Author Topic: Case Study: Wife's Mother  (Read 4513 times)

akoval23

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Case Study: Wife's Mother
« on: November 22, 2020, 05:42:42 PM »
Hi MMM Community,

I'm hoping you all can help me with a case study: my wife's mother.

She will be taking early retirement from her public school teaching job at the end of the year. Long story short, she is under a significant amount of stress due to COVID and upper management - a situation she would describe as "a living hell" - and does not want to risk/suffer waiting it out until the normal retirement age.

Unfortunately, she does not have a robust support circle and is single-income. She also has a large amount of anxiety (historically-rooted) about not being able to afford her living arrangement in twilight years. Because of that, she wants to ensure that she has a home that she enjoys living in and that is paid off. Ideally, she would like a small condo close to the city (we live in a medium sized-city that is fairly affordable).

Some hard data:

Age: 57
Status: single
Monthly Expenditures: $1600
Monthly Mortgage: $900
Total owed on current house: $76,000
Equity in current house: $18,000
Market value of current house: $130,000
Current Income: approx. $85,000
Health Insurance: Active - goes away at age 65
Medicare: Active @ age 65. Approx $300/mnth


Pension:

Per her pension, she has two significant options. She can either:
  • Take a one-time $112k taxable allotment when she retires in June. Tax on this allotment will probably be around $20k. If she chooses this, her pension payments per month will be $1800
  • NOT take the one-time $112k allotment. If she chooses this option, her pension payments per month will be $2300

Social Security:

She has the option of taking Social Security at:
  • 62: $1000/mth
  • 65: $1500/mth
  • 67: $2000/mth

Post-Retirement Work
She has the option of taking post-retirement work. Specifically, she envisions one of the following two options:
  • Target: $18,000/year
  • Substitute teaching: $13,000/year



Here is where things get tricky...

Like I said, she deals with a great deal of anxiety regarding her future housing situation. She imagines selling her current house and purchasing a small condo closer to us in the city. This would allow her to use public transportation and give her access to a more active social life/community.

However, to achieve this goal she wants to do the following:
  • Pension: take the 112k one-time payment (more like $92k post-tax) and use it to pay off the mortgage on her current house, thereby allowing her to save the money that she would have paid in mortgage and put it towards her eventual condo down payment
  • Social Security: take at age 65
  • Part-time job: take a part time job while living @ her current home for 4 years and save to purchase condo



My Thoughts:

Now, I don't know much about homeowning, as I'm pretty young, but it seems to me that this decision isn't in her best interest.

Firstly, I don't understand the logic behind paying off the mortgage of the current home if her goal is to sell it. Secondly, if I were her, I would try to maximize her monthly income by NOT taking the one-time payment, and by trying to hold out until 67 for social security. She's young and that extra monthly income starts to pay dividends if she lives for another 15 years.

She is VERY keen on taking the one-time payment and using it in some manner. Her thinking is that "if I don't take it now, then it will never be available to me again in this large of an amount." So, I'm trying to be sympathetic to that and to her anxiety about her living situation.

Therefore I've recommend that, if she does take the 112k one-time payment, she invests it in a low-risk fund (think BND) and lets it grow for 4 years while she works part-time and continues to pay down her current mortgage. My thinking is that, at the end of those 4 years, when she's ready to move, not only will her investment have grown, but she will also have saved some from the part-time job AND deepened the equity in her home. Yes, her monthly pension payments will be lower (alas!), but if her primary goal is to secure a living arrangement that she feels safe and happy in, then that seems ok. She is a woman of simple needs, so if that primary one is checked off, then I think she can truly be happy.

Am I on the right track here? TBH I am feeling a bit over my head and am worried I could impact this woman's life in a negative way. I just want her to be safe and happy, but I am also trying to be sensitive to and understanding of her deep-seated fear of losing her living arrangement.

Thanks for any assistance you can provide!

Dicey

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Re: Case Study: Wife's Mother
« Reply #1 on: November 22, 2020, 06:15:54 PM »
I would think that tutoring would pay far better and be less wear and tear on her body than working retail. She has specialized skills and credentials that people will pay for.

I'll let others chime in on the rest...

Letj

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Re: Case Study: Wife's Mother
« Reply #2 on: November 22, 2020, 06:43:45 PM »
If she gets $2,300 in pension if she retires now at 55 for the rest of her life, it is a far far superior choice than taking the lump sum. That would be a dumb move and quite detrimental. I am, however, totally confused why the lump sum is only $112K if her annual pension is $27,600. She would be receive all of that $112K in four years. The numbers don’t see right to me.

