My parents are in their 70s and have never been great with managing money. They recently inherited just over $100k, and I convinced them to pay off all their debt except for their house (which they bought a few years ago and owe more on than the inheritance covers). The debt they paid off had interest rates higher than 7%, and now they’re on fixed incomes from Social Security and small pensions.
Their income will cover monthly expenses and even allow them to save a little each month if they stick to a proper budget. I’ve already convinced them to set aside $10k in a money market fund for emergencies. Now, the question is, what’s the best strategy for the remaining $40k? They say they want it to grow, but they’re also very risk-averse and would be uncomfortable if the market takes a downturn. I know these two goals conflict, but I’m struggling to help them understand that. Any advice on how to manage the $40k, and how can I convince them to stay calm during market fluctuations?
How do I get slightly better return than a savings account without massive risk? seems to be the most often asked question in this subreddit these days. For what reason aren’t we discussing bonds and bond ETFs more?
Although annuities are not very common in this area, at 70, 50k SPIA will pay out roughly $300 per month. Lifetime income guarantee, albeit inflation will inevitably gradually reduce it. Even if your parents aren’t very good with money, it might still be worthwhile.
I agree. Annuities are great. I would advise a variable annuity if they were younger, but because they are older, that is not as secure of an investment. a lump sum annuity in which the company assumes the risk while continuing to receive income on their investment.
I would ladder the money market assets in government bonds with varying maturity dates because they are risk averse and 70 years old.
They have almost no risk unless the U.S. government defaults. However, we will all face far more significant issues than only principle loss if the United States defaults.