My mother is 78. She has about $3 million, including $580,000 in a money market account, $266,000 in an IRA, $400,000 in a savings account, $100,000 in a checking account, $359,000 in CDs, $950,000 in bonds, and the rest in mutual funds. She is turning over her investments for me to handle, as she feels she's getting too old to make decisions with her money. She also receives $3,000 in Social Security benefits and $2,000 in contracts.
I want to be a good steward with her money and am not sure where to invest the $400,000 sitting in her savings account. She is going to use $400,000 to buy a new home. (She had a lifetime estate where she was living before, but it recently burned down.) I know this is a lot of info, but I'm getting conflicting advice from advisers. One says put it in a fixed annuity; the other one says put it in mutual funds. What do you think?
Your mother was wise to realize she needed help. You'd be wise to realize you need better help than you're getting.
A $3 million portfolio is too big for a do-it-yourself approach and too tempting for advisers who get paid by commissions. Most advisers aren't held to a fiduciary standard, which means they don't have to put your mother's interests ahead of their own. They can recommend mediocre investments as long as those investments aren't clearly "unsuitable" -- which is a pretty low bar.
A fee-only Certified Financial Planner professional would tell you that any money your mother needs in the near future shouldn't be invested at all -- it should be sitting in a boring, but safe, savings account. The planner also would tell you that your mom has way too much in that money market account, given that it's probably earning less than half a percent interest and most of the money is not FDIC-insured. (If what your mother has is a money market mutual fund, rather than a money market account from a bank, then none of it is insured.)
You can find fee-only financial planners who charge by the hour at Garrett Planning Network, but you might want to consider a fee-only planner who can help manage the investments. You'll find those at the National Association of Personal Financial Advisors. Your planner can help you find an estate planning attorney and a tax pro, two other financial experts you'll need to help manage your mother's finances responsibly.
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