MrThatsDifferent

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Re: Case Study: Wife's Mother
« Reply #3 on: November 22, 2020, 06:49:49 PM »
How much would the condo be that she’s considering?

Letj

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Re: Case Study: Wife's Mother
« Reply #4 on: November 22, 2020, 06:51:11 PM »
Just re-read your post. She would receive $500 less if she takes the lumpsum which is a payback of 18 years when she is 73. I think if she needs to the money to pay off her mortgage and reduce her outflow that would be fine. It really depends on how comfortable she is with carrying mortgage debt in retirement. Personally, I would take the lump sum. At a modest 4 percent return a year she will recoup most of the $500 she giving up. She can even keep that money in a rainy day fund and continue to pay her modest mortgage.

AMandM

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Re: Case Study: Wife's Mother
« Reply #5 on: November 22, 2020, 07:49:34 PM »
I'm confused, too. Why does your MIL want to save up for a down payment on a condo?

She could sell her house right now and use the equity and appreciation as her down payment. If she took the higher pension, with no lump sum, it might be enough to cover all her expenses  (assuming the mortgage on the condo would have a lower payment than the current one).

Or she could sell her house and take the lump sum payout and buy a condo with cash.  With no mortgage, even her reduced pension might be enough to cover her monthly expenses.

Either way, there is no need to save up for a down payment.

I don't think taking the payout is a huge deal. If you think of it in terms of the 4% rule, that $92k would be equivalent to an extra $3680 per year, which is $2320 less than the $6000 extra per year that the higher pension gives her. Of course $200 less per month is not optimal, but it's not disastrous. She could make up the difference working 5 hours a week at Target. It may well be worth the peace of mind if she is very anxious about it. It's definitely not worth impairing the relationship between you and your MIL!

Jaayse

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Re: Case Study: Wife's Mother
« Reply #6 on: November 22, 2020, 10:41:30 PM »
One thing that hasn't been mentioned so far is what state the pension is in.  Some state pension plans are better funded than others, if her state is in danger of the pension collapsing, then she may be better off taking the lump sum, however, if it is well funded then she would definitely be better off with the increased monthly income.  Is there inflation increases for her pension, or flat monthly payments?  Either way, even if she takes the lump sum because it makes her feel better, she should be fine if she pays off the mortgage and keeps her expenditures the same, and with SS she will have extra money to save or use as she likes.  I also agree with others that she could tutor for more money and less exposure and exhaustion, there are plenty of online options for this.  My dad is a retired teacher who tutors online.

MDM

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Re: Case Study: Wife's Mother
« Reply #7 on: November 23, 2020, 12:23:21 AM »
Does she having any savings (403b, IRA, HSA, taxable, etc.)?

Would the $112K be on top of the $85K salary for this year?  Will it be treated as wages?  If either of those is true, the tax bite will be higher than $20K

No need to decide on SS right now, but opensocialsecurity.com could be useful as that approaches, assuming it is still available....

akoval23

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Re: Case Study: Wife's Mother
« Reply #8 on: November 23, 2020, 07:31:49 AM »
Thanks everyone for the replies so far! I will try to answer them all in order.

Dicey - I agree tutoring is the better option here! If you can believe it, she has mentioned before that she has always dreamed of working a part-time job at Target, though I think a year or so of doing that might quickly make her switch gears :)
 
Letj - You answered your own question. The one-time payment wouldn't account for her entire pension, but just a chunk of it, which is why the monthly pension payments would go down. But she envisions using that one-time payment to pay off her current mortgage with the goal of selling her house in four years to buy a condo. Am I off my rocker to think she shouldn't be putting more money into that house than is necessary to meet her monthly payments? I don't like the idea of her banking on selling it, since the housing market can be pretty unstable.

MrThatsDifferent - great question! Forgot to include that. We estimate it being between $125k-$150k.

AMandM - Indeed, it is a confusing situation and very much informed by emotions. The equity in her house is only around 18k, so (from what I understand) after all the fees associated with home selling, she wouldn't net much. The lump sum is tempting to her because she doesn't want *any* mortgage payment. The idea of having a mortgage payment while in her elder years is very scary to her. For reference, throughout her life she has been displaced from her home for various reasons, so she is afraid of that happening to her when she's older. Thus, she wants to own her home. I agree about selling her house now (or soon) and using the lump sum to purchase the condo asap, but I think she's concerned she will not have enough money to buy it outright, and that maybe one day she might not be able to make the mortgage payments. Fear is our worst enemy here.

