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My parents recently inherited 100 K (CAD), and want to use this money to supplement their income over the next 7 years until my dad can retire at 65 and he starts collecting his pension. The reason is that my dad recently had lymphoma, and so he is slowing down in terms work (he's an auto mechanic), and so my mom would like him to have the option of not working, and just use her income (about 24 K or something) plus this 100 K until their retirement stuff kicks in when he's 65 in 7 years. They would like to take about 1 K a month out of this 100 K pot over the next 7 years (84 K), and the question is: how should this be invested? The snake oil salesmen at their bank want them to put it into some highly-managed fund so that they can make maximum profit off of it, but I doubt that's the best option. Suggestions?
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May 22, 2014 03:18
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| # ? Apr 18, 2024 15:51 |
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Something like Vanguard Target Retirement Income fund could be reasonable - it is 70% bonds / 30% stocks. You could get more conservative with something like 50% cash / 35% bonds / 15% stocks. There's probably no reason to look beyond those three instruments (cash, broad stock market index fund, broad bond market index fund).
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May 22, 2014 04:07
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Vanguard also has managed payout funds, which will distribute a percentage of the portfolio on a monthly basis. However, I think the largest payout is 7.8%, which is roughly 2/3s of the amount that you're parents were hoping to get.
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May 22, 2014 04:50
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slap me silly posted:Something like Vanguard Target Retirement Income fund could be reasonable - it is 70% bonds / 30% stocks. You could get more conservative with something like 50% cash / 35% bonds / 15% stocks. There's probably no reason to look beyond those three instruments (cash, broad stock market index fund, broad bond market index fund). Why cash over the can version of TIPS?
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May 31, 2014 17:43
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Assuming you mean 5 year TIPS, sure why not? I probably wouldn't because I'm not that worried about inflation in the short term and I understand cash better. But I ain't he.
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May 31, 2014 19:07
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What about an annuity? The could fund an annuity and take a period certain payout of 7 years.
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May 31, 2014 22:24
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| # ? Apr 18, 2024 15:51 |
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Annuity doesn't help if inflation hits afaik. Assuming the plan is to take $1k a month in inflation adjusted terms I'd split it between cash and TIPS, not sure of the best ratio though. edit: Also, I would stay the gently caress out of the stock market. You're not gunning for real returns here, it sounds like you are just trying to avoid losing money to inflation. If you put the money in the stock market there is a large risk that your parents will not meet their goal of $1k inflation adjusted per month for 7 years.
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Jun 1, 2014 07:33
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