Another large stash of cash

[I Shrugged]

I am helping with relatives who are about to sell their house and net $350,000.  They are 87 & 90 years old, still getting around.  They have moved to an apartment.  They have no brokerage account.  They get enough income from pensions and SS to pay all of their expenses, until someone needs nursing care.  They trust banks.  They would not stand for seeing a fluctuation in the principal.

My thinking is simply 3 or 4 CDs, across 2 banks?  Maybe laddered in some fashion?  Would that be the highest yielding scenario using banking products?

[barrett]

Gosh, at their age liquidity has to be really important. Do you know if they have long-term health care insurance? Even if neither of them has a serious health issue at present, just basic care in any kind of facility costs a ton.

Even with everything invested in CDs, you are really only talking about generating maybe $3,000 a year in interest (they would have to be laddered so that some of the money was always available). Some of that interest may well be taxed and/or affect how their SS checks are taxed. Investing everything to net them maybe $2,000 after taxes is not really worth it in my opinion. Better to have liquidity. I'd probably think differently if inflation were raging and they were ten years younger.

[I Shrugged]

They do have a decent amount of liquid cash.  I'm not sure how much but I'm confident it would carry them till a shorter term CD would mature.  I was thinking something like 6, 12, 24 month CDs?  Or more like 3, 6, 12, then keep rolling each one into a new 12?

They don't have long term care insurance so if and when intensive nursing becomes needed, all bets are off.  At least they have a reasonable nest egg going in.

[Fred]

I am helping with relatives who are about to sell their house and net $350,000.  They are 87 & 90 years old, still getting around.  They have moved to an apartment.  They have no brokerage account.  They get enough income from pensions and SS to pay all of their expenses, until someone needs nursing care.  They trust banks.  They would not stand for seeing a fluctuation in the principle.

My thinking is simply 3 or 4 CDs, across 2 banks?  Maybe laddered in some fashion?  Would that be the highest yielding scenario using banking products?

Are you saying the $350K they will net from their house is all they money they have? If so, then you probably need to be very prudent with the nest egg they have left, although at their age they obviously don't have a lot of time left.

For the record my parents retired in the late/early 80's with about $300k plus SS and a small pension and kept ALL their money in CD's.  That small nest egg with interest, mostly at around 5% or higher, was all they needed. My Dad died a couple of years ago and now my mother is in an assisted living facility for probably a few more years and the math says there will still be enough, but just barely (and with no inheritance for me or any of my siblings, BTW - though I discounted that a long time ago).

More than anything I think this points out my own doubts about the PP sustaining me during my up and coming retirement. My parents always counted on getting at least 5% on a CD up until a few years ago.  Can any of us approaching retirement right now predict getting any thing like that relatively modest return from simply keeping our money in the safety of a bank in the near or mid-term future? I think not unless things change drastically.

[Stewardship]

I think estate planning would play into a big part of the equation here.  That is outside of my area of expertise however 

[WiseOne]

I think estate planning would play into a big part of the equation here.  That is outside of my area of expertise however 

+1.

Additionally, I would keep it rock simple while staying under the 250K FDIC limit.  Don't burden them with new accounts if you can avoid it.  Put one chunk in their current savings account, and don't worry about the interest rate.  If they have a brokerage account, put the rest into a Treasury money market fund.  Otherwise spread it among other bank accounts if they have more than one.  If they only have a checking/savings account at one bank, then put the rest into a high interest online savings account or CD at another bank.  Alternatively, consider having them buy US savings bonds with the help of someone at their current bank.

Simple is way better in this case.  $350K is easily enough to see them through the next 10 years.  You can always stake them to their 100th birthday parties!