Question Regarding Parents (both in 60's)

[BEVO]

Ok, father is 65, mother is 61 - both in good health. They still have their own business which brings in steady income - complete service business though. ZERO retirement savings/accounts - don't ask me why. House, around 300K paid in full. About 20K in cash in a savings account. Other than monthly bills (food, utilities, etc,) no debt. Besides Medicare, no health insurance. They also want to retire fairly soon. Might be able to get 60K for the business. What advice would you give them? My brother and sister and I are anticipating that we will need to help them out.

[neatdesign]

To be perfectly honest, I'm not sure they really need any advice. If they've been able to afford a $300k home that's paid for in full AND carry no debt, it sounds like they're doing something right. They may have investments that you're unaware of. If not, they could always sell their house and move into someplace smaller if they need the cash. It's unfortunate if they have absolutely no money set aside for retirement savings, but it's not like they don't have assets to work with, either.

~ Jenney

[poundwise]

It certainly does seem that there is a lot to work with there.

If nothing else, they could look into a reverse mortgage.

[Broken Arrow]

They're doing great if they're planning to never retire....

Please remember that they could live (and should plan for) as long as the next two decades.

So, even if they sell both house and business, that's 360k total, or 18k per year for the next 20 years. That and social security might make it sound like they can barely get by, but realistically, they still have to live somewhere....

Either that, or hopefully they have other investments that we are not aware of.

If not... they may also have to put off retirement for a little while longer.

[fairy74]

I agree with neat design, unless the parents have specifically asked for advice, there probably is not too much planning that can be done. Parents sometimes do not share all their assests/funds etc.. with their children. As neat design said they have several assets to work with. Maybe Bevo and siblings could start a seperate ef to start saving towards helping their parents in the future if need be. The parents are still quite young though and it seems like they might be able to obtain part-time jobs to cover their monthly expenses, even after they sell their business.

[Ima saver]

With no savings to live on, they will have to keep working. I would suggest selling the house and getting a smaller, cheaper one to live in.

[Fern]

They should not consider a reverse mortgage now; they're too young to do so now and would likely outlive the income stream they'd get from it. They should wait til they're at least 70 to do the reverse mortgage.

I woudl imagine they'd want to keep the $20K in savings as is for emergency use, but they sure could use some tax-deferred investments, like an IRA, as their $$ would grow so much faster.

If they're in good health now, chances are they will live for another 3 decades, and any unexpected health problems could really put them in a bind. Maybe it is time for a candid conversation with them to try to sort things out and see if there are other assets that could be better deployed. Selling the house for maintenance-free condo living might be a good idea.

[disneysteve]

My question is this: How much do they actually live on now? Is that amount more or less than they would get from Social Security? If the amounts are comparable, then they are all set. If there is a deficit between what they need and how much they will collect, then they have some work to do.

The money from the sale of the business will help some. 60K plus the 20K they've already got, can safely generate about $265/month in year 1 (and adjusted annually) without having to touch the principal. If that plus SS is enough, then again, they are all set. If there is still a deficit, then they have to look at other options like working a little longer or downsizing their home.

This may not be as bleak as you think.

[BEVO]

thanks for all the responses. i know for a fact that they have ZERO assets other than the house and savings. NO 401(k), ira, etc.,

from the posts, it appears that because of their age, they don't have a whole lot of other options other than to continue to work (i.e., delay full retirement).

btw, 320K isn't a whole heck of a lot for 2 people to retire on. i don't know what their monthly expenses (spending) is but i would assume that they would like to do a little traveling and live in comfort in their retirement and not just scrape by. with nothing but medicare, if God forbid, something happened, couldn't the bills go through the savings FAST?

[lgslgs]

If they are even considering the idea that a reverse mortgage will solve their problem, have them run the numbers on a reverse mortgage calculator first - like the one at AARP http://www.rmaarp.com/

Reverse mortgages are rarely the endless magic ATM that folks hope they will be.

Lynda

[disneysteve]

Originally Posted by BEVO

i don't know what their monthly expenses (spending)

This is what you really need to know to assess the situation. Also, see if they have their estimate of benefits from SS. Like I said earlier, if their home is paid for and they have no debt, they may be just fine with SS and income from their current savings plus the money from selling the business.

[Ima saver]

Well, I know that if and when my husband ever retires, we will have have about $1200 a month from social security to live on. That is only $14,400 a year for two people to live on. We certainly could not live on that.

[Broken Arrow]

While I agree with Steve that-- depending on their general lifestyle-- is indeed possible for them to retire, I also hope that they're planning to live lean for the rest of their lives.

At the same time, I also agree that they are adults, that ultimately it is their lives to live as they see fit. As such, besides vigorous urging, there isn't too much we can do about it....

Unless you're willing to provide some financial support of your own.

[disneysteve]

Originally Posted by Ima saver

Well, I know that if and when my husband ever retires, we will have have about $1200 a month from social security to live on. That is only $14,400 a year for two people to live on. We certainly could not live on that.

It certainly isn't much money, but it is enough for some. There is a retiree on another board I frequent who lives on about 12K/year and is perfectly happy. She is always posting to give another point of view to those who say you need a multi-million dollar nest egg before you can retire.

[Broken Arrow]

Originally Posted by disneysteve

It certainly isn't much money, but it is enough for some. There is a retiree on another board I frequent who lives on about 12K/year and is perfectly happy. She is always posting to give another point of view to those who say you need a multi-million dollar nest egg before you can retire.

Hehe. I'm glad it works well for her. My grandmother-in-law is like that too. She lives in a single wide trailer at a friend's backyard, and lives strictly off of social security and medicare... and she's essentially happy with her life.

Me? I'll take that multi-million dollar nest egg. Better to have it and not need it than need it and not have it.

[safari]

My grandmother is 79 and lives on SSI, which is $836 a month. She is renting a 1-bedroom apartment in a senior residency complex and pays around $200 a month rent. The utilities are really cheap because of different kinds of government assitance. She's got Medicare and doesn't have any other expenses, besides food, occasional clothes, miscellaneous household items and a senior metro pass. She is able to save $200-300 a month. Money has never been a problem for her, and she is perfectly happy with her income.

[tinapbeana]

wow, a lot of the senior living complexes here are 500-1000 a month, and that's not an "assisted living" setup either...

just from what i've seen, housing, transportation, and medical costs are what will make or break a retirement. if i'm healthy, have transportation, and am living in a paid off house, i could retire on less than 1k per month in today's money for both DH and myself.

that's a lot of ifs...

[neatdesign]

Originally Posted by BEVO

btw, 320K isn't a whole heck of a lot for 2 people to retire on. i don't know what their monthly expenses (spending) is but i would assume that they would like to do a little traveling and live in comfort in their retirement and not just scrape by.

Traveling and a "comfortable" living is not something, in my opinion, children should have to help provide their retired parents. The bare necessities, yes -- food, shelter, running water, electricity, some health care, etc. But travel? That's not a necessity. Being able to eat out several times a week or playing golf once a week and that sort of thing aren't, either.

Should you help them with the bare necessities if they need it and you can afford to help them? Yes. Should you help them pay for any indulgences beyond the bare necessities? Not if you don't want to, that's not your responsibility.

~ Jenney

[Fern]

Some of you have said you know of some seniors who are "perfectly fine" living on very little. But the big monkey wrench for all of us is the unpredictability of health issues that develop as we get older. There's a heck of a lot that Medicaid doesn't cover.

Unexpected accidents or health issues are one of the top reasons people declare bankruptcy, besides divorce and the loss of a job.

So keep saving those sheckels.