Father taking big risks with retirement savings- what to do?

I have a family/financial issue that I am not sure how to deal with, and I thought it would be best to bring to you all, my most financially-saavy friends.

Short story: I feel that my father is gambling my parent's retirement savings on a few very risky stocks. He is quite stubborn and is not the type to take advice from anyone. He had a string of good luck with his stock-picking in the past, which is likely why he feels that he will be able to beat the averages. He is a good father, but this has been driving me nuts. He has a background in accounting, which makes it even harder to believe that he is taking these kind of risks.

Long story: In 2008 my father correctly timed the market bottom by a few months. He moved ALL of his/my mother's retirement savings from diversified mutual funds into individual stocks. The number of stocks that he is in at one time varies from 5 to 10, though usually it is heavily weighted towards two or three. His investment strategy was one of picking stocks that had been beaten down by the market.

For a while, this strategy worked REALLY well. From his initial starting point, the money had quadrupled by mid-2010. I believe he came to view himself as an expert capable of strategically selecting stocks at this time. Since then, it has been on a downhill slide and today stands at a number just greater than his initial starting point.

I have spoken to my dad about diversifying on a number of occasions, but my dad seems pretty convinced that he can do better than the market. If the money was only my father's I would have no problems letting him do his own thing with it. That is not the case, however, as my mother is nine years his junior. My mom is an amazing person, but her financial savvy is limited to things like getting deals on groceries, etc. I do not believe she fully understands the risks of her portfolio, and she does not want to get involved with what she views as my father's territory.

My father is now retired at age 63 while my mother is still working at age 54. My parents live a middle-class lifestyle and could be perfectly happy without a ton of money. It seems like there is very limited upside happiness-wise if the stocks do well, but there could be a lot of pain and suffering if they do not.

Has anyone here ever dealt with a similar situation? Is this any of my business to begin with? Thanks in advance for your help with this.

ConcernedSon

When looking for your next house, consider one with mother in law quarters or pool house.

uutxs said:   
You probably meant "my mother is nine years his junior".
I did... fixed the OP.

Before I reply, no, it's not any of your business if he's of sound mind and body. However...

Get him to talk about his results over the last three decades. If he's beaten 60/40 stocks/bonds on a buy and hold basis, then he can trade whatever he wants. One or two years doesn't matter.

Or I'll refer him to one of my relatives, who I recently found out got wiped out with a bunch of Enron stock he received as compensation from an acquisition. Great stock on paper, but ultimately worthless due to accounting fraud. He's still working at age 70.

The point being, he'd be retired now if he had been diversified.

TravelerMSY said:   Before I reply, no, it's not any of your business if he's of sound mind and body. However...

Get him to talk about his results over the last three decades. If he's beaten 60/40 stocks/bonds on a buy and hold basis, then he can trade whatever he wants. One or two years doesn't matter.

He never traded individual stocks before December of 2008, so he doesn't have any track record. He was previously exclusively in mutual funds.

It's not my dad I am concerned about here, it is my mother. She will stand and not become involved with financial issues, so I feel some responsibility for her well-being. My mom does not have any significant savings of her own; they are all-in together.

soundtechie said:   Does he actually have enough to reitre, or is he trying to make up for a lack of savings by seeking miraculous returns?

As of right now he could scrape by in retirement but it would really be no-frills. Any expensive medical bills could easily put them under given a bit of time.

I do think he is seeking very high returns. The stocks he is in typically trade at $1 - $3. He is not investing in profitable companies, he is really rolling the dice that the companies will turn around.

Glitch99, I'm personally identifiable under my other name.

I don't expect any inheritance, nor do any of my brothers. I also don't want to pay for 15+ years of care for my mother because my dad made some risky investment choices.

ConcernedSon, Glitch's question wasn't just "why use an alt id?" it was "Why use an alt id then alert everyone that it is an alt id?" You've gone a step further and given us a new clue about your 'main' id.

I think it's weird too.

satchelsofgold- I think you are right in that he views it as a hobby. Your solution sounds like a reasonable one. I will bring it up with him to see what he says.

Revike- I don't know if my mom has really thought about what could happen. I'll try to bring it up without terrifying her.

Glitch and Tim- You guys are right, my ID is irrelevant. Can we let it go now please?

Call me a cynical skeptic, but I say TripleB is on a rampage of invented crisis scenarios. Within just two days, his 91-year old mom was run over, his wife is cheating on him with some guy in MI and his dad is risking (his other mom's) retirement savings.

ScrawneyWallet said:   Call me a cynical skeptic, but I say TripleB is on a rampage of invented crisis scenarios. Within just two days, his 91-year old mom was run over, his wife is cheating on him with some guy in MI and his dad is risking (his other mom's) retirement savings.His billion-dollar IPO should be dropping any day now, too.

He earned it, he can do as he pleases with it. Sounds like this is more of a "there won't be anything left for me to inherit" issue.

