Finance for the Elderly and the Money Market

As far as the Franklin Templeton investment if would depend on which one. As he is elderly the best sorts of investments would be fixed income types. I am sure he could speak with a Franklin Templeton representative that could give him advice as to how much percentage in each type of fund is best for some one his age. You must also consider other factors - like future goals, risk level, etc.

A money market fund for the most case is a pretty safe investment. I would check to see what types of companies the fund invests in. They should invest in very low risks companies - those rated AAA. A money market fund is one that invests in short-term (usually less than 13 months to maturity) highly rated commercial paper. The returns are typically low as there is low risk of losing your principle. The returns should be higher than a savings account or CD. They are usually priced at $1 and pay out a monthly dividend of exactly what the fund earned, therefore maintaining a steady $1 value. They are not guaranteed, however, most fund companies will reimburse a money market fund if it does fall in value below $1 - basically if you would not get your full principle amount back. The reason a fund company does this is that everyone would pull out if the value did go below $1 so even though the principle is not guaranteed, it is highly unlikely that you would ever lose any principle.

As a money market fund owns all short-term securities, the dividends it pays (even if you opt to reinvest the dividends) is all taxed at the ordinary income rate. However, being a retiree this may not be a bad thing as he is probably in a lower tax bracket.

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Thank you Linkat

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Most mutual fund companies are competent and relatively safe, but they charge too much. I favor a completely "no load" (no commission) fund like Vanguard. AND I favor index funds because they charge NO commissions (they just match the general market and since no technician is making decisions on the part of the investor no fee is charged) Too bad Cicerone Imposter is not presently on board; he knows much more than I do about this.
Let me just say that I have been invested with Vanguard's "voyager" fund ( as well as the no-load Janus Fund and T. Rowe Price families of funds) for many years now, and I am VERY happy with them (especially Vanguard which is the cheapest).

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I (not being yet "elderly) have a variety of investments including mutual funds-annunities-a variety of stocks and reverse convertable securities, this variety gives me both potential growth as well as fixed income.

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So if we invest for him in a market money then he can still get income but it will be tax deductable. How does annuities work? Because he has some but they seem to be set to mature at outrageous years.

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Actually I do work in the mutual fund industry so I do know a little about these funds. Many mutual fund companies do offer funds with no loads, however, you have to be careful, because in any business a company needs to earn money. Some no load funds will have higher management fees or other fees to compensate and these are on-going fees from year to year whereas a front-end load is paid once. So you would need to also look at the fund's overall expense ratios and compare. There are also some funds that carry back end sales loads.

A front end sales load is a percentage that is charged when you first invest in a fund. Say you invest $100 and there is a 5% front end sales charge, the actual amount that gets invested is then $95. A back end sales charge is a fee imposed if you take out your money within a specified amount of time. Usually this is a decreasing charge the longer you have your money invested. For example, if you take out your money within a year, it is 5%, 3 years 2% and greater than 5 years no charge. There are so many variables about investing to look at that is why I suggest speaking to some one that could guide you and explain all the fees.

On the other hand, Money Market funds should not charge any sales charges (front or back) - very few do (and certainly do not invest in a money market fund that would have a sales load) - no matter which mutual fund company. You can compare the returns on these funds to see which ones tend to earn the higher rates.

If he invests in a money market fund - the earnings or dividends will be taxable at the ordinary income rate. To be honest I do not know much about annuities as an investment, however, I never heard very positive things about them - as an investment vehicle. I, myself, have one, but it is not for very much - it is more to diversify my investments.

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Good contribution Linkat. Thanks.
I had some money in a Tax Sheltered Annuity (TSA) when I retired. When it came time to decide whether or not I wanted to annunitize the money, I realized that the money would then belong to the company and in return they would guarantee me a fixed income--as long as they stayed in business. I rolled the money instead over to Vanguard. Am I glad I did. That was in 1990 at the beginning of the decade long market boom. Didn't become very rich, but because my rollover was diversified and low cost. I did MUCH better than I would have if I annuitized by TSA.

