Case study for dad

[mozar]

Hello Mustachians,

My dad almost died last week. He totaled his car but he is fine. We talk a lot about retirement and he knows my plans. We were going to sit down and talk about his retirement plans anyway but I also want to talk to him about risk planning now.

Details:
Age 57
Salary $52k
Side hustle about $10k a year
Rent from disabled sister: about $300 a month

Monthly Expenses:
Rent: about $1200
Child Support: about $500
Food: I'm guessing $200
Transportation: takes the metro to work maybe $200 and has (had) a car note, I'm not sure what it was.

Savings $14k
Pension at 62: $1500 a month, at 65 $2000 a month
SS at 62: $1500 a month, at 65 $2000 a month

That's what I know right now. He has to buy a new car. The insurance will pay off his car note and give him some money for a new car. I think he owed about $10k and he would probably get something similar. I think it was a Honda. He also needs to move soon. His rent just went up by 350 for his tiny two bedroom.
His plan is to move to the Dominican Republic when he retires. I'm not sure when he thinks that will be. He has a 4 year old and his disabled sister lives with him. His disabled brother lives about 2 hours a way and he visits every couple of months.


Any advice? I'm going to ask him if he has access to a retirement account outside his pension and talk about term life insurance.  I would say work as long as possible but his main work is exhausting and he has had a couple of kidney stones from the stress.

[MDM]

If there are no significant other expenses, by age 62 he will be in reasonable shape (more income than expenses) with only SS + pension.  SS will go up with inflation - will the pension?

If he starts putting $18K/yr into a 401k now he'll be saving 25% on almost all of that.  Then he can withdraw at a much lower rate in only 2.5 years.

Can his cash flow allow $18K per year into a 401k?  An additional $5500/yr into a traditional (or Roth) IRA?

The longer he can work and/or defer SS and pension the better for longevity concerns - but you know that....

[mozar]

I'm not sure how the pension will match inflation. It probably will. He said he can save about $800 a month right now. I will talk to him about that too.

[okits]

The big things that jump out at me are what provision does he want to make (or is legally obligated to make) for dependents (4 y/o, disabled sister, disabled brother)?  Will his sister move to the DR with him eventually?  Will the 4 y/o want/need/legally be able to extract college funds?  Insurance policies may help with this, depending on projected needs and how much the premiums are.

How long can he keep the $10k/year side hustle going?  For his main work, can he switch to something less exhausting or go part-time to earn less per year but work longer?

[mozar]

His side hustle is doing well and growing. For going part time it might mean getting less in his pension? He has been applying for lots of jobs but I think ageism is a factor.