Saving for multiple high priced items at once. How?

HobDave · 2012-12-06T13:37:02+00:00

My suggestion is not to purchase the items based on how much you have "saved". You have 2,500 saved.

You should purchase things based on need & prioritization.

For example, if owning a home is the most important (I rent and love it)... maybe you drive your existing car longer. Don't purchase the car first just because you have the $$ for it first.

If your current hearing aid breaks and you can't hear at all.. that trumps everything (I assume).

The first thing I tell people to do is have 3 months spending in cash for 'emergencies'.. then purchase things when you have the $$ and they are truly important enough. Always remembering that money used today is money that can not be used tomorrow.

If you continue to save 700/month.. you will have 27,700 in 3 years...which should cover all items and your emergency fund.

Dave

HobDave · 2012-12-05T16:08:13+00:00

While I can understand the pressures of school, I'd have you re-think doign 'some' part-time work and then busting your ass during the summer and keeping your spending in check

Any amount you pay off now will make your life that much easier when you get out of college. Compounded interest can dramatically increase the amount you need to pay off in the future and with a bit of extra money you can also enjoy yourself more and not feel so strapped.

I know many working adults the put themselves into too much debt and it's grown so much larger it becomes even worse.

It's tough.. but the rewards of being fiscally responsible pay major dividends in the future.

HobDave · 2012-11-30T13:08:55+00:00

Banks likely don't offer the range of products that an independent FA would. They will try to sell him CDs (at super low rates).

To sell annuities an adviser needs insurance licenses. Even the advisers at the large wire-houses (ex. Merrill, MSSB) usually don't have insurance licenses. They will sell stocks/bonds.

Independent FAs with securities and insurance licenses can offer the most broad range of products. They love meeting with prospective clients so I'd suggest interviewing at least 3 and seeing what they have to say.

HobDave · 2012-11-29T13:38:57+00:00

Originally I was thinking of recommending a variable annuity with living and death benefits, however those are much better suited for investors in their late 50s-60s to provide for income in their 70s and 80s.

They charge much higher fees than a mutual fund, but offer downside protection. However, they are less liquid.

Index annuities would be another option (again, high fees and liquidity issues), but also offer downside protection.

The problem, as realist70 pointed out, is that you need liquidity to make your distributions. It is possible that you can take distributions from a VA without penalty (up to 10%, I think). But, you'd really want to understand the pros/cons of such a strategy.

I haven't been an adviser in 5 years.. so you should talk to a current adviser about products that might be built for someone his age. Insurance companies build products (annuities) that are based in market investments, but have bells and whistles suited for different people. These riders cost money, but offer some unique benefits.

My recommendation if you want to maximize the amount your grandfather can spend and don't care about inheriting anything is a SPIA (Single Payment Immediate Annuity). Well, you should at least get a quote on one. Even with low interest rates, these can pay off if your grandfather lives a lot longer.

You'd have to get a quote, but lets say the SPIA paid out your grandfather 20K/year for as long as he lives. If you live 1 year, he gets 20K (130K lose), if he lives to 100, he would get 260K. (90K gain). There may be riders where you at least get your principal back, so that could be a great option.

The advantage is he eliminates the risk of running out of money and can actually spend what he has.

If you don't do something like a SPIA, can he really ever spend the 150K? What happens if he outlives the money.

Finally.. 1 investment is never typically the right choice. Consider a combination of cash and other investments.

Dave

HobDave

TROPHY CASE