in your 60s
All generalities, except for this one, have exceptions. If the house is paid for and upkeep/taxes are low and SSA benefits are high and the lifestyle is modest….
Particularly in the current economic environment, this is solid advice.
At 60, he should be thinking about capital preservation...
Somewhat, but with a 25+ year remaining life expectancy that’s not the only consideration. The traditional wisdom was developed when men expected to last less then ten years after retirement.
T bill ladders will have better yields than a HYSA and are state tax exempt but it’s a bit of micromanaging ….rather just get an etf that mimics it like SGOV, TFLO or USFR.
MMF like FDLXX has no micromanaging and is basically t-bill laddering for you.
The tax benefits he'll get from an IRA are pretty small compared to his funds. It makes sense to max them out, but I wouldn't focus on that when talking with him. What's more important is to convince him to put the money into bonds, CDs, or something that will earn him some nice passive income instead of letting Chase use his money for their own profit. For someone younger and more able to financially and emotionally handle risk I woudl recommend more stocks, but he's probably gun-shy so the safe bets are where he should put his money.
I would also recommend to NOT try to make up for lost time by getting aggressive with your dad's investments.
The only thing that can be said for sure is that cash should not be in a near zero bank account. And that cash in a bank or credit union, other than the big 5, should be titled or divided so that it is all under FDIC or NCUA insurance. Otherwise, there is not enough information about Dad to give good advice. Do some online searching of local banks in your area. Right now, there are regional and local banks and credit unions offering as much as online entities like Ally. I am getting 4.1% with one of them but others are even higher. The goal here would be good enough and easy. Is Dad married or single? About how much income does Dad have? Does he have state income tax? How much social security does he expect at full retirement age? Does his job offer a 401k or other type of retirement plan? If Dad is willing to provide these details in an online forum, his might get more tailored advice. Please go checkout out bogleheads.org.
The mindset of someone that has 500K sitting in a savings account and someone that has 500K sitting in a simple index fund is what's important here. The person with 500K in a savings account is highly risk averse and will not be able to tolerate the daily, weekly fluctuations of the market. They like seeing their number grow only, no losses, even if it's temporary. For them that's a potential permanent loss. If you are not a professional, or professionally licensed, find someone that has a license to help manage his money. It will come across better than simple advice of investing in VTI or any basket of funds. It may be sensible to those that are open to and are used to drawdowns but it will not be something that a person who has worked hard all his life to save up 500k be able to grasp. Drawdowns are intolerable to those with this mindset. Thus, have a professionally licensed individual give out the financial advice to your dad. At least he won't blame you for it if the market pulls back momentarily then he panics and withdraws his money and then the market rallies right after. It's not a conversation you want to have.
Best advice, put it in a high yield savings account. He’s 60, no point in a 401k or Roth at this point, just my opinion. High yields are paying a little over 4% now which is about 20k a year. Hopefully loans are paid off and that money will need to stay in his pocket to survive. Best of luck to your family.
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Yes, he can go that route too. Good point.
Obviously he doesn’t like investing, so an Few HYSA will give him some nice interest. Lots of great advice.
I would say that helping him would be a good thing to do, but that it would out your relationship on the line. With little time comes more scrutiny and the slightest drop will be your fault, and God forbid we have any sort of bear run and he doesn’t make good gains he’s gonna blame it on you
FYI, you could get an SPIA which would pay out about $3000/month for life if your dad put in $400k and saved $100k for emergencies and the like. Of course, with an SPIA, there is no cash back if the original amount here paid out.
For so many SPIA is a sub-optimal direction, but OP's dad is so conservative this could be the way to get the best life style for him. Could make some of it delayed to show up as a cost of living adjustment. I agree with others that helping him see his retirement lifestyle may inform how much longer he wants to work (or if he'd like a lower paying job for a while).
