The Retirement Planning/ Investment/ Savings Thread (4 Viewers)

How do you guys like to hold your cash and cash equivalents?
I don’t understand the nature of your question. What is “Cash”? This guy?

johnny cash GIF
 
Google-fu is helpful for so many things, but some topics are simply too vast and deep.

I’ve read some stuff from time to time and listened to a video here or there, but where does someone start who is semi financially-illiterate and doesn’t want to learn everything? More specifically, what type of financial help/professionals should I be looking for and at what time?

As a hypothetical, let’s say that as a non financial guru home, a families finances are extremely simple. Nothing crazy or funds parked in various locations, extremely straight forward joint household, very few accounts, simple 401k and some stock, and not currently taking advantage of any tax avoidance opportunities like 529 accounts, etc. Just don’t have the knowledge nor time/energy to do so.

Both household incomes have ownership as principal types in their companies, but don’t take advantage of realizing losses in one. And lastly, while it may never come to fruition, there is a not insignificant chance that the household will realize sudden gains of 7 to low 8 figures within 2 calendar years.

As those changes become more imminent, we know we need to do something - likely finding someone to get involved and handle our finances. I’m concerned regarding taxes on things like company buyouts, distributions, etc. may vary greatly dependent on what we did or had ready in place prior.

Is it as simple as interviewing financial professionals until we find the right fit? If we move a bit does it matter if they’re local? Does anyone just have “1 guy”, or is that foolhardy and you need to be in charge of your own stuff and/or have diff people who handle diff financial stuff (tax, investments, etc.)?

Thank you in advance.
 
Oh, second question!

Only living relative that I’m even the slightest bit responsible for, grandparent. Has retirement and social security, retirement is running out.

Primary personal worth is in their house. They owe essentially pennies on the mortgage (like sub $20k), and it’s valued somewhere just south of 1.5 mill.

They are going to do something with it. They said that a friend introduced them to someone who said a reverse mortgage would be best and they’d handle it. Alarm bells went off in my head because, well back in the day there were horror stories and I don’t quite trust that someone isn’t trying to take advantage.

I have done research on this, and haven’t quite found a better solution and apparently reverse mortgages aren’t horrid anymore?
  • They don’t need a ton of cash on hand, they aren’t hemmoraging money but will need this to happen soon. Needs around an additional $1400-1600 per month.
  • 77 years old no major health concerns, likely chance to live another 10-15ish+ years.
  • No large expenditures, no credit debt, no other loans, vehicle owned outright, $20k left on mortgage.
  • No other reliable income.
  • Not worried about leaving anything behind. Regardless of how the estate is left, including in shambles, can be handled after by family.
  • Doesn’t need large upfront balance or access to funds, just ongoing enough to help cover day to day life alongside SS.
  • Selling and moving is not an option.
Ideas/suggestions? Concerns or things to avoid?
 
Oh, second question!

Only living relative that I’m even the slightest bit responsible for, grandparent. Has retirement and social security, retirement is running out.

Primary personal worth is in their house. They owe essentially pennies on the mortgage (like sub $20k), and it’s valued somewhere just south of 1.5 mill.

They are going to do something with it. They said that a friend introduced them to someone who said a reverse mortgage would be best and they’d handle it. Alarm bells went off in my head because, well back in the day there were horror stories and I don’t quite trust that someone isn’t trying to take advantage.

I have done research on this, and haven’t quite found a better solution and apparently reverse mortgages aren’t horrid anymore?
  • They don’t need a ton of cash on hand, they aren’t hemmoraging money but will need this to happen soon. Needs around an additional $1400-1600 per month.
  • 77 years old no major health concerns, likely chance to live another 10-15ish+ years.
  • No large expenditures, no credit debt, no other loans, vehicle owned outright, $20k left on mortgage.
  • No other reliable income.
  • Not worried about leaving anything behind. Regardless of how the estate is left, including in shambles, can be handled after by family.
  • Doesn’t need large upfront balance or access to funds, just ongoing enough to help cover day to day life alongside SS.
  • Selling and moving is not an option.
Ideas/suggestions? Concerns or things to avoid?
I have a close colleague that does reverse mortgages and he's shared some of the situations where a reverse has been a big help. The details/story you shared sounds familiar (fwiw).
 
