Should my mom retire?

[mrmoolaman]

Here's the details:

My parents are not MMM followers (yet)!

My dad is retired from a government job, monthly pension: $2600 after tax. He also receives an additional disability payment of $1000 after tax for next 9 years (until he's 65). (So yes, he's early retired!)

My mom works three days per week and makes $3000 per month after tax. Some bonuses as well but nothing to count on.

They also still receive rent payments from two children living at home. $500 dollars total. (Don't say to increase this as this is my rent payment :))

Total monthly income: $7100. This would drop to $3100 if mom retired. If, however, my dad dies then the disability payment ends and the pension is cut in half.

Current assets:
House worth 850k (92k mortgage balance)
TFSA: 95k
RRSP: 45.6k

Liabilities:
House mortgage: 92k @ 3.4% with 26 years remaining. Monthly payment is $376

Expenses (roughly, they're bad at budgeting):
Water and garbage: $41/month
House maintenance: $75/month (not really enough)
Truck maintenance: $50/month
Truck Insurance: $200/month
Truck Gas: $100/month
Entertainment: $100/month (never enough)
Clothes: $50/month
Gifts: $75/month
Car Gas: $195/month
Car repairs: $292/month
Car Insurance: $162/month
Mom work clothes: $108/month
Property tax: $231/month
Timeshare Expense: $75/month
Holidays: $75/month (never enough)
Cell Phones: $90/month
Donations: $600/month
Groceries: $700/month
Smoking: $400/month (Dad's being trying to quit for as long as I can remember)
Life insurance: $200/month
Electric: $126/month
Gas: $52/month
Cable/Internet: $160/month
House insurance: $85/month

Total: $5700/month (This is lower than income but somehow the money doesn't pile up too drastically in the chequing account.)

They also contribute $1100 monthly to their TFSA accounts.

For me looking at it, I feel like the house feels like a big asset, but it can't be relied upon in retirement because it's just a place to live.
I think they need a fresh set of eyes to take a look at it and tell them where to cut the crap!!

In short, can my mom retire, or if not, what kind of game plan do they need to enact to make it happen.

Thanks!

[MrThatsDifferent]

Can she retire? Sure, anyone can. Should she? Doesn’t seem like it unless they plan on drastically changing their lives. Cigarettes and charity alone is $1000/month. $700 for groceries for 2 people or are the two kids (you included) not contributing to the other bills, just rent? Your parents aren’t in the best place financially at all, so yeah, the two at home should help out more. Still have no idea how they would make it without the Mom’s job, or if the Dad passes from all the smoking or after he’s 65 when he loses so money or when the kids move out?

I’ve learned the power of forecasting so help them design a budget that takes the income without the Mom working into consideration and after 65. It’s good to see it written out and then decide what should be modified to fit.

[Laserjet3051]

Release the equity in the house by downsizing and use it to either buy an annuity (SPIA) or invest it conservatively. That could solve the problem without having to cut down on cigarettes and other lifestyle excesses..........This is one easy solution to the problem.

[Cassie]

Totally agree with Laser.

[ysette9]

They are spending an incredible amount on their vehicles between gas and maintenance and insurance and and and. Do they really need such money sucks? If your mother retired could they downsize to one reasonable car instead of two expensive ones?

Is moving and downsizing an option they would consider? Basically they have a lot of equity and otherwise have very little. I can see here why people call a mortgage “forced savings”.

[myrrh]

So I think with the given budget your mom cannot afford to retire, especially given their low amount of savings, unless they are willing to downsize and move. That of course would mean the kids would need to find alternate living places, and Mom may want kids nearby more than retirement. I also think that they need to keep the life insurance given that without it, either parent will be in a very bad place in the event one passes.

I agree with Ysette, between the truck and car they're spending 1000 per month on gas, insurance, and maintenance. Have they gotten a quote on car insurance lately? I pay less than $100 per month for insurance on two vehicles, although I realize I'm in a completely different area. Also the maintenance seems like a LOT, maybe it would be worth it to get more reliable cars?

I didn't see a category for medical, do they have prescriptions/copays/eye doc/glasses/dental stuff that isn't covered?

And this is probably minor in the big scheme of things, but how many work outfits does your mom really need? Or does this category include haircare and beauty as well?

Do they actually use the timeshare, since there is a vacation category there too?

If you know the phone provider and how much data they use we can probably suggest cheaper alternatives for the cell phones.

I'm not gonna comment on the smoking thing except that the thought of $4800 going literally up in smoke every year makes me sick to my stomach.