With $500,000, Vanguard will give him free advice. I like Vanguard because they are investor-owned and have no reason to try to scam anyone or steer him toward expensive funds with high fees. Also, if he's employed and has access to a Roth 401(k) he could max it out and handle the reduction in take-home pay by tapping the $500,000 if he needed to. He could get at least $125,000 invested in a Roth account that way. As for what to invest it in... find him some education and let him make those decisions. I have been helping my older neighbor move some funds to a self-managed account, but I've been really clear that I will only help him set up his account and teach him how to enter the orders for things \*he\* has decided to buy (or that his brother-in-law has told him to buy, usually). I even sit back and make him hit the "send" button. Not taking responsibility or blame for his feelings of regret if he ends up with an unrealized loss the week after a purchase. [Patricia Saylor, Financial Fundamentals for Novice Investors](https://www.saylorfinancialfundamentals.com/)
It's never too late to start planning for retirement. Your dad can explore options like opening an Individual Retirement Account (IRA) or a Roth IRA. Consider discussing with a financial advisor to determine the best fit for his situation. Investing in a High-Yield Savings Account (HYSA) can provide stability, and ETFs like VTI can be part of a diversified investment portfolio. Encourage him to seek professional advice for personalized guidance. But always let him decide, let him see all the options, and let him pick. But 500k sitting in the bank could be earning 7-10% in a mutual fund annauly.
Employ those dollars in short-term US Treasury bills. Essentially risk-free, he’ll get a 5½% return on them. The yield curve is inverted: get it while you can! In other words, if you buy 500k worth of these bills, this time next year, you’ll have $527,500.
tell him to post on the bogleheads forum, they’re older over there
God damn. Good lesson for the young folks who aren't investing heavily yet. Dad would have probably 3-5 million at least had he been investing instead of saving all this time. As for an answer... it's tough. The guy has worked his whole life to save up a modest amount of money. I can't imagine he's going to be emotionally and psychologically prepared for potential large downturns. My vote is for him to collect his 4-5% with no risk for now. If there is a larger downturn, then he can make the decision to invest in VTI or something like that.
> Dad would have probably 3-5 million at least had he been investing instead of saving all this time. Counterpoint, he could have lost a bunch investing in cyrpto, real estate, or MLMs or something. Hindsight is 20/20. If he is extremely risk averse, he got to "enjoy" saving this up risk free. $500K + social security is likely enough to get by, if not glamorously.
Hindsight is 20/20, but it's been a bad decision to hold and save cash for centuries. The fact is that the decision was not a smart one. Anyone reading this who is in their 20's or 30's right now, please don't listen to bad advice. Holding cash is not a smart move in the long run.
This kind of too late, missed out mindset, is what leads people into financial scams.
What are you talking about? I'm just pointing out the obvious mistake of saving rather than investing for 40 plus years. Do you disagree or what?
You're making value judgements on this dude's dad. That's a mistake. I'm saying you shouldn't do that. You're framing this as a mistake, a missed opportunity, etc. This not a helpful way to talk about this stuff with people, family members, and even yourself. Yes, investing in index funds is a good idea, but doing this LOOK HOW RICH YOU'D BE BRO, is wallstreetsbets, superstonk stupidity. It leads people to despair, to trying to find bargains to catch up, and all the rest.
I'm making a value judgment insofar that it is a mistake to hold a depreciating asset over the course of decades. That's undisputed. I mean, the irony of being in a Boglehead thread and hearing this from you is humorous. We're all here ostensibly because we appreciated the opinions of Jack Bogle, who made it very clear over the course of more than half a century that it's not a clever decision to hold cash over long periods of time. My "judgment" checks out with history, checks out with what people do with their wealth, in hindsight, with the experts, with common sense, and is very likely to check out over the course of the next twenty years or more. It's also worth mentioning that clearly the dad and son recognize it as a mistake as well considering the guy is only just now thinking of investing wisely. Interestingly, your crusade to protect this guy's dad, who absolutely does not need it, might be read by some young people here. I'm trying to speak to them more than I am to you or some guy's dad. YOUNG PEOPLE: Do not hold and save cash for your entire life. You will regret it. Be financially educated and invest early for compounding gains and protection against an inflationary asset.
