Managing retirement

Hi all

My parents are nearing retirement age, and are facing a number of challenges, one of the biggest is what to do with their retirement savings.

I was wondering what suggestions you might have regarding what to do with the money. They have worked hard, saved, and have some assets in real estate (not investments), super, shares etc.

They are not really good with or interested in finance, and distrust the financial planning industry. They went to see a few financial planners but found they were fairly disinterested in their situations and dismissive of their concerns.

What would you do if say you were 70 with 2 mil to invest, risk adverse and looking mainly for income, and growth that ideally kept up with inflation.

Appreciate any comments, links, funds to investigate etc
 
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what were their concerns( that the FP was dismissive of)? With that much money they could just stick it in the bank at 5% and have 100k less tax to live off. Or stick it in a super thing to pay bugger all tax. Have they only just retired?
Do they want to travel? Are they well?
There are really so many questions to be asked before anyone can help.
I feel for you though as I have to help my parents with their $ now and they are very risk averse and untrusting of advice from professionals.
 
Hi,

You do need some qualified advice, you could try Mark Bouris new mob Yellow Brick Road, he writes in the Sunday paper, ask him.

I would probably start my own SMSF to reduce fees and taxes, put half into an ASX index tracking fund which pays the same divis and half in govt bonds or bank term deposits. Mix up the maturity lengths so you average out the interest rates.

My thoughts
 
They definitely need advice. Not just on asset allocation, but vehicles as well. Super may be a very good vehicle for them given their age.
 
What would you do if say you were 70 with 2 mil to invest, risk adverse and looking mainly for income, and growth that ideally kept up with inflation.


Your parents have 2 main factors there - age and amount of $, and you are trying to squeeze 3 main outcomes, which unfortunately are not complimentary.


It's fantastic to be risk adverse, almost everyone, especially elderly folk, prides themselves on being risk adverse.....but you naturally pay a massive penalty in taking that view, in both yield and growth prospects.


Equally, it's fantastic to want to have mainly income that not only keeps pouring in, but is generated by an asset that not only grows, but grows at a pace matching inflation.....but you must be prepared to sacrifice your "safe" position in terms of risk exposure.


You're pushing the envelope with your criteria pete. I suspect you'll have to either ;

a) Back off on your desired nett after tax income and growth prospects, OR
b) Back off on your parents risk adverse nature


What you're asking for is what everyone else and their dog is looking for in the investment world.

Low risk, great yielding and great growth.

I reckon your parents might be lucky to get 2 out of the 3. Forget 3 out of 3.

Perhaps they insisted to the FA's this desire to get 3 out of 3, and why they were summarily dismissed ?? Who knows except them....
 
Your parents have 2 main factors there - age and amount of $, and you are trying to squeeze 3 main outcomes ...

Low risk, great yielding and great growth.

I reckon your parents might be lucky to get 2 out of the 3. Forget 3 out of 3.

In IT and prior to that in automotive and many other industries, it has always been said:

1. Cheap
2. Fast
3. Good

Choose any two. You can't have all three.

Finance and Investment share a similar paradigm.
From the FP viewpoint, it's all about managing expectations. Sometimes the expectations just aren't realistic.
 
What you're asking for is what everyone else and their dog is looking for in the investment world.

Low risk, great yielding and great growth.

I reckon your parents might be lucky to get 2 out of the 3. Forget 3 out of 3.

I guess it depends on what you mean by 'great'. If I was 70, and had $2M to invest to live off, I'd be very happy with 5% yield and 5% growth. In fact, if I could achieve that sort of return over the longer term, I'd be ecstatic. I think such a return should be possible without what I would consider large risks.

I'd pick a few managed funds, including a yield-oriented fund and an index fund, perhaps a couple of serviced apartment style IPs (at the cheaper end of the spectrum), some term deposits (various maturities), and some cash in a high interest savings account. I'd think very carefully about how I could wrap it into a SMSF, for tax purposes.
 
I think such a return should be possible without what I would consider large risks.

I guess it depends on what you mean by 'large' VYBV8.


What you've kinda generically described as reasonable would commensurately scare the living bejesus out of a pair of retired 70 y.o. folk. They'd typically run a million miles from Index funds and cheap serviced apartments.


Sounds like chicken feed for a young savvy investor, but for a couple who have been brought up during WW2 where anything other than cash in the bank is a step into the unknown.....
 
I'd say let's not tar all 70 year olds with the "safe, secure, grew up having money in the bank but take no risk" tag. My parents were nothing like that, and none of their friends were either.
 
