Senior couple with $50k to invest (bond, IRA, mutual funds, cash)

[no kudzu]

He is 72, still working, she is 65 SAHM, 2 grown kids, 2 minors still at home.
They/ He does not want to retire and probably will die with his boots on.
Not very much money is going out as expenses are basically mortgage, groceries, utilities, LTC premiums and a few other set expenses.

What do they do with $50k which currently is in a bank which is drastically cutting down on interest rates.$15,000 at 2.01 but anything over that only .5.

They want to protect that money for emergency expenses but at the same time earn a decent rate of interest.
I'm figuring Roth is not good cause of his age and they are already having to take money out by law.

Any suggestions will be appreciated.

[ChiGuy2.5]

Originally Posted by no kudzu

He is 72, still working, she is 65 SAHM, 2 grown kids, 2 minors still at home.
They/ He does not want to retire and probably will die with his boots on.
Not very much money is going out as expenses are basically mortgage, groceries, utilities, LTC premiums and a few other set expenses.

What do they do with $50k which currently is in a bank which is drastically cutting down on interest rates.$15,000 at 2.01 but anything over that only .5.

They want to protect that money for emergency expenses but at the same time earn a decent rate of interest.
I'm figuring Roth is not good cause of his age and they are already having to take money out by law.

Any suggestions will be appreciated.

Hmm, this is tough. I would assume you consider yourselves risk averse right? If this is money you plan to live off of when you are older then you will want to invest in something that is guaranteed not to fall. Unfortunately there is not many great investing options right now to make a guaranteed return. Bonds are probably your best bet, but they have to mature, which wouldn't be something you want. Mutual funds run some risk to them because you better hope the economy recovers.

[dsnellen]

Take a look at the Vanguard family of bond funds. Two that might interest you are VWEHX currently paying 6.25% and VFICX paying 3.99%. VWEHX is a high yield bond which some people consider risky. I think the risk is acceptable. Remember you are not investing in a bond so much for the capital appreciation as you are for the fixed income. VFICX is a higher quality intermediate term bond. Vanguard has others so it's a matter of mixing and matching to find a combination you are comfortable with.

Just need in mind that corporate bonds and bond funds will have declining dividends until the interest rates go back up. This is because as the individual bonds within the fund mature or sold, they are replaced with bonds paying a lesser interest rate. I would stay away from individual bonds. No reason to assume the risks associated with individual bonds.

You could do this in a Roth account for tax free gains. Simply convert IRA money to the Roth by paying the taxes. If its a saving account, then you can only place into a Roth an amount equal to $6k or the max of the income earned whichever is less. You have to have reported income to make deposits to a traditional or Roth IRA.

[yellow4yield]

I would suggest buying corporate or municipal bonds which are due to mature within a few years. You should be able to get something fairly safe which pays a coupon of around 7%.

The thing is when buying bonds, you are loaning money to a corporation or to a city, county, or state government. You can loose everything if you do not check out the bond issuer with a fine tooth comb!

And that takes a LOT of learning, research, and work. Something I imagine they can't do. Also buying online. (My elderly neighbor can't use the TV remote, let alone buy something online!)

I don't know if you could find a financial advisor who could do that for you? Many of these people like to do the least amount of work for maximum commissions. They will recommend mutual funds which can go down in value and don't pay squat in distributions.

Whereas if you buy the bond yourself, you do get the stated 7% or whatever.

There are charitable funds like for universities, pension funds, and the like which have people to invest those funds in bonds and so forth. Perhaps you could talk to some of those folks (local) and see if they know anyone who could do this for you?

If you want to do it yourself, the best book on bonds is...
Amazon.com: The Bond Book, Third Edition: Everything Investors Need to Know About Treasuries, Municipals, GNMAs, Corporates, Zeros, Bond Funds, Money Market Funds, and More (9780071664707): Annette Thau: Books

Read that book cover to cover before buying anything.

[TuborgP]

Originally Posted by no kudzu

He is 72, still working, she is 65 SAHM, 2 grown kids, 2 minors still at home.
They/ He does not want to retire and probably will die with his boots on.
Not very much money is going out as expenses are basically mortgage, groceries, utilities, LTC premiums and a few other set expenses.

What do they do with $50k which currently is in a bank which is drastically cutting down on interest rates.$15,000 at 2.01 but anything over that only .5.

They want to protect that money for emergency expenses but at the same time earn a decent rate of interest.
I'm figuring Roth is not good cause of his age and they are already having to take money out by law.

Any suggestions will be appreciated.

In addition to posting in this forum you might want to ask the same question in the retirement forum. You might get a more age related response there and you can combine the thoughts from both forums to help you decide.

[samnyc]

Since your age is 72 & 65, I would stay away from stock market. Bonds are good idea but you only have $50K, you can make little money but not much.

Since you have mortgage, how many more years you have left on that? In case, some thing happens to him, do you have a backup to pay the mortage? Can your kids pick up if some thing happens?

As a emergency fund, you should have six month if not, I would move this $50K to CD and keep it there.

I don't mean to sound mean or anything, but given your age, you are little late to play on the stock market, also you said you have two minor kids at home.

[TuborgP]

Originally Posted by samnyc

Since your age is 72 & 65, I would stay away from stock market. Bonds are good idea but you only have $50K, you can make little money but not much.

Since you have mortgage, how many more years you have left on that? In case, some thing happens to him, do you have a backup to pay the mortage? Can your kids pick up if some thing happens?

As a emergency fund, you should have six month if not, I would move this $50K to CD and keep it there.

I don't mean to sound mean or anything, but given your age, you are little late to play on the stock market, also you said you have two minor kids at home.

This in part is why I suggested the retirement forum. They have multiple issues and variables that at their age could be problematic.

[mysticaltyger]

Originally Posted by ChiGuy2.5

Hmm, this is tough. I would assume you consider yourselves risk averse right? If this is money you plan to live off of when you are older then you will want to invest in something that is guaranteed not to fall. Unfortunately there is not many great investing options right now to make a guaranteed return. Bonds are probably your best bet, but they have to mature, which wouldn't be something you want. Mutual funds run some risk to them because you better hope the economy recovers.

I agree with this. My thought would be Vanguard Short Term Bond Index.

Bonds are riskier than keeping your cash in the bank....but getting almost 0% interest is also risky because you lose purchasing power to inflation....so there's risk either way.

I'd put part of it (maybe half???) in the Vanguard Short Term Bond Index mutual fund.

[mysticaltyger]

Originally Posted by dsnellen

Take a look at the Vanguard family of bond funds. Two that might interest you are VWEHX currently paying 6.25% and VFICX paying 3.99%. VWEHX is a high yield bond which some people consider risky. I think the risk is acceptable. Remember you are not investing in a bond so much for the capital appreciation as you are for the fixed income. VFICX is a higher quality intermediate term bond. Vanguard has others so it's a matter of mixing and matching to find a combination you are comfortable with.

I don't think it's a good idea to tell someone who is concerned with safety to put their money in low rated bonds.

[mathjak107]

i second that opinion.

high yield bonds have just about all the risks of stocks but limited reward. a bond fund with a falling price is still of very much concern and its still all about the total return not just the interest.

heck ill pay ya 6.5% but i keep all your principal, hows that deal?