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Re: Finance for the Elderly and the Money Market

bsingh5 wrote:

I am trying to help my older next door neighbor who came to me for help about his finances. He wants to know if a Franklin Templeton investment would be ok for him. I told him I don't know so I was wondering if you guys could help.

Also he wanted to invest in the money market. What is that? Is it safe for a retiree to invest in something like it? What are returns like? What about tax?

How old is your "older neighbor"?

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bsingh5 wrote:

So if we invest for him in a market money then he can still get income but it will be tax deductable. How does annuities work? Because he has some but they seem to be set to mature at outrageous years.

The money market fund would be taxable, if it wasn't part of a Roth IRA plan.

Annuities are complex topics and products and as such should be explained ( if they haven't already) to your neighbor by a financial
planner.

"Outrageous years"? How so?

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Quote:

To be honest I do not know much about annuities as an investment, however, I never heard very positive things about them - as an investment vehicle. I, myself, have one, but it is not for very much - it is more to diversify my investments.

I've studied annuities extensively and I have several of them.
I recommend to all investors to obtain, an "immediate annuity"
as part of their overall portfolio.

I've heard many, many postive things about annuities and if you read the WSJ on a regular basis, you'll learn about these postive things. :wink:

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WSI? What's that, advertisements?

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Miller wrote:

bsingh5 wrote:
So if we invest for him in a market money then he can still get income but it will be tax deductable. How does annuities work? Because he has some but they seem to be set to mature at outrageous years.

The money market fund would be taxable, if it wasn't part of a Roth IRA plan.

Annuities are complex topics and products and as such should be explained ( if they haven't already) to your neighbor by a financial
planner.

"Outrageous years"? How so?

Have to add, the MM account isn't taxable as part of a regular IRa or a Roth IRA.

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JLNobody wrote:

Most mutual fund companies are competent and relatively safe, but they charge too much. I favor a completely "no load" (no commission) fund like Vanguard. AND I favor index funds because they charge NO commissions (they just match the general market and since no technician is making decisions on the part of the investor no fee is charged) Too bad Cicerone Imposter is not presently on board; he knows much more than I do about this.
Let me just say that I have been invested with Vanguard's "voyager" fund ( as well as the no-load Janus Fund and T. Rowe Price families of funds) for many years now, and I am VERY happy with them (especially Vanguard which is the cheapest).

I also like the Vanguard Index funds. I also like to invest in Blue chip stocks that pay good dividends.

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I consider my pension checks to be the equivalence of dividend checks. I only redeem mutual fund money for special occasions, i.e., buying things, taking trips, emergencies, etc.. Frankly, I'm afraid to die WITH money--got no kids.
I have a close friend who plays the market as his major recreation. He's as tight as one can be, is single, lives in a small paid for condo and has at least a couple of million (probably more)in investments. I warn him that he'll die with lots of money and no heirs--the supreme irony and stupidity. His answer is that the money means nothing; it is the earning of the money, like a high score in a game. Rolling Eyes

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Better to have an excess of money, than to be very poor.

By the way, isn't it nicer to be able to take a cab, instead of having to walk someplace, especially when the temp outside is 100F? Laughing

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Oh God yes. Much better than "being wealthy" is simply not worrying about money. Obviously this is achieved by two means: (1) having the means to meet your needs, and (2) having needs that do not surpass your means. We live below our means which means that we never worry about money. That's as good as "being wealthy."

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JLNobody wrote:

WSI? What's that, advertisements?

WSJ: Wall Street Journal

Annuties, as far as i can recall, aren't advertised in the WSJ.
Many infromative columns have been written about them, however.

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JLNobody wrote:

Oh God yes. Much better than "being wealthy" is simply not worrying about money. Obviously this is achieved by two means: (1) having the means to meet your needs, and (2) having needs that do not surpass your means. We live below our means which means that we never worry about money. That's as good as "being wealthy."

One never knows what life will bring and because of this, it's a wise man who has the bankroll to accumodate any emergency, especially if it pertains to one's health or requiring the services of an expensive lawyer.

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Finance for the Elderly and the Money Market

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