Where to put money for short term- a few years?

[cricketwife]

I’m sure this has been answered a million times, but I feel overwhelmed and would love advice, please.

I am POA for my mother who has Alzheimer’s.  I will be selling her house this year and expect to clear $300-500K.  (I know that’s a huge range, but the house was severely damaged by Hurricane Ian and there are just so many extenuating factors and unknowns, it’s hard to make a better guess at this moment.). Even at the low end, it will be more than I can put in a single bank and be FDIC insured. 

This money needs to pay for her care through the end of her life.  Obviously, that’s impossible to know, but best guess based on averages is 5-7 years. I’d like to keep roughly 1 years worth of expenses in her normal checking account and then put the remaining funds into something that earns some interest, but that I could draw from yearly.  Like, each year, pull funds for the upcoming year.  So I don’t mind tying money up short term.  At the same time, I’d don’t want it totally inaccessible if there were an emergency of sudden serious decline. Like, maybe I’d pay a penalty, but I could still get to the money.

I hope this makes sense.  What advice do you have?  

[al dente]

For that amount of money idk if this is best, but we have an Ally account for our 6 mo emergency fund and it's currently at 3.3% interest so we're making close to $200/mo in it. It's an online savings account so it might have a limit on withdraws within a month but it seems like that would be fine for you.

[sadlebred]

Long term, maybe put $10,000/year in ibonds. CDs? Maybe a money market, or ETF? I'd spread it out, so that you don't reach the FDIC max at any one bank.

[magma]

Look into annuities - may be a good option here to get a guaranteed revenue stream.

[gt7301b]

I'd look into CDs. A quick google search shows one year CDs with a rate in the 4%. You could even ladder the lengths just to lock in the returns. I'd probably do something like 25% in a high yield savings account, 25% in a 1 year, 50% in a 2 year. The rates don't seem that much better to go any longer, but it also might be good to lock some of the money into a fixed rate.

[mae0111]

I agree with gt7301b - HY savings and CDs. I'd maybe keep 18 months in HY savings, and you may be able to spread the CDs into 6, 12, 18, 24, 30 month...

www.capitalone.com/bank/cds/online-cds/

Capital One has good rates for HY savings and CDs right now, if you wanted to keep most of it in one place...

[niq]

Beyond the i-bonds, CD rates are decent these days. You consider that or just vanilla treasuries.

IIRC, in the '80s-90s "laddering CDs" was a pretty popular investing strategy. It lets you pick your own mix of ROI vs liquidity, but I don't really know how it works.

[bee20]

I agree CDs are a good option for this and rates are finally high enough to make them worthwhile. A ladder just means you buy a range of years the first time (1 year, 2 year, and 3 year maturity) and then when the 1-year CD pays out, you reinvest that as a 3-year if you're not using it. Thus, you'll always be getting one year's investment maturing in a year but getting the better long-term rates after your first cycle pays out.

I have some money in Vanguard Brokered CDs (although you could also walk into your credit union and see if they have something similar). What I like about Vanguard over other options is 1) I already have a vanguard account, so they're easy 2) Rates are competitive because it's an interface for tons of banks.

They might not be right for you, because as brokered CDs can lose money if you have to cash out early. A lot of credit union options will give you a lower rate, but you will only lose a few months interest (and can't lose the principal) if you cash out early. Different banks will have different fees and policies for redeeming early, and some will have absolutely no cash-out option.

[quesyrah]

I was in the same situation in 2021. My parents bill in memory care was $16,000 a month. I had to draw $10K from their house profits every month to cover the bill (their retirement income was just over $6K).

Because I needed the money to last as long as possible, needed to withdraw from it every month and couldn’t afford to lose any in the market, I just kept it in their HY savings account. I spoke with a FA who agreed that in our position that was probably the best idea.

I will also say that other than dementia my parents were relatively healthy when they moved to memory care. My dad lived just under a year and my mom died 3 months after him. I had been so worried about making the money last, I was totally unprepared for how short their stay in MC would be. They were 81 and 73 when they died.

[cricketwife]

Jan 13, 2023 15:21:29 GMT -5 quesyrah said:

I was in the same situation in 2021. My parents bill in memory care was $16,000 a month. I had to draw $10K from their house profits every month to cover the bill (their retirement income was just over $6K).

Because I needed the money to last as long as possible, needed to withdraw from it every month and couldn’t afford to lose any in the market, I just kept it in their HY savings account. I spoke with a FA who agreed that in our position that was probably the best idea.

I will also say that other than dementia my parents were relatively healthy when they moved to memory care. My dad lived just under a year and my mom died 3 months after him. I had been so worried about making the money last, I was totally unprepared for how short their stay in MC would be. They were 81 and 73 when they died.

I very much appreciate you sharing your experience and I’m sorry for your losses.  My mom is 77 and in good health otherwise. Of course I have to prepare for her to live longer rather than shorter, and it literally keeps me up at night thinking about her potentially outliving her money, but H and I were just talking about how much she declined in the last year (she’s only been in MC for 3 months.) so it’s very possible that I experience something similar to you. 

[awkwardpenguin]

I think a combo of high yield savings and laddered CDs are a reasonable option.