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Investing For An 85 Year Old Parent

|Includes: Vanguard Total Bond Market ETF (BND), SPY

If you have parents in their mid 80's and you are helping to manage their investments, well good luck to you. If you look at actuarial tables from Social Security, you will see that an 85 year old male has a life expectancy of 6 years and a female 7 years. So if your main consideration is for their immediate welfare and not those of their heirs, then you are looking at a fairly short investment horizon. Given this short time horizon, how should one choose to invest their funds?

Given the short time frame we are talking about and the inherent volatility of the stock market and the fact that US markets are at a near all-time high, it feels like investing the money in stocks is questionable choice. The upside is probably minimal given certain long term metrics like the Shiller PE/CAPE, and even if you are not a bear, you have to be open to the possibility of at least a 20% slide to the downside at any time in the next few years. When it comes to my parents, this is not a trade-off I am willing to make(at least at these valuations).

So where else does one dig for returns that are reasonably stable in the short term and that don't risk forever saddling you with guilt for blowing Mom and Dad's savings?

Just as with any other investor of any age, certainly the entire spectrum of investment options is open for consideration. However, the time frame constraints seem to strongly push the conversation towards the fixed income end of the investment spectrum. But even in the area of fixed income, changing interest rates challenge the wisdom of buying a total bond index(NASDAQ:BND) yielding between 2-3% with a duration of 5-6 years versus locking in the "wonderful" 2% on a 5 year CD offered by some internet banks.

Frankly from my viewpoint the 2% CD is just about the best option for most of the money.

Certainly I think you could argue for a very modest amount of a dividend stock or stock fund, but personally I could not see going beyond 20%. And yes for many a fixed annuity may make sense to provide a certain amount of guaranteed income for the rest of their life. But beyond that where does on look for the optimal investment?

So the question is, if you were managing the money for your 85 year old parents, what investments would you choose?