How to Manage (Your Mother-in-Law’s) $250,000

FMD

More positive analysis on this one here. Some of us bought it cheaper a few weeks ago, but – for better or worse, and with all the usual caveats – I also bought more at current prices.

MUSHROOMS

Don Hurter: ‘When I shop at the local Safeway, I head over to the bakery department before going to produce. Why? So I can pick up a paper bag (normally used for hand-picked bagels) and use it for the mushrooms instead of a clingy plastic bag. No need to transfer later. Just leave the top open at the cashier so they can see what’s inside.’

Mark W. Budwig: ‘I forgot to say refrigerate, or was that obvious? (Or maybe it’s not even necessary. I don’t know; I always do it.) The key thing is that the mushrooms can breathe so they don’t rot in their own moisture.’

☞ If you don’t refrigerate, your mushrooms could grow a fungus. (Yes, I know.)

YOU HAVE TO WASH IT?

Michael: ‘After you wash your lettuce (you DO wash it right away, right?), drain and then wrap in a paper towel before putting it back in the fridge. The paper towel absorbs excess moisture that otherwise will turn the edges brown.’

☞ Lettuce comes in its own wrapping. Just toss out the outer leaves (coated with pesticide, dirt, and germs), then cut off a wedge, drown in dressing and devour.

And don’t start talking to me about ‘romaine’ lettuce. It’s way more expensive, it’s probably French, dirt does get stuck throughout all its leaves, and Cooking Like a Guy™ guys just don’t have time to mess around with it. Paper towels? If God had meant for you to use paper towels, He wouldn’t have invented sleeves.

JONATHAN POND’S ADVICE

Gray Chang: “I am reminded of a story I read in Herb Caen’s column in the San Francisco Chronicle. Back when he was in high school, a teacher told his class, ‘Is it worth a lifetime of guilt and shame for just one hour of pleasure?’ So a kid in back raises his hand and asks, ‘How do you make it last a whole hour?'”

GUNS — WHAT SAY YOU?

Jonathan Levy:“Your item on guns reminded me of an idea I have had for a long time. There should be a requirement that all guns carry insurance against death, injury, and property damage they might cause. The manufacturer would be required to take out the original policy on any gun and the only way a policy (i.e., the insurance company) could be relieved of responsibility for a gun would be if the gun were picked up by another policy. Such a plan would have a number of benefits: (1) It would assure that most gun victims could be compensated. Only those injured by an unknown gun would be left out and even they could be included if there were some provision to create a pool of money from the insurance premiums to compensate victims of unidentified guns. (2) It would create a stronger disincentive against letting guns fall into the black market. The last known owner and his/her insurance company would be on the hook for these guns until they resurfaced and were properly passed to another insurance policy. Most likely, the owner would not have to pay premiums forever for stolen guns but there would be a provision (priced into the policies) for insurance companies to carry the ongoing risk for no additional premiums on stolen guns properly reported to the police. (3) It is a free-market solution that should appeal to conservatives. The law-abiding hunters that the NRA likes to put forward should be able to get very low rates through competition between insurance companies. Some guy with a string of arrests likely would pay much more or not even be able to find coverage and thus would not be able to own a gun. However, it would be the private insurance markets that made that decision, not the government. (4) For those who might argue that only law-abiding gun owners would buy the insurance, not criminals – fine.   One more charge prosecutors can level against people most of us think should be locked up, anyway. If it gives them a chance to do it before the people commit violent crimes with the guns, that is even better. (5) This plan works with any gun policy. It could be implemented with as much or as little other gun control as communities, states, and Congress saw fit.”

HOW TO MANAGE $250,000

Dan: “My recently widowed 67-year-old mother-in-law asked me for some financial advice. (First big mistake.) She has a modest net worth in the $250K range and needs income to supplement her Social Security and small pension. As my own focus is growth, I’m not well versed in income maximizing strategies. I suggested that she assemble a diversified portfolio of income producing assets. My thoughts were some Treasury instruments, ginnie maes, perhaps a cautious bond fund and some dividend oriented stocks, like utilities . . . and a small growth component (10%?) in an index fund like Vanguard Total Market. Dividend stocks seem reasonable as the tax treatment is better and the yields may be better at the cost of a bit more risk. Fair advice? Any other comments?”

☞ Consider using the $250,000 to buy a lifetime annuity (learn about this at brkdirect.com). The annuity will never run out (though if it’s not inflation adjusted it would dwindle), and she has the advantage of – in effect – being able to spend the principal as well as the interest.

Her Social Security pay-out rises with inflation, but because most annuity pay-outs do not, maybe put $150,000 in the annuity now and $100,000 in Vanguard’s inflation-protected fund (VAIPX). Then, after a few years, if interest rates should rise – and with VAIPX having held its value against inflation in the meantime – you might cash that in to buy a second annuity that throws off as much as the first.

(How can a $100,000 annuity throw off as much income as a $150,000 annuity? Two ways. First, if interest rates are higher when you buy the second one, so too will be the rate at which the annuity pay-out is set. Second, having waited a few years, the insurance company will assume a somewhat shorter life expectancy over which it will have to make payments.)

Of course, if you had reason to believe your mother-in-law is unlikely to live a long life, this may not be the way to go. Nor is it a good option is if she is determined to leave you and your wife an inheritance. With a lifetime annuity, the insurer will pay forever (if she lives forever). But once she’s gone – whether at age 110 or next week – so is your money. (For a price, some insurers will provide gimmicks to partly get around that. But there’s no free lunch. The more bells and whistles on your annuity, the more likely you are getting less than great value.)

Finally, if your mother-in-law owns a home, she should consider taking out a reverse mortgage.

HAVE A GREAT WEEKEND