Jaayse - The pension is in PA. You raise a lot of good points that I had not considered. I will look into that. I just don't can't think of any benefit as to her reasoning that she should pay off her current mortgage if her end goal is to sell her home in four years and buy a condo. Am I missing something? To me it just seems pointless and a little dangerous. Also, if it's not too much to ask, does your father use a specific tutoring site or resource, or does he just find clientele via his own methods and schedule Zoom sessions? I'd love more info on that.

MDM - She has a liquid savings of approximately $30k. I don't believe she has a 403b, IRA, HSA to speak of :( The 112k would not be on top of the $85k/year. The $112k would be received at the end of her teaching career, then her pension would kick in. So it would be $112k + future installments of $1800/month. And thank you for the SS resource!

A main question that still lingers in my mind is: does it make any sense at all for her to pay off her current home using the 112k payment if her end goal is to pay it off in 4 years and buy a condo (ideally, in full). I don't love the idea of dumping that super valuable lump sum into the somewhat unpredictable housing market. Her house is in ok shape and doesn't need any major repairs, but who knows how long it will sit on the market, and while it's sitting, something could break in the meantime. If I were her I would put the money in a secure risk-light investment, let it grow for however long she wants to stay in her current home, simultaneously continue to build equity and work part-time, and then eventually cash out and sell the house to buy the condo.

oldladystache

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Re: Case Study: Wife's Mother
« Reply #9 on: November 23, 2020, 07:45:15 AM »
Quote
Total owed on current house: $76,000
Equity in current house: $18,000
Market value of current house: $130,000

Something wrong here.

akoval23

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Re: Case Study: Wife's Mother
« Reply #10 on: November 23, 2020, 07:53:50 AM »
oldladystache - how so? Admittedly, I am a total novice with home buying/selling, but it is my understanding that when she bought her home, it was valued at $96,000, so the initial loan she took out was around that much. Since then, however, the housing market has done well and the value of her house has grown to be estimated as being worth $130,000. Again, I could be missing something.

Dicey

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Re: Case Study: Wife's Mother
« Reply #11 on: November 23, 2020, 07:57:10 AM »
Quote
Total owed on current house: $76,000
Equity in current house: $18,000
Market value of current house: $130,000

Something wrong here.
This + What interest rate is she currently paying? If she refi'd, she would amass equity faster so that when she does sell, she will have a bigger cushion for her down payment and selling costs.

I'm thinking with her limited social circle, she should look into a Senior Community when she moves. Bonus points if it's a new one. Everyone who moves in will be looking to make new friends, which is half the battle.

Blue Skies

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Re: Case Study: Wife's Mother
« Reply #12 on: November 23, 2020, 08:00:25 AM »
oldladystache - how so? Admittedly, I am a total novice with home buying/selling, but it is my understanding that when she bought her home, it was valued at $96,000, so the initial loan she took out was around that much. Since then, however, the housing market has done well and the value of her house has grown to be estimated as being worth $130,000. Again, I could be missing something.

If it is currently worth $130k and she only owes $76k, then when she sells she would get $54k (minus seller's fees).  So, her current equity is $54k.

akoval23

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Re: Case Study: Wife's Mother
« Reply #13 on: November 23, 2020, 09:38:10 AM »
Blue Skies - ah, thank you! That makes sense. I didn't realize equity also considered the market value of the house. I thought it only considered the money you had already personally invested in it.

Dicey - her interest rate is 4%. Would it still be worth it to refinance in that case? Seems like a pretty low rate to me.

yachi

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Re: Case Study: Wife's Mother
« Reply #14 on: November 23, 2020, 09:57:33 AM »
Are you sure her monthly expenses are accurate?  I ask because a) $19,200 per year is some good cheap living and b) her $85,000 per year income hasn't resulted in huge pile of saved up money.

If this is projecting newfound frugality, you need to make sure it's sustainable.  Did she spend just $1600 per month each of the last 12 months?