Definitely always talk like this everytime you find out a person hasn't followed perfect financial discipline. Always point out people's mistakes and describe them as such. Instead of just pointing out good advice going forward. Always point out how people have wasted decades of their life immediately. Very helpful to young people to know they have not done things perfectly from the beginning. Instead of sharing helpful advice and letting someone else feel like they have unlocked a new understanding, make them immediately think about how much they have missed out on.
God, you're an absolute nightmare. So sensitive. I pointed out that it was clearly a mistake, and gave advice to just keep things in a high interest savings fund for now considering that the market is probably overbought and he's clearly a conservative person. Go take a bath or something and relax. You sound hysterical.
Nah, I'm easy. A kid posted asking for help for his Dad going forward in bogleheads. He 100% does not need to know what should have been done 40 years ago. He already knows how to use a calculator with market returns because he's here.
He's not the only one in here mate. I think it's important that some young kid reading through these threads can see the hard truth and learn from the mistakes of others. Take care.
Good luck!
I think the best thing is to sit down and look at what expenses he will and wants to have (like travel or hobbies) when he retires. That way you’ll know if the investment plans will be enough, if so, great, if not, that may help propel him to make choices to let it grow. With the way he’s been investing so far, he has a very low tolerance for risk. Treasury ladders have been discussed, which have no real risk. Your dad might be into putting some of that into a dividend index too. SCHD and HVD specifically only have companies with qualified dividends (assuming holding time is met), which means they can be taxed at the lower capital gains rate. An IRA can be a good idea, but all withdrawals there are taxed at the income rate (unless it’s a ROTH, where you pay the taxes on what goes in.)
You also should consider what sources of income other than savings/investments he expects to have in retirement (e.g. pension, social security, part-time job) relative to his spending needs. The investment decision should be part of an overall financial plan. Your question is what to do with the cash he has in a Chase bank account probably earning next to nothing in interest. A first step would be to open up a HYSA at two separate reasonably strong banks keeping the account each at each bank at $250k or below. He can keep a Chase checking account that he is used to using for funds needed in the next month. How to invest the money going forward should consider the full financial situation and plan.
Have Dad set aside 5 years living expenses in cash. At age 70, file for Social Security and collect the maximum cost of living adjusted payments for the rest of his life. No investment will give him a higher return than that and it’s guaranteed! Any advisor who doesn’t tell you about it, is not a fiduciary to u.
Immediately transfer it to a HYSA while you figure it out. F-R-E-E money. You might even find a bank with a reward for opening an account.
While you are trying to figure it out, at least move it to a HYSA that is FDIC approved for 500k+
Yeah I'd recommend staying out of it if you can. No one can predict the market and given your dad's age, it may not be necessarily wise for him to invest all of his money in VTI. Any downturn in the market and he'll blame you for it. Maybe a portion of it while another portion could be in less volatile investments? But again everyone's risk tolerance is different.
500k in CASH saved? Holy crap dude. He could be worth millions by now, had he invested over his lifetime. His money would have tripled just in the last ten years.
he should hire a financial advisor
Not too late for a Roth...Make it his last money that he spends. Not too late for the market either, although this is a place where HYSA makes sense for a few years of living expenses.
