Talking to Your Elderly Family Members About Fixing Their Portfolios


A client of mine (let’s call him Mike) recently showed me his 86-year-old mom’s portfolio. Mike’s father had handled the investment decisions, so his mother has let the portfolio run on autopilot since he died. Mike and his siblings are concerned about the contents of her nest egg, since 80% of it is in just a handful of blue chip stocks (gulp). So how do we help our elderly moms fix their broken portfolios when they ask for help?

The Talk

Mike’s example is common because women tend to outlive men. I suggested that before Mike launch into advice mode, he first put himself in his mom’s shoes. Does she have any emotional attachments to her portfolio since her husband played a role in creating it? How much is she spending each year? What are her biggest fears with the money? Once Mike learned that her biggest concern was the risk of outliving her portfolio (due to her annual spending levels), it was easier to brainstorm ways to reduce that risk.

His mom also shared that one of her primary goals (besides maintaining her lifestyle) is to leave a healthy portion of her wealth to her three kids. So the three siblings had a group meeting to mutually agree on the next steps.

Step 1: Reduce Mom’s Exposure to Stocks

If she leaves her portfolio as is and lives another 15 years, there’s a small chance she’ll fail to achieve both of her goals (not run out of money and leave an inheritance to the kids).  When you’re trying to guess an elderly parent’s remaining years of life, the scientific rules of investing sort of go out the window—I assume that a healthy person will live to age 100 (as you know, many go even longer). Mike and his siblings chose the middle path—reduce the exposure to stocks to about 50% with the rest in bonds and cash. This should give the portfolio a better cushion in the event of a big correction (think 2008).

Step 2: Make Portfolio Changes in a Tax-Efficient Manner

Thankfully, Mike’s mom has half of her nest egg in an IRA, thus allowing her to make investment changes there to avoid the capital gains taxes that would otherwise occur if she did so in the trust (the trust assets will not be subject to tax if they are sold by the kids post-inheritance). This means that each account will have a different ratio of stocks versus bonds, but as a whole, she’ll be 50/50.

If anyone wants to share an experience they’ve had when discussing a single, elderly parent’s finances, please shoot me an email. I’d love to know how it went and what you learned from it.

Happy planning,