They are not really good with or interested in finance, and distrust the financial planning industry. They went to see a few financial planners but found they were fairly disinterested in their situations and dismissive of their concerns.

What would you do if say you were 70.....risk adverse


wylie - I have no interest in your parents or their friends, and by the questions posed in the original post, pete doesn't care too much about your parents situation either.

I was responding to the thread topic as highlighted above, extracted from the OP.
 
I would be buying 3 or 4 houses in good areas, paying them off outright, living off the rent and the houses will appreciate. Safe, generates income, capital growth - Ticks all the boxes I have done just that and living very comfortably thank you
 
Thank you all for your replies.

They are not looking for great growth, just roughly keeping pace with inflation (i.e 3%p.a.). They are at an age where what they have is what they have, and working an extra 2-3 years probably isn't going to make a huge difference. Or to put it another way, they are probably better off accepting what they have, stopping work and enjoying it, even if it means they aren't going to spend the next 5 years traveling Europe first class. I am pretty sure they have enough to have a very comfortable but not extravagant life. They are not extravagant people so I don't see why they are waiting out for this.

They could get a LOC on their properties and live off the equity for the next 10 years easy. Not the best idea but considering that plus a lifetime of super plus some other assets they have, I just don't see why they are working when neither of them wants to be. They haven't exactly been diligent about tracking their assets so working out what they have is going to be the first step.

They are both still working, no obvious health issues and want to go traveling. They have a holiday property they want to do up, but how serious they are about it I'm not sure. Dad is/was a builder so it would probably be a pet project.

I totally agree with the sentiment that they need advice. The reality is they find it too complex to deal with, and for a bunch of reasons find it easier to just keep going how they are now, even though it would very much be in their interests to take care of it. So my sister and I are going to try and sort it out for them. Dazz's point about WW2 is pertinent, my father was born before it started, and grew up in one of the countries that lost. I don't want to get into a sob story but he did not have easy life (he is married to my mother after all ;) ), but he is over 70 and just doesn't need to be working.

They do need advice but right or wrong they're just not going to do it themselves. I cannot manage their assets for them, but I also don't want to push them to a planner who I can't trust.

I was thinking of something like this:

Get an IP for $300k - $400k, pay cash but get an 80% lend on it. That's their "oh ****" money if they lose everything else, and will provide some income.
Put 80% of the rest in bond funds/term deposits for income.
The other 20% goes into equity for mostly growth but hopefully a little income.

For the 80/20 split its a question of what specific funds/managers to use. I want someone that's not afraid to go all cash (and actually capable of it) if something like 08 were to repeat. Pension funds with massive positions that require board approval to liquidate are not gonna cut it.

They can still keep their PPOR and weekender, so if it really hits the fan they can sell them and still be ok.

Thank you all again for your input, it is very useful.
 
Interesting isn't it. I'm 68 on Fri and I chase penny mining stocks. Even the one that has Delivered (note cap "D") doesn't pay divs, so I have no good advice to give. :)

You know I'm a doubter on RE but that is mainly for those approaching retirement. Young high earners have different views and that's OK. The cash returns are too low and you can't sell the porch to take a holiday and frankly there are too many hassles. The heirs may think it's OK though. :D

VYBV8's 5+5 returns are more elusive than he thinks and two mil doesn't go as far as he thinks.

Pete didn't mention how "savvy" his parents are. I could have told my parents anything but that naivety is rare today. It they have kept up to date with the GFC it becomes much harder.

It would be a hard sell but if it is cash at the bank now, I would advise most of it in BHP and some in Telstra to boost the divs a little, but if they are going to panic if/when GFC II comes all advice is negated.

I know you give that advice and I'm a little tongue in cheek anyway but it is my belief that it is better than an RE based portfolio under the circumstances.
 
Hi all

My parents are nearing retirement age, and are facing a number of challenges, one of the biggest is what to do with their retirement savings.

I was wondering what suggestions you might have regarding what to do with the money. They have worked hard, saved, and have some assets in real estate (not investments), super, shares etc.

They are not really good with or interested in finance, and distrust the financial planning industry. They went to see a few financial planners but found they were fairly disinterested in their situations and dismissive of their concerns.

What would you do if say you were 70 with 2 mil to invest, risk adverse and looking mainly for income, and growth that ideally kept up with inflation.