MDM

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Re: Case Study: Wife's Mother
« Reply #15 on: November 23, 2020, 10:02:46 AM »
MDM - She has a liquid savings of approximately $30k. I don't believe she has a 403b, IRA, HSA to speak of :( The 112k would not be on top of the $85k/year. The $112k would be received at the end of her teaching career, then her pension would kick in. So it would be $112k + future installments of $1800/month. And thank you for the SS resource!
If "the end of her teaching career" is a year in which she has earned $85K, then the $112K would come on top of the $85K for the purposes of her federal and state income tax return for that year.  Throw ~$197K into your tax estimation program of choice and the tax will likely be more than $30K.  If the $112K is treated as wages, the tax (including FICA) will be more than $35K.

If the $112K comes in a year with no full-time W-2 income, and is not treated as wages, the tax bite including PA state tax (don't know about PA city tax) would be closer to $25K.

Regardless of the pension choice, but especially if the lump sum will hit in a full-time pay year, she should strongly consider contributing the $26K-$29K allowed to her 403b.  Even more if she also has access to a 457b.  See How Much Salary Can You Defer? | Internal Revenue Service.

And yachi raises a good point about reconciling historical lack of saving....

Quote
A main question that still lingers in my mind is: does it make any sense at all for her to pay off her current home using the 112k payment if her end goal is to pay it off in 4 years and buy a condo (ideally, in full). I don't love the idea of dumping that super valuable lump sum into the somewhat unpredictable housing market. Her house is in ok shape and doesn't need any major repairs, but who knows how long it will sit on the market, and while it's sitting, something could break in the meantime. If I were her I would put the money in a secure risk-light investment, let it grow for however long she wants to stay in her current home, simultaneously continue to build equity and work part-time, and then eventually cash out and sell the house to buy the condo.
She would save a guaranteed 4%/yr on the mortgage balance.  For a short term investment, that's pretty good.

Dicey

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Re: Case Study: Wife's Mother
« Reply #16 on: November 23, 2020, 10:07:52 AM »
Dicey - her interest rate is 4%. Would it still be worth it to refinance in that case? Seems like a pretty low rate to me.
Hell yes! She should be able to get close to 2.5% now, if her credit is decent. That will drop her payment significantly.

Catbert

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Re: Case Study: Wife's Mother
« Reply #17 on: November 23, 2020, 11:29:32 AM »
Yet another option to explore...She can likely roll the 112K from her pension plan into an IRA.  If she can that would mean it's not a taxable event.  There would be a 10% penalty for any money she took out of the IRA before 59.5 as well as tax.  Probably not a good option if she's going to immediately use the money to pay off her house or buy another one.  But it would allow her to spread out distributions over a couple of years (or more) and lessen the taxes.  Taxes could be less even taking into account the 10% penalty.

 

akoval23

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Re: Case Study: Wife's Mother
« Reply #18 on: November 23, 2020, 05:36:40 PM »
@yachi - That is what she estimates her monthly expenditures to be once she retires. I believe she can hold to it. She doesn't spend much money and lives a pretty simple life. I should mention that she just recently got a significant pay raise last year due to her time at the school. She went from making around $55k-60k to approx $85k, so at that new income level she hasn't had much  time to build the savings, but has started to build a fair amount. I'm not sure what her spending was the last year or so, but you raise a GOOD point. I will clarify with her. I know a big reason for her historical lack of savings is because she is still paying off her own student loans in addition to the student loans of one of her daughters, though that may change soon...

@MDM - great point about the taxes. I will factor that in. Someone else mentioned storing it in a IRA temporarily. That might be a good call.  I will double check regarding if she has a 403b or a 457 available. Those are good points.

@Dicey - noted! Thank you!

@Catbert - That is a really good call. I didn't think about that, even though I'm somewhat familiar with the idea. I don't *think* she would need access to the money for 2 years so storing it away is a possibility. If she puts it into an IRA, would she be able to withdraw it all at once whenever she's ready to buy the condo? If so, I'd imagine she'd pay taxes on the total withdrawal, is that right?

Thanks again everyone for all your help! From the bottom of my heart, I really appreciate it.

alsoknownasDean

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Re: Case Study: Wife's Mother
« Reply #19 on: November 23, 2020, 06:11:51 PM »
If she needs to access the money within the next few years, then I'd lean towards a lower risk investment, especially at her age. What would happen if when she's ready to cash in, the market drops by 30%? Fine for younger folks who can wait, but she might not have the luxury of time.

