# Investment strategy for a 90 year old



## Russ (Mar 15, 2010)

My mother-in-law is 90 and a little frail, but she still wants to be involved in her finances. She lives alone with lots of family around for support. Although she is still very smart and capable, she is not very sophisticated when it comes to investing. 

I seem to have become the go-to person to make sure her bills are paid and her various bits of income are received. Her income comes from a RRIF, small annuities, several small pensions, CPP and OAS. I'm no expert in investing but that job has also fallen in my lap. I could use some feedback and suggestions. 

Here's her situation:

Her income is not quite sufficient to cover her living expenses. The shortfall is about $5,000 per year.
Assets: Home $400,000
GICs (maturing in 3 weeks) $120,000
GICs (maturing in 6 months) $80,000
Bond mutual fund $130,000
Cash (mostly guar. invest. acct) $30,000
TFSA $26,000

My immediate concern is the $120,000 GIC maturing in three weeks. 

I think she is willing to give up return for safety, but frankly I could talk her into anything. However, I feel the same way she does - for someone aged 90. She really is investing for her heirs of course.

Any suggestions?

Thanks.


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## andrewf (Mar 1, 2010)

Here are some annuity tables:

http://www.lifeannuities.com/articles/2012/annuity-rates-canada-2012.html

They max out at 80, but a female at 80 would get a yield of about 10%. I think the yield for someone 90 years of age is well over 20%. Assuming 20% yield, you could produce $5k of income with an additional $25k annuity.


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## avrex (Nov 14, 2010)

It doesn't look like there's much here that needs managing.



Russ said:


> Her income comes from a RRIF, small annuities, several small pensions, CPP and OAS. The shortfall is about $5,000 per year.


Maybe I'm being too simplistic here but.... She has $30,000 in Cash (I'm assuming her bank account).  
This means her expenses shortfall can be covered, by this one source, for 6 more years.

As for the upcoming GICs maturing in 3 weeks and 6 months, I would just roll them over into new 5 year GICs.


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## gibor365 (Apr 1, 2011)

avrex said:


> It doesn't look like there's much here that needs managing.
> 
> 
> 
> As for the upcoming GICs maturing in 3 weeks and 6 months, I would just roll them over into new 5 year GICs.


I would split this it for 3 portion and buy 3 GICs - 1y (2.1%), 2y (2.25) and 3y (2.35%) in PeoplesTrust


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## gibor365 (Apr 1, 2011)

gibor said:


> I would split this it for 3 portion and buy 3 GICs - 1y (2.1%), 2y (2.25) and 3y (2.35%) in PeoplesTrust


Also starting Jan 1 she can put another 5,500 into TFSA, PT gives you 3% for saving TFSA account ...last months I moved all my mothers TFSA (she's a bit younger, but has no idea about investments atr all  into PT


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## P_I (Dec 2, 2011)

andrewf said:


> Here are some annuity tables:
> 
> http://www.lifeannuities.com/articles/2012/annuity-rates-canada-2012.html
> 
> They max out at 80, but a female at 80 would get a yield of about 10%. I think the yield for someone 90 years of age is well over 20%. Assuming 20% yield, you could produce $5k of income with an additional $25k annuity.


Be careful using the data from the link, the rates are 2012 quotes. While interest rates haven't moved much, I'd get a more current quote than one that was a year old.


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## andrewf (Mar 1, 2010)

Of course, those quotes are only illustrative. You'd need to get a current quote from a broker.


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## Potato (Apr 3, 2009)

Russ said:


> She really is investing for her heirs of course.


Unless she wants to start living it up more (even for 20 years with no investment returns she could up her expenditures by about $15k/yr and not run out of money), she really is investing for the heirs. As Avrex said, the cash alone will cover many years of her pension shortfall. 

So, what's best for them? Cashable GICs and savings accounts are a bit easier for an executor to deal with (no capital gains to try to track), but for their time horizons equities might be called for. Alternatively, she may wish to start giving it away while she's alive rather than waiting around and make it their problem to deal with. OTOH if frail turns into needing a homecare worker, those costs could go up sharply so she may want to hold on to her money just in case.


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## AltaRed (Jun 8, 2009)

My bro and I have our 95 year old mother in an RBC DI taxable account and a TFSA that is made up primarily of a 5 year annual pay GIC ladder (about 70%) and the rest in Series D RBC Dividend fund and Monthly Income fund and the RBC ISA. The ISA holds just under one year of expenses. The mix works out to be about 15% equity (based on 110 minus age equals equity). For the most part, a small annuity, small survivor CPP, OAS, and interest and dividend income from her investments pays for her bills in a nice retirement home, with marginal tapping in to capital (mostly from the mutual funds as we draw down the equity component as she ages).

My advice is to keep it simple and all in one or two places. It makes no sense for someone to be managing multiple accounts and chasing interest rates amongst several institutions. There is no way of knowing whether a 90+ year old senior will live one more day, or 10 years.


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## Beaver101 (Nov 14, 2011)

^ +1 ... great advice from someone who actually knows and is practicing it. :encouragement:


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## james4beach (Nov 15, 2012)

That sounds like a great allocation, and I love the idea of the ISA that holds ~ 1 year of expenses (I think of it as a cash buffer... quite vital).

Curious about your GICs. At RBC DI, do they carry 3rd party GICs (like TDW, iTrade, and others) so you can shop around between institutions and find the best rates?


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## AltaRed (Jun 8, 2009)

RBC DI, like BMO IL and others carry a suite of GIC offerings from 10-15 institutions, all CDIC insured, to allow one to pick amongst the competition. Sometimes it is simply the difference between 2.76 and 2.78% and I have seen rates vary daily in times of volatility. We have something like 8-10 GICs all maturing at different times over the forward 5 years.

We have more in the ISA than we need because of GIC maturities approximately every 6 months and we will likely cut that back to 6 months or so. We can always tap into the 2 mutual funds in a real crisis.

One other point: We are still renewing with 5 yr GICs despite the newest ones maturing after she turns 100. We can keep doing that because some/most institutions permit crystallizing the maturity of multi-year GICs upon probate/division of estate. For example: If we are into year 3 of a 5 year GIC at time of probate/division of assets, we will have already collected 2 years of interest at the 5 year rate..... and I imagine we would continue to get the 5 year rate until the GIC is collapsed.

Edited: for grammar and content


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## My Own Advisor (Sep 24, 2012)

GIC ladder. That way, it rolls over as each year passess.


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