Investment options for parents

How much money are you talking about? What are they looking to do exactly?

Are you open to mixing the money up? Keep part of it in a money market and part in something else?

The main issue here is that if their money is at a local bank they likely aren't going to want to move it around to somewhere else.

If they have a Schwab brokerage account they can buy 30-60 day U.S. treasuries today with a yield to maturity of 4.6%+ with the advantage that they would not have to pay Louisiana state income tax on the interest which could save them from paying as much as 4.75% marginal rate taxes on their interest received. And it's credit risk free without any worries about exceeding FDIC coverage.

The disadvantage is interest rates are trending down, just like with their money market account, but they would be receiving approximately 1% more interest if they buy treasuries direct. On the hypothetical $300K you mentioned it would mean about $3,000 more income per year or $250 a month additional income.

The could lock in rates for a year buying treasuries direct with today's YTM rates around 4.3%.

Ha shoot man I was expecting you to come in and say like $150,000.

$1.8 million they have tons of options.

I'd get it out of a local bank and into something like Schwab, Vanguard, etc. so they have a lot of options that are fairly easy to move back and forth on.

As you said keep a big chunk in money market, some in a CD, and then put some into something like the SCHD or another dividend fund as said to get some additional money out.

The difference between 5% and 3% is $35,000-40,000 a year so it would definitely be advantageous for them to do something better.

Thanks for the replies so far. I have some money with a financial advisor.

He mentioned something to me about an annuity for them. They are offering a guaranteed 5.05 return for the next 5 years. Tax deferred. Like I said in the original post, they do not live off this money. They would not have to take any principle early and pay a surrender charge.

Thoughts?

quote:

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He mentioned something to me about an annuity for them

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NO!

It sounds like they are comfortable right now. I'd be looking at the more conservative side for modest growth. JMHO.

This! Fire the advisor he is an insurance salesman not an advisor. He is looking to harvest a big commission.

What do they want this $ to do? Sounds like its not likely to be spent by them. If they want to pass down wealth investing more aggressively in a simple low expense index fund might fit the bill for a large portion. Maybe set up a donor advised fund if they want to support charity (I'm not smart on this just something to consider.) Maybe start gifting to heirs so they cam see the fruits of their efforts. Read the book Die with Zero, for ideas on how.to spend and gift it so they can enjoy seeing their $ put to use themselves or by people and causes they love.

How much is this advisor charging you? Does he have you in high cost funds, whole life, or churning you?

There's a difference between what could be done and what will be done. I assume at that age, and what they've been doing all these years, they'd probably be resistant to doing anything where they "can't touch and feel their money" at a local bank. Understand that. Point is probably risk averse.

CDs and high-yield savings accounts are low-risk ways to earn interest. Consider creating a "CD ladder". This strategy could help you maximize yield while offering slightly more liquidity.

To me, though, with that much money, there are some solid options which can produce much higher yields with minimal risk. Maybe they'd be open to a portion of the assets (maybe 20%). This would probably involve you helping manage the account.

Since I use Fidelity and love it, I'd say take the money, start with opening in a high yield money market account. I have the FIDELITY GOVERNMENT MONEY MARKET (SPAXX), paying 4.45% currently. Then, allocate 1/3 to FIDELITY HIGH DIVIDEND ETF (FDVV) - 2.80% yield currently +35.40% one year total return and 1/3 NEOS ETF TRUST NEOS S&P 500 HI (SPYI) - 11.91% yield currently / +23.39% one-year total return. If they don't need the money right away, consider dividend reinvesting (DRIP).

These are two of the higher performing ETFs that tend to minimize volatility and provide solid overall performance. There are others like JEPI and JEPQ as well.

Research:

FDVV

SPYI

OP, I like Nole Man suggestions.
Please keep in mind that your older parents are going to want the ability to walk into a building and talk to someone if needed. If there is a Fidelity office in your area, I suggest you open account there. Nole Man's first paragraph is the most important, imho.
I'm also in agreement with Nole Man's investment suggestions. Even though your parents are frugal and could be comfortable on SS alone, stay low risk, please. CD ladder I'm sure they would appreciate. Maybe set up so that a CD was maturing every 4 months. Other than this go research Nole Man's suggestions.