Appreciate any comments, links, funds to investigate etc

Pete you would want to very carefull with this,i have been through this a few times on both side of my family,the last one was about 8 months prior to the GFC,i went in with my 72 year old Auntie to one of the big4 banks to see the
FP that was going to help her,i knew from the start when we both sat down in her office that she did not want me there,the FP took my auntie through all the latest bulletproff funds:rolleyes:,most lost over 50%,then all the hot share picks
they also lost over 50%,next was property trusts :rolleyes:,so after about an hour
my Auntie just looked at me and said what do you think,i already had a plan in place i just had to let her see the picture for herself,all i said was if you can get around back then 7-8% paided monthly and just sit back and enjoy
your life,it was not 100% worry free but she still has the core balance she started with,happy in a small costal retirement village,if i had let her go in alone and see the FP by herself she would have gone down the road the FP had planed for her,and if she did it would be hard to look her in the face again at her age..willair..
 
wylie - I have no interest in your parents or their friends, and by the questions posed in the original post, pete doesn't care too much about your parents situation either.

Feeling is mutual Dazz..... but please don't put words into pete's mouth. I'm sure he can speak for himself.

I was responding to the thread topic as highlighted above, extracted from the OP.

I read the same post but "risk averse" doesn't mean they are only interested in putting their money in the bank.
 
Pete didn't mention how "savvy" his parents are. I could have told my parents anything but that naivety is rare today. It they have kept up to date with the GFC it becomes much harder.

They are reasonably savvy. Dad had 6-7 IP's at one stage but for some reason does not have them any more, I was quite young when this was going on so not sure what happened there. Would you believe my Dad even has a business card of a young Steve Navra from a company called Town & Country properties, I dont think they had any dealings though. The folks are well aware of the GFC as they watched the value of their super plummet. :rolleyes:

Anyway they wouldn't have an RE based portfolio. They have their ppor and a holiday home but I doubt they would want to be servicing debt. A 300k property would just be a bit of diversification from an 80/20 bonds/equity split or something along those lines. This is obviously a real estate forum was expecting some RE ideas, but I was sure others here have had to work through similar issues and just wanted to hear some more ideas.

I am very wary of both financial planners and fund managers. I believe most of them do genuinely try and do the best they can, but the industry as a whole has a number of issues. From what I have seen the really good fund managers & planners are not really accessible to retail investors. Anyway have got a recommendation of someone who seems reputable who can hopefully help.
 
I guess it depends on what you mean by 'large' VYBV8.


What you've kinda generically described as reasonable would commensurately scare the living bejesus out of a pair of retired 70 y.o. folk. They'd typically run a million miles from Index funds and cheap serviced apartments.


Sounds like chicken feed for a young savvy investor, but for a couple who have been brought up during WW2 where anything other than cash in the bank is a step into the unknown.....

I guess it depends on whether we are talking about emotional response, or risk management. My response would typically generate more than the numbers I mentioned anyway, which could be used to build a cash reserve to help through the lower performing times.

I completely understand (and agree), that retired 70 year olds may get nervous about this, but to my thinking we should consider risk management rather than simply being scared off by something we haven't seen before, and encourage others to do the same.
 
I would add that my parents engaged a financial planner to guide them through some tricky estate planning issues. This process has taken a number of years to put into place. He charged several thousand up front for ongoing planning, meetings, background work etc but we have well and truly got our money's worth. I believe if we were paying by the hour, we would have surpassed the total long ago.

Financial planners we have seen in the past (last one for us personally probably 14 years ago) were hopeless at assessing our risk profile.

The one we used 14 years ago we chose because he was one of the few "fee for service" around at that time, but he suggested we sell up our IPs, put some money in a "product" that he (of course :rolleyes:) could sell us and lessen our risk. Pfffft!! And.... after we made it quite clear we were not risk averse and had time on our side to take some calculated risks.

Anyway, this chap we will be seeing is good, has steered our path through the maze of problems and helped us as a family get things sorted with the minimum of cost and with care to minimise the costs of moving things to a trust.

I have absolute faith in him, but unfortunately he is in Brisbane. He is part of a large chain, and I don't know what the other planners are like in the chain, but he is a "keeper".
 
what were their concerns( that the FP was dismissive of)? With that much money they could just stick it in the bank at 5% and have 100k less tax to live off. Or stick it in a super thing to pay bugger all tax. Have they only just retired?
Do they want to travel? Are they well?
There are really so many questions to be asked before anyone can help.
I feel for you though as I have to help my parents with their $ now and they are very risk averse and untrusting of advice from professionals.

Got it in one!
 
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