Subject: Re: Portfolio for a 90 year old
But one never knows if they will require expensive care and for how long.

Jim has posted some interesting suggestions regarding using annuities late in life. Here are couple of recent examples that have made me think more about their usefulness in certain situations.

Post #6682 by mungofitch on the Berkshire Hathaway board

Post #696 by mungofitch on the Retirement Investing board

I like to use questions like yours to force myself to think about what I might do, or want my spouse to do, in a similar situation. Please don't take any of this as advice. This is just my selfish rambling as we are barely halfway towards 90.

If me or my spouse are 90, I will certainly feel like we have won the game of life. My spouse, like your mother-in-law, would have zero interest in managing the funds. I think my advice to my spouse, if she were to reach 90 without me, would be to take as much risk off the table as she can and just enjoy her time. I looked at annuity payout estimates for a 90yr old female and they are currently 18.75% of the purchase amount based on the calculator I found. For every $100k annuitized she would receive $18,750 a year for the rest of her life. If the portfolio at age 90 were large enough that my wife could take a portion and earn 18.75% to cover all potential expenses, and leave the rest to do what it may for heirs, it seems that would feel like a wonderful win.

So the next question would likely be, how much should be annuitized? I have a feeling my spouse's spending habits, even at 90, might be greater than your MIL :) . I might tell her to annuitize enough to cover her current spending needs plus maybe 10-15% to cover future inflation for the next 5 years.
For round numbers let's say she needs $10k a month at age 90 (yes that probably seems like a lot but who knows). Increase that 10% to offset about 5yrs of inflation for life expectancy (getting a little morbid) and we have $11k a month needed from an annuity, which the calculator says would require $704,000 for a 90yr old female. AI says long term nursing home care currently runs about $120k/yr (i have no idea if that's accurate) but it would seem that amount should take a lot of risk off for any long term care needs too. It could require selling up to $1M or more of assets to yield an after tax $700k to fund the annuity.

Of course there are social security and pensions one should consider as well but i think the above is at least some reference for what may be possible. I realize this is quite late as a response. I draft my posts outside of shrewdm and when I went to respond to something else today I realized I never posted this. I guess life got in the way.

Jeff