Ms Wade’s projected windfall from the sale of her house is set to boost her nest egg to just over £250,000. Mr Wade’s primary goal is to maximize the potential of this money.
“She wants to be realistic,” he acknowledges. “She understands that the fees will consume the rest of her capital.”
He further explains, “It’s a challenging task, so I’m seeking as much assistance as possible. Even with the proceeds from selling her home, it’s difficult to stretch that amount when faced with annual care fees exceeding £60,000.”
The question now arises: what should Mr Wade do with the funds obtained from his sister’s house sale, and does her current investment strategy require a reevaluation?
Rob Burgeman, investment manager at RBC Brewin Dolphin:
Ms Wade’s annual fees amount to approximately £65,000, while her yearly income is just under £31,000. In order to cover these expenses, she currently has £121,131 available, or £256,131, including the value of the house.
If we exclude the house and simply hold onto the cash, it will run out by the time Ms Wade reaches 81 years old – a relatively short timeframe. However, including the house valued at £135,000 would extend this to around 84 years, assuming one’s health remains stable. Clearly, doing nothing is not a viable option.
When considering investments, there are some crucial concepts to grasp that are highly applicable in this scenario. The first, and most important, is the concept of capacity for loss. Since Ms Wade is entirely dependent on her capital, we cannot take excessive risks to bridge the income-outgoings gap.
The right risk profile involves assessing the risk you need to undertake (in this case, high), the risk you want to undertake (likely much lower), and most importantly, the risk you can afford to undertake.
An investment strategy yielding a 4% return would extend the age to 81 (excluding the house) and 86 (including the house).
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
