What to do with $$

January 26, 2018 5:43 PM

I'm helping my parents sell their house. They will likely make over $400k on the sale (California, crazy, I know). They are old. Where should we put the money so that it is sufficiently liquid that they can spend it on their needs, but will earn some interest?

FWIW, their funds are already in a revocable trust of which I am a co-trustee, and it's all relatively simple where the sale proceeds will just stay in the trust. All the legal stuff is squared away, I just want to know what is a smart thing to do with a large pile of money belonging to people who are unlikely to live more than 10 more years.

posted by latkes to Work & Money (10 answers total)

I'm no financial whiz, but someone who is told me that a good strategy is to put money in a rotating set of CDs. For example, put 50k in a 6 mo CD, 50k in a 1 year CD, 50 k in a 18 mo CD, and so on. That way, every 6 months, a 50k CD matures, and they can draw whatever they need from that before reinvesting it in a long term CD, but the rest of the money earns interest, and in the case of the longer term ones, a pretty good interest rate. You can choose the amounts and durations to fit your parents' financial needs.
posted by Salvor Hardin at 6:18 PM on January 26, 2018 [10 favorites]

Salvor Hardin's advice is good. They can also consider putting a large amount in a money market account through a bank, which usually earns a bit more interest than a savings account but is regarded as very safe.
posted by shortyJBot at 6:20 PM on January 26, 2018 [1 favorite]

For the record, what Salvor Hardin refers to is called a "CD Ladder".
posted by so fucking future at 6:22 PM on January 26, 2018 [1 favorite]

If you want to super simple solution that will allow for growth plus mange the liquidity for a payout, you could consider the Vanguard Managed Payout Fund. It pays out 4% a year which is sustainable for the long term (if they might live longer than 10 years and/or want to have something left over.) The money is not tied up - they can always to extra withdrawals if they need it.

Or you could do it yourself with a conservative mix of money market fund, short and intermediate term bond funds and stock index fund - say 10% (or at least one year's worth of spending) in the money market fund, 25% short term bonds, 25% intermediate term bonds and 40% stock market index. More cash (money market) would make it more conservative but you want some stock to have enough growth potential for years 5-10+.
posted by metahawk at 6:28 PM on January 26, 2018 [8 favorites]

Does the trust makes it so if one gets sick or needs rehab or a nursing home they can't take all the money?
posted by beccaj at 6:42 PM on January 26, 2018 [2 favorites]

Annuity?
posted by notyou at 7:16 PM on January 26, 2018

Sure CD ladders are fine but hell. This is easily 10x enough money to justify paying a pro a small fee each year to help guide your folks through this.

Or YValuesMMV. For my money, I want things to be easy and right for me (my spending, budget for unexpected spending, my earnings goals and my risk profile). And someone else makes sure it’s all squared up.

So hire a pro, is my advice.
posted by SaltySalticid at 7:29 PM on January 26, 2018 [6 favorites]

This is a good question to post on bogleheads.
posted by Dashy at 6:27 AM on January 27, 2018 [1 favorite]

I went through this same calculus with my mom about four years ago (sold her house with a large windfall profit). Everyone gave you reasonable suggestions, but they all made implicit assumptions about your situation and risk tolerance. There is a lot of information missing here that would qualify exactly what you mean by "Where should we put the money so that it is sufficiently liquid that they can spend it on their needs, but will earn some interest?" Examples: do they already have savings, retirement accounts, pensions, or other funds? Do they have insurance? If yes, what kind? Are there chronic conditions that are expensive to treat? Long term disability insurance? Life insurance for the survivor? Are they planning to buy a new house/condo in another state, or moving into an assisted living place that has a monthly rent?

Rather than trying to hash this out on ask.metafilter, i think that SaltySaticid gave you the best advice - hire a pro. There are five or six different common compensation models for financial advisors, in this case just paying an hourly fee for a couple of hours of advice would probably be your best bet. Good luck!
posted by kovacs at 10:20 AM on January 27, 2018 [4 favorites]

How much will they need to pull out, and when? ($40k/year? $100k/year?)

The answer is different for every time horizon, really.
posted by small_ruminant at 1:47 PM on February 1, 2018