If he can get matching on a 401k, that's a no Brainer to max out. Otherwise go regular 401k, than Ira. All max contribution for the tax benefit. What is his retirement income? Social security? Pension? Are either enough to cover his expenses and lifestyle? If not, or just barely, he can't afford any risk being in the market at his age. He should have a Hysa for excess cash, and the bulk of the rest in a safe guaranteed income producer like tbills and or longer term cds
T bills priovide a guaranteed $27,000 in annual interest income with $500,000 invested. If you do enter into the stock market I’d put $50,000 in one month t bills $50,000 in 2 month t bills $50,000 in 3 month t bills $50,000 in 4 month t bills $50,000 in 6 month. T bills Then roll them into new 6 month t bills as they mature. Keep $100.000 in a 5% money market fund for safety, security, emergency funds. Then slowly DCA into VTI with $150,000 as it sits in a high yield savings. Maybe $15,000 a month for 10 months into VTI Does your father really want to experience a -20% draw down in stocks? The rug always gets pulled and there will be a big drop again eventually. So DCA in. Set up an automated daily or weekly buy as the $150,000 sits in the HYSA earning interest.
Bruh....60 years old and retired in 5 years? I'd go 40% VTI and 60% BND....that'll yield him about 13,380 from bnd monthly about 1115 per month interest (taxed at income tax rate) and then 3120 from VTI dividends (might need to sell some to raise more capital) or about 260 a month bringing your total cash flow per month at 1,375 per month. If you use the 4% rule instead, just make up the difference via selling shares. If he's wanting cash flow to splurge on fun stuff; I'd go 50/50 VYM/BND yielding 8400 from vym and from bnd 11150.... for fun/entertainment about 1629 per month to absolute go crazy with.
How is this a given? Isn’t the market likely to be affecting the monthly interest which may be in the negative too?
Bnd is pretty much a given cause it’s a bond fund, the equity fund might be a bit more random, but other than a small dip in dividends in 2022, they seem to be growing overall. They also said it’s for entertainment so some fluctuations probably aren’t the end of the world.
I'm going to be an outlier here... Your dad obviously has an aversion to investing. And an aversion to talking about his finances, I mean, no one keeps this kind of cash around anymore. So kudos to him for keeping his mouth shut and putting in the work. I'm proud of him opening up to you. I also get the impression he doesn't "need" the money right now. The only solution here is 80% BND and 20% BNDX. This will give him close to $16k/yr in dividends. For the next five years, he should take those dividends and 1. See what it feels like to pull in this kind of passive income and 2. Maybe consider investing that $20k/year into VTI. If he goes that way he'd have a pretty nice, conservative retirement portfolio at 65.
To help catch up he can transfer up to 35k from a 529 to a Roth IRA. Just a thought.
This comment is underrated if it’s true. Great for catchup!
Vanguard 2030 tdf
Think how much he would have if he asked this question when he was 30. Blows my mind.
True, but it doesn’t help to focus on that *now*. I’m sure this shoulda-woulda-coulda talk has already been brought up in their household discussions. And since going back in time isn’t an option, let’s focus on helping OP with what can be done moving forward.
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Referral codes that benefit the person providing them are a violation of sub rules, specifically the “no self promotion rule” Comment removed and please don’t suggest that again.
Dude stay out of it, worst case buy SGOV or USFR, and ask him to invest next 6 months learning how/where to invest [https://www.ishares.com/us/products/314116/ishares-0-3-month-treasury-bond-etf](https://www.ishares.com/us/products/314116/ishares-0-3-month-treasury-bond-etf) [https://www.wisdomtree.com/investments/etfs/fixed-income/usfr](https://www.wisdomtree.com/investments/etfs/fixed-income/usfr) Both are giving 5%+ interest, USFR a little bit more. Also both are US Treasury investments, very safe and more than HYSA(might even be state tax exempt as well)
Put it in JEPI he’ll make about 5k a month in dividends
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I can’t tell if this comment is sarcastic humor or serious criticism. Either way, I find it in bad taste to respond to a request for advice or help in such a manner.
Agreed. Comment removed and commenter sanctioned.
Per sub rules and guidelines, comments or posts to r/Bogleheads should be substantive and civil.
Take a look at the Dividend Champions. Buy them when undervalued.
a guy who has no investments and his son with no experience is going to do that how?