Many years after retirement, my dad, always a prudent investor started chasing yield. I asked him what changed is investment philosophy and he said that he needed a certain return on his money to maintain his lifestyle and at his age, preservation of capital was not his primary objective. Hard to argue with that.

Thatsnotme said:   Your dad has told you all he doesn't want to listen to or take your advice.

Your mom has said this is your dad's territory and she is allowing him to take control of their finances.

They are adults, of sound mind, entitled to make their own decisions, and yes, that includes their own mistakes.

You've shared your concerns, you've been rebuffed. Personally, after airing my concerns out of love, I'd shut my trap and move on out of respect for them.

This.

Really, what can you do here? My folks are of the same age and my story is eerily similar to yours. Mix in maybe a bit more of a sense of entitlement and an irrational anger towards the federal government, and my folks are right there with yours.

I expressed my concern, but they retired early to the beach and are counting on a guaranteed return from the market in the short term to maintain their lifestyle.

I have no room for them in my house, so we'll cross that bridge when we get to it if it gets to that point.

Maybe we should form a support group?

dukerau said:   parmenides said:   Thatsnotme said:   
I have no room for them in my house, so we'll cross that bridge when we get to it if it gets to that point.


You or the OP may not have any way to stop your parents' risky investments, but this is the reason why it is your business. If you know that in the case of investment failure you will be responsible for the financial support of your parents, it is certainly your business how your parents are investing their money.

Yes, agreed, in a perfect world. However, the situation the OP has expressed (and my comments too) reflect an imperfect scenario. There is no pre-planning which can take place because both parties are not at the table. It takes a good-faith effort on both sides to come to terms here.

However, as OP and I are discovering (I think) what we mean by "good Son" is not necessarily what out parents think the term means. So, we go into contingency mode. Unless we're going to completely walk away, contingency mode means to "be there" as any good family member would do for another, given an uncertain and unknown future.

I think this just means that for OP and I there will be a rocky ride ahead, not of our doing, and not as we would have planned things. Such is life at times, correct?

Thatsnotme said:   Your dad has told you all he doesn't want to listen to or take your advice.

Your mom has said this is your dad's territory and she is allowing him to take control of their finances.

They are adults, of sound mind, entitled to make their own decisions, and yes, that includes their own mistakes.

You've shared your concerns, you've been rebuffed. Personally, after airing my concerns out of love, I'd shut my trap and move on out of respect for them.
The father's actions do not reflect a sound mind - he is gambling with his and his wife's future. The mother does not need to be harangued, but it does not sound like the seriousness of possible worst-case scenarios has been presented to her or considered by her. The obvious outcome of a miscalculation by the father is that the son ends up supporting his parents for an extended time, an outcome that is entirely preventable if the father's gambling can be curtailed.

The son has specifically stated he is not interested in an inheritance, he may be lying but there's nothing to support that assumption. Odds are his mom will outlive his dad and hopefully be around for several more decades. Arranging for her support during that time is the father's responsibility. He is running a significant risk of dumping that responsibility onto the son, so it is the son's business and it is preventable at this point.

If the father's car was in a dangerous condition because he neglected to take proper safety/maintenance precautions despite his son's warnings, and the mother said "well, he's in charge of the car stuff, not my business", should the son shut his trap when they plan to set off on a cross-country trip?

chaddi said:   ScrawneyWallet said:   Call me a cynical skeptic, but I say TripleB is on a rampage of invented crisis scenarios. Within just two days, his 91-year old mom was run over, his wife is cheating on him with some guy in MI and his dad is risking (his other mom's) retirement savings.
On the other side, Codename47 posted today after 2 years. What has been going on??

Easy: TripleB was finally able to hack into CN47's stagnant account.

BrlDsguise said:   ConcernedSon said:   Is this any of my business to begin with?

ConcernedSon
I vote no, you expressed your feelings now let it go.

If you have to support your mother for 15 years so be it - you didn't support yourself until you were 15.
And maybe OP enjoyed the level of support he received as a child because his grandfather didn't have a gambling addiction and didn't saddle OP's parents with an unnecessary financial burden.

Curious whether OP has a family. The father's irresponsibility is likely to impact them significantly if OP ends up supporting his parents for an extended time.

The fact that the worst-case scenario is entirely preventable is the maddening aspect. Millions of responsible retired people would kill to have $500K to finance their retirement, and here is a guy who, given enough time, is more than likely to flush that amount down the toilet ...

He can still have individual stocks if he wants, but he need to do it right and in the context of a diversified portfolio. I hope he doesn't learn that the hard way. Living off social security is the consolation prize if he busts out.

Get him some portfolio management books at the next present-giving occasion. And a stock picking one too, so it won't seem like you're manipulating him. I recommend "Pioneering Portfolio Management" by Swensen and for individual stocks, "Yes you too can be a stock market genius" by Greenblatt. Sorry for the title, but it is one of the best stock books around.