I'd honestly start by paying off the mortgage on the house so that albatross is gone, along with any other debt. Then if she's happy to do relief teaching or whatever to keep some money going in until she can access a pension or SS...

Jaayse

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Re: Case Study: Wife's Mother
« Reply #20 on: November 23, 2020, 08:11:42 PM »
My dad uses tutor.com for his sessions.  He only tutors around 4 hours a week, and he mentioned something about being allowed to schedule up to 7 hours a week and being able to pick up hours if he wanted.  He said there was a lot of demand right now with so many people taking classes from home.  There is an application process that is pretty extensive, but it seems worth it and ensures quality.

Catbert

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Re: Case Study: Wife's Mother
« Reply #21 on: November 23, 2020, 09:02:37 PM »
Yes, she would have to pay taxes when it comes out of IRA.  Even if she only took it out over 2 years that would spread it over 2 tax years and keep down her tax rate.  Tax rates for singles ratchet up pretty quickly

Dicey

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Re: Case Study: Wife's Mother
« Reply #22 on: November 23, 2020, 10:06:00 PM »
If she needs to access the money within the next few years, then I'd lean towards a lower risk investment, especially at her age. What would happen if when she's ready to cash in, the market drops by 30%? Fine for younger folks who can wait, but she might not have the luxury of time.

I'd honestly start by paying off the mortgage on the house so that albatross is gone, along with any other debt. Then if she's happy to do relief teaching or whatever to keep some money going in until she can access a pension or SS...
Oh, FFS, she's only 57! Paying off the mortgage is not to her advantage! Do a re-fi to get the rate down, then let that sucker ride.

blingwrx

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Re: Case Study: Wife's Mother
« Reply #23 on: November 24, 2020, 04:09:26 PM »
Dicey - her interest rate is 4%. Would it still be worth it to refinance in that case? Seems like a pretty low rate to me.
Hell yes! She should be able to get close to 2.5% now, if her credit is decent. That will drop her payment significantly.

I would disagree on refinancing right now if she wanted to buy a condo and move soon. She wouldn't make back the closing cost on the refinancing unless she stayed like another 5 years or more.

I would say sell the house now. Use the equity for a 20% down payment on the condo, get the fantastic historic low rate of around 2.5%. If there's anything left over after that save it and invest it.

She needs to understand the interest rates are at historical lows right now so while there is peace of mind in owning the house or condo out right, borrowing money at 2.5% interest is like free money. In most cases you can do 4% or better investing it.

At the end of the day it's about her monthly income meeting her monthly expenses and regardless if she still has a mortgage these expenses will be met if planned properly.

I would take the higher monthly pension over the lump sum since it looks like she has enough home equity to cover buying a condo and will still have money left over, this is also assuming she's in good enough health where there's a good chance she will live long enough to reap the benefits of the higher monthly pension payments.

Villanelle

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Re: Case Study: Wife's Mother
« Reply #24 on: November 24, 2020, 05:27:00 PM »
I see the explanation that Target is her dream job, but it seems to me like she might be happier with more money and a non-dream (but not horribly) job.  A job tutoring gets her out of her current horrible situation.  That seems like a huge upgrade.  Also, I know many families know are struggling with distance learning.  They are hiring teachers to manage their kids or a pod of kids.  I don't know if she's thinking about quitting now or sticking out the year, but if she does it now, she might be able to pick up that kind of work.  I read an article that said some families are actually paying more than teachers make doing public school teaching. 

It may not be the dream, but if doing that and/or tutoring for a year or two buys her comfort and a lack of financials stress, it may be worth it.  Target will always be there.


Paper Chaser

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Re: Case Study: Wife's Mother
« Reply #25 on: November 25, 2020, 03:45:09 AM »
What's the plan for healthcare after she quits teaching? A lot of retailers that offer healthcare coverage require full time hours to qualify for that option, and tutoring obviously has no employer sponsored healthcare option. So a part time job or "side hustle" kind of work might have some expensive gaps that need to be filled. If you have to work full time to keep healthcare coverage until Medicare kicks in, then it might make sense to stick it out teaching (and making $80k) vs a retail gig that pays $25k/yr.