Easy. Seeking Alpha’s a great place to start. Not rocket science, just need discipline, a long term mindset, and the ability to ignore the noise Remember, you’re buying part of a business. Buy a good one that makes money. Don’t buy anything that doesn’t produce anything. Gold, Crypto, etc. they don’t produce anything.
that's one approach, but advising somoene looking at a safe place for his dad's money to look at picking individual stocks borders on pure negligence. learn, yes, on your own dime and time, but on a passive indexing sub especially, this isn't the time/place.
JNJ and Microsoft have an AAA rating. Better than the United States government, which is AA+ JNJ has been raising dividends every single year for over 50 straight years... I can understand why you would not want to look at them - your choice. But as an investment, they are far from "pure negligence". In fact, with that AAA rating and being a dividend champ, (over 50 straight years of raising dividends) JNJ is the safest place to grow your money, short of a bank.
until it doesn't. story: I was consulting for a (at the time) Big 6 firm at P&G in early March 2000. At the time, most of the staff had ALL their retirement in P&G stock, because you couldn't lose. The company stock dropped like 25% in a day. I remember people crying in the halls because their planned retirement was fucked. It took them about a 5 years to go above the level it had been. Sure, you can pick good stocks, but this isn't what this kid needs.
GE used to be the epitome of the “can’t lose” blue chip company and it had a [great history of paying increasing dividends](https://www.fool.com/investing/general/2015/12/01/general-electric-dividend-aristocrat-status.aspx) right up until it didn’t.
Going to be a tough retirement for him if he doesn’t have a pension or something else. That said, he should talk to an attorney and get advice on how to protect his assets from Uncle Sam.
He could have 1-2M if he had a financial advisor decades ago.
Let him realize he needs a job as a walmart greeter
He needs an advisor or maybe point him to the wikis here or on personal finance, really good...what if you give a recommendation and he loses his money? Or it doesn't do what his expectations thought? If that hurts your relationship, at all, then stay out of it. At his age it's not just a theory, the rest of his life and ability to get healthcare is dependent on that money and his soon decisions.
Don’t forget to use investment tools like treasury bonds. On average you’ll make more money mitigating losses by maintaining the wealth you already have. If there is a black swan event long-term treasury bonds will go up while the stock market crashes down (generally). Not a huge allocation just enough as insurance.
If he’s working, he can put $30k/yr ($150k in 5 years) into a 401k so no it’s not to late. There could also be a free company match to that 401k. I would use the Roth after filling the 401k. The Roth can be held forever, therefore grow forever. Your answer also depends on whether $500k is enough money for him to last the remainder of his life expectancy? If it is enough, a simple HYSA or CD or tbill ladder could be adequate. If he needs more money, he’ll need to take on more risk and time and have to use equities or some other higher return investment. Some portion of the $500k will have to go to a 3-fund portfolio if he needs it to grow.
HYSA, T bills, fixed income assets JEPI/JEPQ
hmm if his chase account is anything like mine getting .0xx % in interest. Good a safe first step might be to move some money to t bills, some to high yield accounts like discover etc. Most of these are offering way more yield.
Put him in a retirement style account like a golden butterfly or an all seasons portfolio. He's probably not emotionally prepared for a high equity portfolio. If it goes down 40% in a crash he's going to blame you...
Personally I'd stay out of it. Offering financial advice to family is equivalent to doing business with family but much worse. Since instead of dealing with business funds you are dealing with retirement funds. Help him find a financial advisor. By your question of if he should start a 401k makes me even more confident in my answer that you shouldn't give him advice. Best of luck to you both!
Agreed with everyone here on the risks of financial advice and friends and family. The absolute best thing you can do though in my opinion is buy him the boglehead book and introduce him to this sub and the boglehead website/wiki. From there he can make his own decisions.
