Hi everyone,

I'm using the Fire philosophy myself for numerous years which has already proved very profitable and given me a degree of financial freedom for the rest of my life.

Now my parents are on Pension with a large savings account and now a substantial inheritance that has come their way, they want to start investing their money a little more.

To give you an idea, my parents started with €0 and worked hard for years to get ahead, which means they are also cautious with their money when it comes to investments. (They have done little to nothing in this regard.)

Because of their age, a different strategy is needed than for myself.

Their horizon is a lot shorter with the uncertainty of when/if they will have to move to a retirement home (high monthly costs).

Potential monthly cost if both are in a nursing home NOW: €+-6k/month

Their pension is just below this amount at the moment.

The plan is to buy a nice appartement but they can use the money from their ('recent") home.

First draft i was thinking was in this direction:

Bonds (EU) 20% IE00BFPM9W02 ?
All world (EM+DEV) 80%
Cash 6 months income
Bonds (EU) 20% IE00BFPM9W02 ?
Bonds (EU) 0-1Y 10% LU2531807738 ?
All world (EM+DEV) 70%
Cash 6 months income

When i backtest the first scenario, its still relatively 'safe' keeping in mind:

- They have their house as an asset

- 6 months income cash

- At this moment in good health and very active

- Currently save a lot every month (high pension, low costs)

- Expect another inheritance in the future (also very big amount)

When they go in the retirement home they can use:

- They can either use the money from selling the house

- Or can they pick up what is necessary

What are your concerns, or input?

  • parent

  • Sequence-of-returns risk matters a lot here, a bad market early could permanently damage their ability to self-fund care.

    A more sensible target would be closer to 40–50% equities, 40–50% high-quality bonds, and 1–2 years of cash to cover any health or housing shock without selling assets at the wrong time. The house is a backstop, not something you should be forced to rely on in a downturn.

    Also think in buckets:
    cash for 1–2 years of living + care, bonds for the next 5–8 years, equities for long-term growth and inheritance.

    One thing that really helps with this kind of planning is being able to model different spending and care scenarios over time. Tools like firenum.com are useful for this because they let you stress-test portfolios against changing expenses and longevity instead of just looking at average returns.

    parent

    Thanks for the input and useful tool. I now backtested with cruvo website.

    Cash is indeed maybe little low, 2y expenses (= 1y income) could be better.

    I'm not sure on the 50/50 equities and bonds but indeed will backtest different ratio's to calculate the risks.

    Especially in the situation that they have a lot of "buffer".

    Just illustrate:

    House €>500K

    Car currently €100k

    First investment batch €>500K
    Inheritance next years (terminally ill) €>500K

    So when they need to go the nursing home they can either use the money from their house and cash or choose to sell off a portion or a combination of both.

    To round off the number lets say they have €1.5m and they need to go to a nursing home today which costs €72000/year for both.

    - their income (pensions) they would need like €10.000/year out of their funds.

    = thats 0.67% of their worth (without expensive car and + €60k cash buffer.

    That is also why I was leaning more towards a higher percentage of equities. Their bonds are sufficient.

    parent root