On another note, if I'm understanding the situation, she currently has $30k cash, and ~$50k equity in the current home. Her income is a healthy $80k/yr. I'd probably look into buying the condo now while she could qualify for a really low interest rate and have no "debt to income" problems for a mortgage underwriter to worry about.
A $150k condo - $50k equity from current place - $10k from cash savings is a 90k mortgage (about what she's currently got), but the lower interest rate would mean a lower monthly housing cost than she's currently paying. She'd be living in the condo she wants, for less than the house she's currently in. She'd have $20k cash left over for an emergency fund, an $80k income for as long as she's working, and a lump sum that could be used to pay off any remaining mortgage debt upon retirement with 5 figures left over to bolster cash reserves or invest, plus the pension income each month.

akoval23

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Re: Case Study: Wife's Mother
« Reply #26 on: November 25, 2020, 08:02:36 PM »
Thank you everyone for your thoughtful replies! I really appreciate them and certainly have a lot to think about going forward, but I think I have what I need to make a solid, informed decision.

@alsoknownasDean - yea definitely the lower risk investments are the way to go if I go that way.

@Jaayse - that's really great to know about that resource. Thanks so much for sharing!

@Catbert - That's good to know. I think it's definitely possible for her to stagger the withdraws if she decides to go that route.

@Dicey - yea she's young. The only problem with that is that I'm not sure if she should pay down a mortgage on a house she's planning to selling 4 years. I just don't see the point really. Someone below argues against refinancing and mentions not being able to recoup enough in the four years or so to cover the closing costs of the refinancing, which makes sense to me.

@blingwrx - I think selling the house for the equity and getting the 2.5% interest on the condo makes the most sense to me, personally. I had never considered the free money aspect, but that makes a TON of sense. Even if we were to invest the 112k (or whatever it comes to post tax), getting 4% on that seems reasonable. I like the idea of the higher monthly pension as well, though it may be an uphill battle convincing her to go that route. Ultimately, I can't push her too hard, but I'll try to do my best to be compassionate and firm.

@Villanelle - I think tutoring is the best way to go, ESPECIALLY with the pandemic situation going on right now. Even without, I don't think she's considered that she can substitute teach AND tutor online, which would give her a lot of good ways to continue to make money.

@Paper Chaser - so her employer will continue to provide healthcare until the age of 65. She will then go on Medicare, which should cost her approx. $300/month, according to her. I may be wrong with the $30k in cash, but she *should* have that much by the time she retires in June. That plus the $50k in equity is more than enough to put a decent down payment on the condo. I am all for that.

@Finances_With_Purpose - I think her numbers don't quite add up because she *just* got a pay bump at the end of last year. The way her these teacher positions work is you get what is called a "bump-step" every X years, which amounts to a large pay raise. Since then, she has used some of her additional income to "catch up" on some stuff - home repairs, vet bills, student loans, etc. But she has been able to accrue some good savings as well. I don't know what her spending was like previously, but I get the sense it was closer to 'paycheck to paycheck' than after the "bump-step" $20k pay raise went into effect. I do understand your reservations, though, and I will confirm her spending before giving her further advice.

You raise many good points regarding taking the lump sum, investing it conservatively, and striking while the iron is hot on the housing market. Unfortunately, her three daughters are pretty strapped as well. One lives a modest life in NYC, the other is currently a student at Harvard Law and buried in student loan debt, and her last daughter, my wife, is currently saving to buy a home with her husband :) Thanks for all your thoughtful advice!

Dicey

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Re: Case Study: Wife's Mother
« Reply #27 on: November 26, 2020, 01:39:52 AM »
Dicey - her interest rate is 4%. Would it still be worth it to refinance in that case? Seems like a pretty low rate to me.
Hell yes! She should be able to get close to 2.5% now, if her credit is decent. That will drop her payment significantly.
I would disagree on refinancing right now if she wanted to buy a condo and move soon. She wouldn't make back the closing cost on the refinancing unless she stayed like another 5 years or more.
You have no idea what the closing costs would be, so how can you predict the time it would take to recoup them? There are plenty of real world, real time examples of mustachians getting low- or on-cost re-fis, right here on this very forum.

Metalcat

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Re: Case Study: Wife's Mother
« Reply #28 on: November 27, 2020, 06:31:27 AM »
This is a case where I think you should refer her to a professional to help her figure out what's optimal for her situation.

You're obviously closer to the beginning of your learning about these kinds of things, and it's one thing to ask for options from us, but it's another thing to fully evaluate a situation objectively so that you can actually ask the right questions.

We can explain equity, refinancing, investment options, pension funds, etc, but none of it will really make your ability to give her advice particularly useful if no one involved really understands the real situation.