Google-fu is helpful for so many things, but some topics are simply too vast and deep.

I’ve read some stuff from time to time and listened to a video here or there, but where does someone start who is semi financially-illiterate and doesn’t want to learn everything? More specifically, what type of financial help/professionals should I be looking for and at what time?

As a hypothetical, let’s say that as a non financial guru home, a families finances are extremely simple. Nothing crazy or funds parked in various locations, extremely straight forward joint household, very few accounts, simple 401k and some stock, and not currently taking advantage of any tax avoidance opportunities like 529 accounts, etc. Just don’t have the knowledge nor time/energy to do so.

Both household incomes have ownership as principal types in their companies, but don’t take advantage of realizing losses in one. And lastly, while it may never come to fruition, there is a not insignificant chance that the household will realize sudden gains of 7 to low 8 figures within 2 calendar years.

As those changes become more imminent, we know we need to do something - likely finding someone to get involved and handle our finances. I’m concerned regarding taxes on things like company buyouts, distributions, etc. may vary greatly dependent on what we did or had ready in place prior.

Is it as simple as interviewing financial professionals until we find the right fit? If we move a bit does it matter if they’re local? Does anyone just have “1 guy”, or is that foolhardy and you need to be in charge of your own stuff and/or have diff people who handle diff financial stuff (tax, investments, etc.)?

Thank you in advance.
Congrats! Great situation. I would start with a CPA and expand from there. Tax advantages for personal and business are there to be executed on.

Bottom line: investing in your financial and investing acumen is worth your time. For me, understanding my short-term and long-term objectives, both in my business and personal finances, requires me to maintain a constant focus on education. I would interview and move slowly and have several "guys" that you gut check/hold accountable for outcomes.
 
Congrats! Great situation. I would start with a CPA and expand from there. Tax advantages for personal and business are there to be executed on.

Bottom line: investing in your financial and investing acumen is worth your time. For me, understanding my short-term and long-term objectives, both in my business and personal finances, requires me to maintain a constant focus on education. I would interview and move slowly and have several "guys" that you gut check/hold accountable for outcomes.
We’ve put it off for years and I’m just realizing we aren’t going to make time for it. There’s so many of these adult things that are good to do and know, and it’s just not possible to become knowledgeable like we should across the board.

My work is tame, but goes from 40-60 hours a week, and hers is quite literally double that some weeks. Add in small children and constant global travel for her, and good adulting education just doesn’t come close to the priority list unfortunately.

As fundamental as that is, objectives seems smart. Lol we’re just like, whatever happens happens! Maybe talking to the CPAs, we can ask them what financial objectives look like for families and folks our age. I have 0 retirement and am just counting on stock in company to replace that - but have no clue what the implications are.

Good points thank you. Shooting off an email to the CPA that did taxes last year.
 
A reverse mortgage is always -ev. When you die your heirs have 30 days to either sell the house and repay the loan or repay the loan directly with their cash. You’re not gonna get max return if you are hamstrung into a quick sale like that.

If you die early then you get little benefit from the reverse mortgage. If your heirs don’t have cash on hand to repay the debt, they’ll have to heavily discount the sales price to get a quick sale to pay off the mortgage company.

If you live too long then you could be in a position where you run out of money - your mortgage becomes more than the value of your house. Then you no longer have a source of income.

Stating that leaving the house is not an option is a choice that will cost - either you or your heirs. An alternative like renting out a room (or two) is a far better option than a reverse mortgage.

Of course, at old age, maybe you don’t care about money and are happy to let the mortgage company make even more profit off you just because you’re emotionally attached to your house. If that’s the case, roll over and let them have your hard earned cash and capital gains.
 