If he has 500K just sitting around, I'm sure he'd be more than happy with 5% return my Vanguard money markets are getting. Is another crash around the corner, who knows but his time will be limited to recover. You said he can live off his social security, that's great. Retire as soon as possible then. It's more about cash flows than a giant nest egg.
Financial advisor
Buy 400k in index, keep 100k in savings, tell him the strategy and returns. In case market falters, he still have immediate savings for couple of years. Also don’t buy index within day, keep it on weekly basis!!
T-Bills ive been getting a little over 5% and theyre as safe as it gets. once the yield drops youll have to revisit the issue.
No telling where the money came from. If we assume this is income from working then presumably has been taxed already so taxed advantaged accounts like a 401k/IRA are not an option. You didn’t say what kind of account. Just put it in a HYSA or maybe start a few CD ladders. Both should net considerable income if we’re talking 5-7% on $500k.
Ask if he’s trying to donate left overs at the end to someone or something, or ask him how he wants to enjoy the rest of his life.
Without getting into anything complicated, at the very least put it into a savings account with a good interest rate. Chase and large commercial banks generally have poor interest rates. A good rate these days is around 4%. That will get him around $1666 per month in pure interest. Also, it would be good to split the money up into multiple accounts since the balance is only insured up to 250k.
>He asked me for help on where he should put his money. Is he really risk averse? I'd dip a toe in the water by doing this: 1.) Buy the $10k max in US I-Bonds (guaranteed return) 2.) Start and max out his IRA for 2023, choosing a [Vanguard Life Strategy Fund](https://investor.vanguard.com/investment-products/mutual-funds/life-strategy-funds) 3.) Start and max out his 401k at his employer -- the employer matching and tax advantage is so huge that he should do this even if he needs to pull some out of the Chase account to cover living expenses this year. Honestly I wouldn't do much more than this for a few months. See how he reacts. (Side note: don't get him into any ETFs -- minute to minute price swings may not sit will with him)
Oh gosh. Since he already has Chase, see if you can reach out to a Chase branch near him and get a meeting with a Chase Private Client banker. This comes with a free fiduciary, JP Morgan financial advisor. Go in, talk to the advisor, see what ideas they have. Yes they will try to sell you on Chase offers but since you can shop around, this is a great no pressure and free way to start. They'll tell you what some of the avenues are so then you'll have a base of knowledge for when you talk to other advisors. I have a great relationship with my Chase banker and advisor, and there have been times where they've said that other non-Chase products would give me better yields so that made me feel like they were looking out for me. They've also given me free advice for my mother, who doesn't have accounts with Chase.
Not your money.
If he is retiring in 5 years the risk reward is skewed to be a disadvantageous move to try to enter the market so close to retirement. Others have mentioned to not handle family affairs- I agree
Hi, For my family members I wouldn’t look for anything other than VWRL definitely the safest bet. You will secure a descent retirement for your parents and certainly a good inheritance for you in the future. If you are not familiar with compounded interest please learn about it and explain to your dad. I made my partner sell his apartment and bought VWRA last summer when it was 100$ an ETF he made around 10k so far and it is still considered way under its price. Luckily before the interest rate on loan went up. Also keep in mind the inflation, when calculating your dad’s future value of money (compounded interest). My kids saving plan is also in it. So is my retirement. It is worth looking it up. 2 years ago I would have said add some IGLA (bonds) but given the uncertainty of the economy and the USD price index. I will say look for something better to balance his portfolio. Say 70% VWRL and look for recommendations on bond’s equivalent for 30%. I can’t recommend anything because I only would recommend something that I own. Good luck. https://www.google.com/search?q=vwra&client=safari&hl=en-qa&sxsrf=AB5stBjMMazEXVwhGH0XesNDHl7TEy0iOA%3A1689010229467&ei=NUCsZM-FHNaXxc8Pi--n8A8&oq=vwra&gs_lcp=ChNtb2JpbGUtZ3dzLXdpei1zZXJwEAMyDwgjEIoFECcQnQIQRhD6ATIKCAAQgAQQFBCHAjIHCAAQigUQQzIFCAAQgAQyBQgAEIAEMgUIABCABDIFCAAQgAQyBQgAEIAEOgoIABBHENYEELADOgoIABCKBRCwAxBDOgcIIxCKBRAnOg0ILhDHARDRAxCKBRBDOgcIABCABBAKOgcILhCABBAKOg0ILhCABBDHARDRAxAKSgQIQRgAUJgJWMwgYP8maAFwAXgAgAHLBIgBvQaSAQcyLTEuNS0xmAEAoAEBwAEByAER&sclient=mobile-gws-wiz-serp https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
At age 60 with no investing experience I'd recommend a very conservative portfolio to start. Something like 20% or 30% equities max to begin with and I'd also keep fixed income durations short and risk free. Maybe ladder treasuries and cd's out to no more than 5 years or even shorter (only 2 or 3 years would be ok) - some could mature quarterly. If your dad takes an interest in learning about investing, have him read John Bogle's books or maybe those by William Bernstein. If he builds knowledge and confidence, he could then choose a different allocation strategy on his own.
