That is one consideration. I think I could be added to her account as a joint owner, and then there would be double the coverage.
This money market fund, āInvests at least 99.5% of its total assets in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash (collectively, government securities)ā.
It sounds very secure. Government, not corporate.
That could be helpful for other estate planning reasons too. Butā¦ if you have siblings, it could be complicated/misinterpreted.
1 Like
I also have a government backed money market account at Fidelity. I think it is quite safe. To be a co-owner of your motherās accout, there will be tax implications for you.
2 Likes
True. Fortunately my sister knows that Iām extremely ethical in that respect, and always trying to figure out ways to give her money (she needs it, I donāt). But ugh, tax implications, didnāt think of that. Donāt want to pay my moms taxes at my tax rate!
2 Likes
Very good point. Taxes. Not gonna do that.
2 Likes
Not sure there are tax implications. I was co-owner of my motherās credit union account (associated with her SSN), though I did not realize it til after she died. My name was not on her checks, and I assumed she had meant I was beneficiary (as was my sister, on different assets - she tried to split about evenly). I never received any tax statements. Butā¦ this was a relatively small account, so that may make a difference.
This article mentions other concerns, but not tax. Itās a good research topic though - would like to hear other feedback. Be careful when adding family (or others) to your bank accounts: Preservation | Family Wealth Protection & Planning
1 Like
Hmmā¦ may be more complicated than I realized.
āThe standard insurance amount is $250,000 per depositor, per insured bank, for each ownership category. This means that by having accounts in different ownership categories, like single accounts and joint accounts, you can get more than $250,000 in coverage.ā
2 Likes
@busdriver11 - See link, especially examples 3 and 4 (POD seems to count)
1 Like
If I recall, Lehman Reserve was the only MMF that ābroke the buckā, i.eā¦ went under a $1.00. It went to 97 cents but it did take months for folks to get their money back. (The regular Lehman MMF kept its 1.00 price.)
1 Like
There are money market funds that invest only in US Treasury bills/bonds with very near maturity dates, so credit risk would only be for the possibility of a debt-limit-related political default. Of course, if that happened, that would inject a lot of unpredictability into all other financial markets (and FDIC insurance that is ābacked by the full faith and credit of the US governmentā).
1 Like
I feel like giant companies like Fidelity would likely eat the loss rather than take the PR hit it for breaking the buck.
3 Likes
90-day commercial paper (CP) is a common asset class purchased by money market funds. Many, but not all, of them own CP in their funds. Treasuries are considered credit risk āfreeā because the market assumes, correctly at least until now, that Uncle Sam can always print more money to repay its debt. All other debt instruments are priced based on the Treasuries. If the Treasuries default, the debt market would lose its benchmark.
That actually happened a number of times before. Big mutual fund families decided to eat the losses when their money market funds and/or stable value funds were about to break the buck.
2 Likes
Look at Fidelityās SPAXX. Itās a goverment money market fund, itās 7 day yield is at 4.22%. Many people use this as a core account.
4 Likes
The Reserve Primary Fund broke the buck, and because of Lehman. These guys practically invented the MMF. Lehman was circling the drain and desperate for a short-term liquidity fix. Somehow the good people at The Reserve thought it would be a good idea to lend 100s of millions to them on a short/term basis. Turned out to not be very short-term.
2 Likes
Recent article in WaPo. Frightening and sad.
https://www.washingtonpost.com/business/2023/03/18/senior-care-costs-too-high/
2 Likes
Frightening and sad indeed. If you read some of the comments attached to the article, the stories people are sharing have many things in commonā¦just as our Parents Caring for Parents Support thread.
The reality of aging has often been ignored. The cost of aging is skyrocketing and has a profound ripple effect on both the family and society.
On the bright side with these uncomfortable conversations, we can try to address some of the issues contributing to the difficulties associated with aging. Personally, my parents didnāt think about what they were going to do āas they got oldā. Fortunately they were super savers so the financial impact was/is manageable. It was the psychological/emotional impact that had to be navigated without much preparation.
The biggest thing in their favor was the fact they didnāt need to move into a senior community until the oldest boomers were beginning to near retirement age. So facilities were beginning to upgrade amenities and level of future care in an attempt to attract the boomers with money. They were lucky.
As younger boomers we are doing our best to openly discuss and plan for āgetting oldā. We include our children, especially when we share our parentsā (their grandparentsā) issues and how we think those issues should be addressed.
There is no perfect way. There is no guilt-tripping. Weāre all just doing the best we can. For now we are communicating our expectations/wishes before age-related issues arise. We love the young adults theyāve become and will be revising our will to reflect our trust in them.
2 Likes
RookieCollegeMom - that is a sad article. And a reality I think about all the time when considering planning for retirement. Unless you are extremely wealthy or have an incredible LTC insurance policy - itās really tough to imagine how it can be managed.
SPAXX holds mostly Treasury and agency repos. Repo has its own risks, unrelated to the underlying Treasuries and agencies. Thereās the liquidity risk with the repo market and the credit risk that a repo counterparty may fail to perform.
2 Likes
Some of the issue that I saw in the article was needing expensive care early on.
My dil, her father had Lewy body dementia. Heartbreaking. Young. Needed a lot of care. A pandemic. In the end, his wife was laid off from her job due to the pandemic and then took care of her husband in their home. He passed away before very expensive care was needed so their nest egg was spared a complete loss. But now, sheās gone back to work. To rebuild what was loss and for healthcare. Her employer was gracious in letting them remain of employer healthcare for a long time. The husband was on Medicare but the wife was too young.
My mom and my in laws have different situations. My in laws, who have trusts set up. So one spouse isnāt impoverished because of the care needs of the other. They had the luxury of time. To plan. And 5 years for the trust to be effective.
My dad passed away after years of illnesses but was able to stay home until almost the end. My mom has moved into independent living and has funds to stay there for the rest of her natural life. She is selling her home. She has declined to set up a trust but there are no other people in her household who will need her money and assets.
I know many who donāt want to be in a nursing home. But I beg people not to put that burden on your family. There are facilities, good options that accept Medicaid. Donāt impoverish your family due to pride. You donāt have to agree with me. You may have the resources not to have to use that option. My mil worked at a facility that did accept Medicaid. It was good. My mom was just in a rehab facility that would be able to transition to Medicaid. They are good, they are caring. The care was good.
Itās so hard.
5 Likes