A reverse mortgage is always -ev. When you die your heirs have 30 days to either sell the house and repay the loan or repay the loan directly with their cash. You’re not gonna get max return if you are hamstrung into a quick sale like that.

If you die early then you get little benefit from the reverse mortgage. If your heirs don’t have cash on hand to repay the debt, they’ll have to heavily discount the sales price to get a quick sale to pay off the mortgage company.

If you live too long then you could be in a position where you run out of money - your mortgage becomes more than the value of your house. Then you no longer have a source of income.

Stating that leaving the house is not an option is a choice that will cost - either you or your heirs. An alternative like renting out a room (or two) is a far better option than a reverse mortgage.

Of course, at old age, maybe you don’t care about money and are happy to let the mortgage company make even more profit off you just because you’re emotionally attached to your house. If that’s the case, roll over and let them have your hard earned cash and capital gains.
Yes in initial looks this is what I saw. And I was like ummmm hey grandma maybe there’s better options?

It’s difficult because I don’t care at all about getting screwed on the backend, I don’t need a penny from her. But at the same time, why watch potentially hundreds of thousands be swept away if not needed to, when that could even just be donated in her name.

In the live too long scenario, that’s where I just end up her benefactor and will take care of her.

I was trying to see the other options, line of credits on the house she can access and the like - but that all starts to read as more complicated and difficult when there’s 0 income. We’d likely have to be guarantors and such, if even possible.

Any suggestions? She can’t move (no one her age can) because it’s in LA. Downsizing from a million+ home bought for $30k in the 60s means purchasing a small studio condo for….million+. Lol none of the retirees can afford to downsize.

I was trying to look up options where we could just pay off the last of her mortgage and she could get a great rate loan against the house, but not seeing that used as a viable option much.

Maybe I’ll do some more searching, surely there’s another standard way (non heloc) to pull cash/equity on a fully paid off home.
 
Yes in initial looks this is what I saw. And I was like ummmm hey grandma maybe there’s better options?

It’s difficult because I don’t care at all about getting screwed on the backend, I don’t need a penny from her. But at the same time, why watch potentially hundreds of thousands be swept away if not needed to, when that could even just be donated in her name.

In the live too long scenario, that’s where I just end up her benefactor and will take care of her.

I was trying to see the other options, line of credits on the house she can access and the like - but that all starts to read as more complicated and difficult when there’s 0 income. We’d likely have to be guarantors and such, if even possible.

Any suggestions? She can’t move (no one her age can) because it’s in LA. Downsizing from a million+ home bought for $30k in the 60s means purchasing a small studio condo for….million+. Lol none of the retirees can afford to downsize.

I was trying to look up options where we could just pay off the last of her mortgage and she could get a great rate loan against the house, but not seeing that used as a viable option much.

Maybe I’ll do some more searching, surely there’s another standard way (non heloc) to pull cash/equity on a fully paid off home.
If you’re rolled to pay off her mortgage and fund her expenses then why not do that with the agreement that you’ll inherit the house.

An alternative could be for you to effectively buy the house from her either through paying off the loan and owning the house (in writing) and then agreeing a monthly sum you’ll pay her ad infinitum. Or giving her the market value and letting her manage how she draws that down.

Either way, effectively you’re providing the reverse mortgage.

Personally I would not recommend this unless it’s someone you trust. She could always “fall in love” with someone and leave the house to them after you’ve funded her for years. Getting into financial entanglements with relatives brings a lot of risk, not just financial!
 
There isn't an easy answer. So many situations lead to so many branching options.

A very few people need a full staff, tax specialists, investment advisors, legal, estate planning. Nine figure net-worths take work from an army of pros.

On the other end of the spectrum people are too poor to afford any help. Maybe some pro-bono help figuring how to apply for assistance.

@BarrieJ3 - - you are further along than you think. You actually have something significant saved. You know some of the more second stage ideas. Likely don't have a good feel for which way to go.