There's a lot wrong with the numbers you've presented, that's not your fault, she's either not understanding her own numbers, or she's obfuscating them purposely. Regardless, the only responsible advice she can get is from someone she's transparent with.

As others have said, there's no way her income has been what it's been and her spending as low as she thinks, and the only savings she has to show for it over decades is 30K and an 18K dent in her mortgage. Did she refinance? Did she own a home before this? In either case, where did the decades of equity go?

How did she still have personal student loans at 50? What was she spending her salary on if not to paying down her decades old student loan?

Where the hell did all of the money go? Because even if she wasn't always making 85K, if she's been working as a full time teacher, she has made a fair amount of money in that time and if she doesn't have much, then she spent it.

People can seem like they're not spending much and still be living on 60+K per year. Some realistic accounting needs to be done here before any even remotely responsible advice can be given.

Since it's really not your place to hold her accountable, I strongly recommend that you indicate that this is beyond your skill set and help her find a qualified professional to go over everything in detail.

She has some huge decisions to make, the most loving thing you can do for her is to help her find the support she needs to make them.

former player

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Re: Case Study: Wife's Mother
« Reply #29 on: November 27, 2020, 06:56:39 AM »
While I agree that professional help is a good idea and that OP isn't in a position to give definitive advice, a woman of 57 with children is highly likely to have spent a significant number of years with limited earnings due to child rearing, may well have gone to college later in life (for instance after becoming single through widowhood or divorce or if always single after the lessening of child rearing duties) and if entering the teaching profession later than usual might well be in line for big promotions in her late 50s.  From that point of view her current financial situation is not at all unlikely.

Metalcat

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Re: Case Study: Wife's Mother
« Reply #30 on: November 27, 2020, 07:00:04 AM »
While I agree that professional help is a good idea and that OP isn't in a position to give definitive advice, a woman of 57 with children is highly likely to have spent a significant number of years with limited earnings due to child rearing, may well have gone to college later in life (for instance after becoming single through widowhood or divorce or if always single after the lessening of child rearing duties) and if entering the teaching profession later than usual might well be in line for big promotions in her late 50s.  From that point of view her current financial situation is not at all unlikely.

Yeah, anything is possible. We don't have nearly enough accurate information to assess that though.

Either money has been spent, or it wasn't earned in the first place. Whatever the case, a HUGE puzzle piece is missing.

CrustyBadger

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Re: Case Study: Wife's Mother
« Reply #31 on: November 27, 2020, 07:08:43 AM »
@akoval23

Your MIL seems to me to have a case of burnout and might not be thinking clearly right now.

I'm a teacher, and teaching during COVID has been extremely stressful for many reasons.  So many of us teachers (especially older ones) have been talking with each other about how what is being asked of us is unsustainable.  This is true whether we are doing full distance learning, in person with masks etc (or not!) or some kind of hybrid.

But things should return much more to normal by next September.   Your MIL isn't talking of leaving work right now, she wants to finish up the year and then retire?   So she will have gotten through the worst of the 2020-2021 year in that case.   Retiring at the end of this year won't get her out of anything.

It seems to me your MIL is doing a bit of fantasy thinking.  Work is tough right now; she contemplates leaving her job but feels she wouldn't be able to cover the mortgage.  You say she has trauma from losing housing, so she's daydreaming about retiring early as so many people do.   She's looking at that $112,000 pension lump sum payment and realizing it could be applied to her mortgage RIGHT AWAY and relieve that fear of being homeless.   That's what is driving her. 

But it doesn't make sense to me.  If she gets through to the spring she will have worked through the worst of COVID.  Next year will be much more normal.  She's making decent money compared with her salary in early years for sure.   If she can hold off two - three more years at this higher salary (without needing to pay off loans anymore) and prove to herself that she really only has $1600 a month in expenses, she can build up some good emergency savings as well as increase her pension and eventual Social Security benefits.  She could even explore working at Target during the summer to see if that's truly how she wants to money in her retirement from school.

There may also be the option of working closer to where she eventually wants to buy a condo -- if that is a different school district.  Sometimes switching school districts or schools is a good way for a teacher to get a fresh start and get away from the crazy demands of higher ups.

Her finances don't look solid to me for her to retire.  Mostly I am very skeptical that she really is living off of what she thinks she needs.

 

Wow, a phone plan for fifteen bucks!