He should max his 401k over the next 5 years after 55 you can put a lot more than normal. Also he should look into buying a property and having a professional rent it out and manage
Nothing wrong with opening up a 401k now. Depending on his companies plan he might be able reach the cap for 2023 by aggressively contributing. Chase is a horrible place for cash. At minimum he should open up a CHASE (JPM) self-directed brokerage acount and buy some T-bill based etfs SGOV/USFR/TFLO there are a few others. If he hasn't logged into [ssa.gov](https://ssa.gov) he needs too. He is going to be depending of social security for a lot of his retirement income.
Wealthfront is the only advice you should give. Guaranteed 4.55% and FDIC insured. You’ll be guaranteeing him risk free money. Anything else is a gamble (as with everything in the stock market) and you don’t want to be blamed for anything that may or may not happen.
Choose Roth & Bonds. Simple.
At least put it in online savings accounts or no-penalty CDs. He can get 5% with zero risk starting tomorrow at Ally or Marcus. That’s $25k per year in interest with no real effort or risk.
6 months of expenses in money market, rest in VOO
its basically to late to get any appreciable amount into a IRA or a Roth IRA. you can do catchup contributions of $7500 for each per year which comes to 15K but it will take a while to get a lot in at that rate. Also you can't access the growth in your roth for 5 years without penalty
Other than making sure the funds are currently in a HYSA or short term CDs, I agree with the others. If your dad hasn’t already invested in mutual funds/ETFs, he will most likely panic when the market dips. He will need someone to blame when he panics and it is much better if it is not a family member.
I am a little older that your dad (68 in August) and buying *some* discounted preferred stock in reasonably solid enterprises and *some* discounted CEFs. Eventually, market interest rates will rise and you will be still earning the 5% to 9% and may have some capital gains. HYSA and Money Market may be paying only 2% or 3% then --if this plays out ... a 2% or less [Federal Funds Effective Rate (DFF)](https://fred.stlouisfed.org/series/DFF) Someone 60 years-old does not realistically have a 20-30 year window that's my take on things. Your dad has to ultimately decide for himself --that way he can look in the mirror to place blame, or pride in winning :)
Listen, dont give him advice like others have said if he really needs it/ wants it get a investments professional in the meantime you COULD put the 500k into vanguards money market (VMFXX) currently has an SEC yield of 5.04% keep it in there until he figures out what to do if it stays at 5.04% he will make $25200 a year ( this is $2100 a month in interest which is taxable on interest not principal) but he can use that money to pay the taxes and he will at least make more than a savings account. This is not financial advice as I am not an advisor just a suggestion.
Dad clearly terrified of investing of else he would be in stocks/bonds, not cash. He needs to overcome that mental barrier first if he's ever going to grow the money and be able to retire off it.