Don't pay anyone a percentage fee. Pay by the hour for professional services. Perfectly fine to pay for an initial consultation - but only at a fixed rate or hourly. It is impossible to be specific - I can't say if you need legal help, tax help, investment help, life-cycle advice or whatever. I suggest your lawyer or accountant might be people who can offer you referrals.

One thing - if you are missing the basics like a will, medical plans that sort of stuff. Get it done first.

As for the old people with way too much money in their home. The basic problem is retired people with limited means shouldn't have essentially all their money tied up in a million-dollar house. There might be mortgage products that would be suitable. Home equity lines of credit or reverse mortgages. The timing for this sucks - the rates on loans are Ouchy.

Loan brokers lie take liberties with the truth adverse to their customer's interests. If a six-figure loan is being considered - please get legal advice.

People who expect to live a decade or two need to be very careful taking on large loans that are payable as a balloon at death or when they leave the home. a 7% loan doubles every ten years if no payments are made. You should see that a big draw down today can easily lean to future problems. It is the last to die/leave the home that triggers the effects. 15 years seems pretty solid for second to die. A $500,000 loan becomes something like a $1,500,000 ballon in 15 years at 7%. Typically, a reverse mortgage triggers at the time you leave the house. Could be at death. But also, could be when the last one moves into assisted living.

Elder care for demented or medically infirm people burns money like crazy. You might think the monthly nut is less than $2,000 per month today. It very well might be ten times that later. There are financial risks at either end of the spectrum.

Selling the house and downsizing might be the fiscally prudent choice. But it might be practically impossible to convince the parents to agree to do so. More so, since this will entail moving somewhere modest houses don't cost a million plus.

Be very very careful taking on this problem personally. So many ways to get burned. So many ways to fracture the family. Many times, relatives turn into monsters with money involved. Expect to have your character impugned. Get a good lawyer, you might need it more than you ever expected.


Good luck. Even if you all make really good decisions at the time, you'll still need it -=- DrStrange
 
If you’re rolled to pay off her mortgage and fund her expenses then why not do that with the agreement that you’ll inherit the house.
I know small beans about real estate, but wouldn't this be the best option? And upon inheritance, the house can then become a rental property, or potentially a home for a child or other family member in the future?

From my understanding, rental properties are so common any more it's not very difficult to profit from renting a home out and having a middle man to do the supervision/major rental upkeep etc.

This is HUGELY common on the east coast.
 
I'm a CPA, and I work with a tax accountant and financial planner for all this stuff. The cost of their services is worth it to me because I don't have to be a domain expert in those things. The market is the market so much of their advice is about tax optimized strategies and ensuring that assets are properly allocated between short term and long term requirements. All funds are low cost indexes, and cash portions are optimized based on whatever interest rates are doing.

Setting up wills and trusts is critical. Paying a few grand to a good attorney is well worth it. Mine even retitled bank accounts and real estate to align with trust structure.

Like anything else, you can do this stuff yourself if you have the time and energy. I'm guessing your time is better spent elsewhere.
 
A most important thing to remember in drafting your will is to be specific.
 
A most important thing to remember in drafting your will is to be specific.
Funny story. A few years ago, my parents took an overseas trip. At the time they didn't have any will set up. My mother sent an airplane text to me and my siblings that said the following:

“Hi kids, if anything happens to us, Patrick is in charge and please split everything 4 ways”

This text was very funny because I am one of six kids. My mother was one of four, so when she sent the text she was confusing herself.

Of course I responded that I would honor their wishes and that I interpreted “4 ways” to mean that each of the 3 brothers got a share and each of the 3 sisters would split the 4th share. Even though they knew I was kidding, my sisters collectively lost their minds. I still needle my parents about that one from time to time. Also, after those shenanigans they finally got their documents in order so that was a win.
 
Oh, second question!

Only living relative that I’m even the slightest bit responsible for, grandparent. Has retirement and social security, retirement is running out.

Primary personal worth is in their house. They owe essentially pennies on the mortgage (like sub $20k), and it’s valued somewhere just south of 1.5 mill.

