Financial advice for my retired grandmother

I know there are several financial-types around here, so I thought I would be able to get some very general advice.

My grandmother is sitting on a moderate sum of money–not in the millions, by any means, but enough that she should be able to invest it and live modestly off the interest. However, neither she nor anyone in my family knows anything about investing–we’ve never had enough money to worry about it.

Who would she go to for professional financial advice? She needs someone she can trust who can look at what she has, what her needs are, and what her concerns are, and decide what she needs to be doing with her money. Is there a way to tell who is good and who isn’t? What can she expect something like that to cost?

Also, what percent could someone reliably expect to earn on an investment? Like I said, she’s living (mostly) on this, so it needs to be reliable.

I’m hesitant to be more specific, since it isn’t me. If anything, I’d just like to be pointed in the right direction.

Thanks in advance.
Dr. J

Frankly, with the tons of free and more than reliable information to be had on the Internet, to include people like Cecil (Shameless plug), and Bruce Williams, the excellent syndicated columnist/radio host the very last thing I would ever do is consult a “professional”; they’re called “brokers” for a reason, ya know. Seriously, it really isn’t necessary, except possibly to avoid the tax man.

You’ll have to be more specific as to her age, where the money is right now, and so forth. Treasury Securities are among the safest in the world, and offer a modest return as might be expected. Given the unsettled market conditions as of late, you might consider those, but it’s hard to give advice without knowing a little bit about her situation.

She’s 71 and in incredibly good health; I expect she’ll see 90 or more. The money is currently in CDs, earning about 5%.

The reason I mention a professional is that she is not likely to do a lot of research on her own about it. If anyone in the family would do the research and manage the money for her, it would be me, and I neither have the time nor want the responsibility. (Besides, I’ll be moving to another state next year.)

Dr. J

Well, the first thing that I’m asking myself is: how much income does she need from her current capital? You mention she’s getting 5% annually from CDs-is this enough, or is she looking for a higher rate of return?

Mutuals are generally a good investment if you’re interested in generating current income while protecting a long-term capital investment, and if I won the lottery tomorrow, I’d sink it all into mutuals and live off the dividends.

Most indexed mutual funds (meaning that they’re comprised of the major subsidiaries of the indices) offer substantial return over time and tend to be very good earners.

The thing about mutuals that I like is that if you don’t sell them to generate cash, you can skim off the dividends without taking a huge tax bite each year.

OTOH, most banks have private client lines that are set up to deal with wealthy individuals, and can generally help out people who don’t want the hassle of dealing with finance. While nobody looks after your money as well as you do, there is something to be said for industry experience-although Tedster is right on here.

While your grandmother may in fact live another 20 or 30 years (I certainly hope she has a long healthy life!) it’s generally accepted that high risk investments are a definite Bad Idea™ for her age bracket.

With all the bastards out there preying on our senior citizens pocketbooks I would be leery of anyone telling you to invest in the market. Stocks and mutual funds are long term investments, at least 20-30 years. Anything less than that isn’t “investing” in my opinion.

Now, if she wants to speculate with securities, that’s another thing altogether. But it isn’t investing, as such.

You may want to look into finding a professional financial advisor, rather than a traditional broker. The National Organization of Personal Financial Advisors is a group of advisors that work on a fee-only basis - they don’t get a commission for selling you certain products or when you buy and sell, so they are less likely to “churn” your account to generate brokers’ fees. They specialize in figuring out what kind of investment mix works for individual financial situations, which it sounds like is exactly what you need.

ENugent is right. A fee-only professional might be a good idea.
With her age and desire to protect principal I wouldn’t go farther than a balanced mix between investment grade corporates and government income securities. Harbor Bond and Vanguard GNMA come to mind. This mix is so conservative, however, that it’s return isn’t that much more than the CD’s.

The Vanguard site is a good place for anyone to learn about mutual funds

Here’s the Harbor site for browsing:

You might also look at Dodge and Cox Income. It’s from a very old and very conservative fund family here:
This is for educational purposes only and is not to be considered financial advice. Funds are not FDIC insured and are subject to price fluctuation. Past performance cannot guarantee future results.