Should I push for my dad and grandma to start a Roth IRA?

[ithaca]

Ok, my dad is 58 years old and will be retiring from a public high school teaching position in about 2-3 years. Him and my mom have a "normal" amount of debt including $30k left on their mortgage, $10k on a HELOC, and $8k on a car. For retirement he will receive approx. $25k a year from his pension plan and he has $15k total in a 403(b) or something small like that. He also has over $30k in stocks that he really enjoys keeping track. He tells me which stocks have doubled and how great they're doing, but of course he probably forgets to mention the stocks that dropped in price. And of course he's paying some broker a portion of his earnings as well. I'm in the process of starting a Roth IRA for myself (I'm 29), so would this be a good option for him as well? Is there anything that I need to consider about a Roth IRA at his age? I would love for him to be able to convert $4k per year out of his stocks and into a Roth IRA so that he could avoid future taxings on his growth plus avoid paying some broker a percentage of that as well.

My grandma is about 80 years old and was talking to me today about her various forms of income (lots of stock that is 20+ years old) plus a few bank pension plans. She is very feisty and isn't happy about the government taxing her. Before I go into any more details about her, is a Roth IRA even an option for her at that age?

[PRICEPLUS]

Re: Should I push for my dad and grandma to start a Roth IRA?

Grandma is in the spend down phase. No ROTH IRA needed.

[cschin4]

Re: Should I push for my dad and grandma to start a Roth IRA?

I personally don't think giving others advice about their finances is a good idea. If you want to talk about, discuss it, etc then fine. But, you should not "push" another adult to do anything with their money.

[Ima saver]

Re: Should I push for my dad and grandma to start a Roth IRA?

I think your father should open a roth IRA. But not grandma.

[fairy74]

Re: Should I push for my dad and grandma to start a Roth IRA?

I agree with everyone's advice, grandma doesn't need one, good idea for dad but like cschin said it is fine to mention it in a general way but your dad is an adult, not your job to "push" him to do anything...

[disneysteve]

Re: Should I push for my dad and grandma to start a Roth IRA?

Ok, my dad is 58 years old and will be retiring from a public high school teaching position in about 2-3 years. Him and my mom have a "normal" amount of debt including $30k left on their mortgage, $10k on a HELOC, and $8k on a car. For retirement he will receive approx. $25k a year from his pension plan and he has $15k total in a 403(b) or something small like that. He also has over $30k in stocks

I'm curious about a couple of things. Does your mom work? Does your dad plan to continue working at another job after he leaves teaching? If his is the only income and he's not planning to get another job, I wonder if he can really afford to take early retirement. With his pension and minimal investments, he's only looking at an annual income of about 27K. Is that enough to live and still manage the payments on the 48K in debt they are carrying? And I'm hoping their health insurance would still be covered.

Getting back to your original question, the big appeal to a Roth is that you deposit money after taxes. The money grows tax-free until you withdraw it and you owe no additional taxes on it. If your dad will only be earning 27K in retirement, his tax rate is going to be pretty low. I'm not sure that he would save all that much by converting to a Roth. And, of course, he would have to pay taxes on his holdings when he converts them to a Roth. His 403b money is taxable. The stocks are taxable also.

The other appeal to a Roth is that you aren't required to take the money out like you are with a traditional IRA, but I don't think that applies here because it sounds like he would need that money to live.

I think he needs to use one of the online retirement calculators and run the numbers both ways - traditional IRA and Roth IRA and see which works out to his advantage.

[ithaca]

Re: Should I push for my dad and grandma to start a Roth IRA?

Thanks for the advice, especially the reminder to avoid pushing an investment on a family member. My dad and I usually talk about the stock every few months, and this last time I started telling him about the Roth IRA that I'll be opening for myself. He was curious so we had a good discussion about that type of investment. Although I would really like him to open a Roth IRA, I know how much he enjoys tracking his stock and realize that he's got the final word on how to invest that $30k. Thanks again!

[ithaca]

Re: Should I push for my dad and grandma to start a Roth IRA?

I'm curious about a couple of things. Does your mom work? Does your dad plan to continue working at another job after he leaves teaching? If his is the only income and he's not planning to get another job, I wonder if he can really afford to take early retirement. With his pension and minimal investments, he's only looking at an annual income of about 27K. Is that enough to live and still manage the payments on the 48K in debt they are carrying? And I'm hoping their health insurance would still be covered.

One of the major benefits of being a retired teacher is that your health insurance is still covered. So him and my mom are all set there. My mom does work in the insurance industry although I'm not sure how long she plans to continue working. She enjoys her work and probably makes about $35k. My dad has joked that he'll deliver flowers when he's retired But he's an umpire for softball/baseball games during the summer so there is some possible income there.

I have a feeling that the 48k in debt will be almost eliminated by the time they retire. My dad has worked really hard to pay off the house early so that he won't carry that into retirement. They built a house about 12 years ago for $150k and he's already got it down to $40k. The car loan is for my mom who likes to drive fairly new vehicles, but my dad is currently driving a 92 Bonneville with 275,000 miles on it! I suggested to him that he could start a car fund with a few hundred dollars per month so that he'd be all set when this car finally bites the dust.