They are going to do something with it. They said that a friend introduced them to someone who said a reverse mortgage would be best and they’d handle it. Alarm bells went off in my head because, well back in the day there were horror stories and I don’t quite trust that someone isn’t trying to take advantage.

I have done research on this, and haven’t quite found a better solution and apparently reverse mortgages aren’t horrid anymore?
  • They don’t need a ton of cash on hand, they aren’t hemmoraging money but will need this to happen soon. Needs around an additional $1400-1600 per month.
  • 77 years old no major health concerns, likely chance to live another 10-15ish+ years.
  • No large expenditures, no credit debt, no other loans, vehicle owned outright, $20k left on mortgage.
  • No other reliable income.
  • Not worried about leaving anything behind. Regardless of how the estate is left, including in shambles, can be handled after by family.
  • Doesn’t need large upfront balance or access to funds, just ongoing enough to help cover day to day life alongside SS.
  • Selling and moving is not an option.
Ideas/suggestions? Concerns or things to avoid?
One consideration on the reverse mortgage is if they have any desire or intention to leave the asset to anyone (family member, etc.).

With a reverse mortgage, it has advantages from a short/intermediate term cash flow perspective, however at the expense of essentially loss of the asset at the end of term. It can make a lot of sense, in certain scenarios if they are not trying to pass the asset on.

With my wife’s parents, what we tried to do was actually buy the house for an agreed upon (below mkt value) price. Proceeds from the sale go to them and for improvements, etc., and they “rent back” from us with a guaranteed lifetime lease, low fixed rent, and we ensure the mortgage is always paid and they always have a place to live. We cover any gaps, etc. in perpetuity.

This keeps the asset in the family, ensures there is a guaranteed place to live, etc. And has significant trust/tax advantages.

Unfortunately, they decided to go the reverse mortgage route and later wished they had done what I suggested. They would have been debt free with a $400 monthly rent in perpetuity. (Which we planned to cover if necessary in perpetuity if needed)

Unfortunately, the current IR’s make this option much more difficult than it was 15 - 20 years ago.
 
Oh, second question!

Only living relative that I’m even the slightest bit responsible for, grandparent. Has retirement and social security, retirement is running out.

Primary personal worth is in their house. They owe essentially pennies on the mortgage (like sub $20k), and it’s valued somewhere just south of 1.5 mill.

They are going to do something with it. They said that a friend introduced them to someone who said a reverse mortgage would be best and they’d handle it. Alarm bells went off in my head because, well back in the day there were horror stories and I don’t quite trust that someone isn’t trying to take advantage.

I have done research on this, and haven’t quite found a better solution and apparently reverse mortgages aren’t horrid anymore?
  • They don’t need a ton of cash on hand, they aren’t hemmoraging money but will need this to happen soon. Needs around an additional $1400-1600 per month.
  • 77 years old no major health concerns, likely chance to live another 10-15ish+ years.
  • No large expenditures, no credit debt, no other loans, vehicle owned outright, $20k left on mortgage.
  • No other reliable income.
  • Not worried about leaving anything behind. Regardless of how the estate is left, including in shambles, can be handled after by family.
  • Doesn’t need large upfront balance or access to funds, just ongoing enough to help cover day to day life alongside SS.
  • Selling and moving is not an option.
Ideas/suggestions? Concerns or things to avoid?

Sell the house. Pocket the $1.47M. Rent an apartment. Invest $1M of it conservatively. It will throw off a good $50-60K per year, which easily covers their added income needs with $30-40K on top for rent and more. Have fun in old age with the other $470,000. Will a million to you, their heir.
 
We’ve put it off for years and I’m just realizing we aren’t going to make time for it. There’s so many of these adult things that are good to do and know, and it’s just not possible to become knowledgeable like we should across the board.

My work is tame, but goes from 40-60 hours a week, and hers is quite literally double that some weeks. Add in small children and constant global travel for her, and good adulting education just doesn’t come close to the priority list unfortunately.

As fundamental as that is, objectives seems smart. Lol we’re just like, whatever happens happens! Maybe talking to the CPAs, we can ask them what financial objectives look like for families and folks our age. I have 0 retirement and am just counting on stock in company to replace that - but have no clue what the implications are.

Good points thank you. Shooting off an email to the CPA that did taxes last year.
Not sure the size of these companies, however when I was younger and worked for a start up that involved some pretty life changing stock options - I learned a LOT from our CFO and Chief Counsel.

There were a lot of potential tax “land mines” that could have put me in a very bad spot. I was early career and pretty clueless about these things. They provided a lot of guidance.

Unfortunately, the company went bust - so I’m still working for the man - lol.

If these are small’ish companies, the CFO might be a good place to start for the fundamental basics to get you started in the right direction.

Note: Your not asking them for personal investment advice. Your asking what are some key things to be aware of and thinking about in these instances (windfall due to sale of company, etc).

They’ve probably experienced these things before and can provide some good over arching guidance around key things to be aware of.
 
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Definitely speak to a fee-only financial planner - I think you would get good advice.

This White Coat Investor article from 2019 is a good start (probably). The article describes different payment models for financial planners, but at the end of this article is a link to an updated (2023) list of vetted financial planners for the site. They are paid advertisers on his site, but I doubt he is trying to point folks in the wrong direction given the mission of the website. This dude markets his advice towards physicians, butI think it is applicable to any high-networth individual.

Additionally, if you must rely on the internet for important, specific financial advice IMO you would be better off using Bogleheads. People ask portfolio questions all the time...
 
Definitely speak to a fee-only financial planner - I think you would get good advice.

This White Coat Investor article from 2019 is a good start (probably). The article describes different payment models for financial planners, but at the end of this article is a link to an updated (2023) list of vetted financial planners for the site. They are paid advertisers on his site, but I doubt he is trying to point folks in the wrong direction given the mission of the website. This dude markets his advice towards physicians, butI think it is applicable to any high-networth individual.

Additionally, if you must rely on the internet for important, specific financial advice IMO you would be better off using Bogleheads. People ask portfolio questions all the time...

Bogleheads has tons of info.

(Be forewarned that it is a bit like PCF — if you barge in boasting about your awesome authentic casino weight financial portfolio you’re gonna catch flak. Definitely read as many FAQs as you can and do some searches before posting… Some of those folks get pretty irritable about questions which have been asked and answered before.)
 
Tip 1 - Take half the time you spend writing long posts here and invest that time in reading about these issues.
Lol I'm trying, I'm in the top 00.11% supposedly of members regarding total posts, yet have averaged under 1.5 non classified posts for the past couple of months.

So I'm definitely no longer here like I used to be, and generally pop in for a reprieve when I get a second in between calls and decompress by brainlessly surfing somewhere online.

Prob should've made better use of my time than doing that maff. Good to know though, thanks for the help Mod!
 
I cashed out my Roth 401K and put most of it on the Medieval Rennassiance Faire gambling market. Sure, small market, but I have some insider information and a huge edge. Being an expert on historical hereditary titles is critical.
 
Bogleheads has tons of info.

(Be forewarned that it is a bit like PCF — if you barge in boasting about your awesome authentic casino weight financial portfolio you’re gonna catch flak. Definitely read as many FAQs as you can and do some searches before posting… Some of those folks get pretty irritable about questions which have been asked and answered before.)
Additionally, if you must rely on the internet for important, specific financial advice IMO you would be better off using Bogleheads. People ask portfolio questions all the time...
This has been…..intimidating. Helpful and lots of rabbit holes, but intimidating.

For everyone else thank you, I know it’s the same basic information shared online but it’s difficult when there’s so much info out there and varied checklists/suggestions/etc.

Starting out at ground 0 regarding financial literacy is a tall mountain to climb and having familiar voices reiterate where I know to start is reassuring, so thx again for those that took time. Good thread.

Now to have a convo with nana regarding her house….
 

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