Investing after retirement - Helping my aging parents

[hpcaseyy]

General info: My parents are both in their late 60's and living off of pensions. They retired early because of health issues, and my father ended up disabled. They still have quite a bit left on the mortgage and some other debts that my father incurred prior to retirement. They're able to cover their bills and have been working towards paying off the remaining debt.

My concern is that they don't have any savings for emergencies or for long-term care in the future. My father may not be around for much longer as his health has been declining, so it may only be for my mother. I am trying to prepare for the possibility that she will need to pay for a caretaker within the next 10 years. I've tried to get them on board with saving for this, but my mother is more focused on paying off their debt and my dad has very little self control over his spending (unfortunately he is a lost cause).

My question: Is there any time of investment account that makes sense for this situation? If I save/invest myself, would a brokerage account make sense?

I'm so confused by this situation, so any advice would be greatly appreciated.

[CNM]

I would probably approach it like, "I am willing to pay X/mo. for my parents' needs."

And then invest/save as you would regularly-- as in, not a separate account- but include the anticipated spending in your budget projections. 

[4tify]

I don’t know if this is a “good” strategy or not but I’m in a similar situation. I feel like my mother’s debts are between her and her creditors. And when it comes to the latter you’d be surprised how little power they have once you don’t care about credit scores and they can’t collect anything when there’s nothing extra. I would ratchet down repayments to the bare minimum to conserve resources. Once they die the debts are wiped off the books so you don’t have to worry about that. Any way to take out a HELOC on their home?

My mother is an out of control spender too and I have taken control of her bank account and shut down her debit card when she had spent too much shopping online. That ruined her credit but also solved the problem of acquiring more debt.

Do you have a POA on them? Very important for if/when you need to make decisions.

As for investing it’s a challenge. I have been slowly adding to a separate “in case” fund in VTMFX. She doesn’t know about this btw. Its actually done quite well and if I never use the funds they will revert to my nest egg when mom is gone. If she needs the money for hearing aids or LTC etc that’s where I’ll pull from. It’s impossible to know how much she’ll need so I just keep slowing adding every month like I did while building my stash. I figure I’ll max out around 50k if it gets to that. And if there’s a downturn I’ll pull from my cash reserve just as I would in RE.

Hope that helps!

[former player]

If your parents are covering their bills and paying off debt on their pensions then they are to be congratulated for that, particularly as illness and disability got in the way of working.

I understand your concern about lack of money for emergencies.  One way to look at it might be that by paying off debt, and presumably having a reasonable credit score as a result, your parents will have room to borrow if they need to in an emergency.

I think expecting them to be able to pay for long-term care is probably a pipe dream, and that if they do need long term care then it will have to be paid for out of public resources, as it is for a lot of people.

On the mortgage, is there any possibility of your parents downsizing their home?  That might help reduce or get rid of the mortgage debt and give them some where to age in place: limited maintenance, limited gardening, easy access to facilities in case they stop driving, and so on, would be reasons to move that might have the incidental effect of dealing with the mortgage debt.

If you are saving with an eye to helping your parents out that doesn't nessarily need a different investment account but it might mean having slightly more of your assets available in cash or to cash out than you might just on your own account.

[reeshau]

Do you know if your parents pensions are for their joint lives, or single?  If not joint, then they also need to be prepared for the income shock when your father passes and his pension ends.  That could be a very good reason to address the debts now.

An emergency fund is a very good idea.  They are homeowners; what is the condition of their house?  How old is the roof, and the major mechanical items?  That's another thing to be prepared for, or that might spur a discussion about downsizing.

If they really have nothing, then you might want to study up on their state's Medicaid program and qualification.  It's not pleasant, but It's even less pleasant when done in real time, as the need occurs.  The general guidance on LTC insurance is that it's applicable for wealth between $500k and $2.5M.  Above that, you can effectively self-insure.  Below that, and either the premiums or the care would eat up everything.  (I just use this as an example.  With their age and your father's condition, you probably wouldn't find any kind of acceptable LTC coverage)

My Mom went through a school of hard knocks learning on this with her sister, then with my stepdad.

[hpcaseyy]

I don’t know if this is a “good” strategy or not but I’m in a similar situation. I feel like my mother’s debts are between her and her creditors. And when it comes to the latter you’d be surprised how little power they have once you don’t care about credit scores and they can’t collect anything when there’s nothing extra. I would ratchet down repayments to the bare minimum to conserve resources. Once they die the debts are wiped off the books so you don’t have to worry about that. Any way to take out a HELOC on their home?

My mother is an out of control spender too and I have taken control of her bank account and shut down her debit card when she had spent too much shopping online. That ruined her credit but also solved the problem of acquiring more debt.

Do you have a POA on them? Very important for if/when you need to make decisions.

As for investing it’s a challenge. I have been slowly adding to a separate “in case” fund in VTMFX. She doesn’t know about this btw. Its actually done quite well and if I never use the funds they will revert to my nest egg when mom is gone. If she needs the money for hearing aids or LTC etc that’s where I’ll pull from. It’s impossible to know how much she’ll need so I just keep slowing adding every month like I did while building my stash. I figure I’ll max out around 50k if it gets to that. And if there’s a downturn I’ll pull from my cash reserve just as I would in RE.

Hope that helps!

I don't have a POA on them (yet). My mom is still in decent health, but I do see things declining soon, so I'm trying to make preparations before there's a real emergency. Do you mind if I ask how you setup your separate "in case" fund? Is it a taxable account, or did you add money to a retirement account or savings account? I'm definitely going to start doing this, but I don't know what kind of account would enable me to access the funds if need be.

I started a HYSA for her a couple of years ago, and I setup automatic contributions of $100, but she can't access the account without me, and she doesn't know what the balance is. I also can't access the account without her, so it works out. The money is out of sight and out of mind, but it's not growing very much. 

[hpcaseyy]

Do you know if your parents pensions are for their joint lives, or single?  If not joint, then they also need to be prepared for the income shock when your father passes and his pension ends.  That could be a very good reason to address the debts now.

An emergency fund is a very good idea.  They are homeowners; what is the condition of their house?  How old is the roof, and the major mechanical items?  That's another thing to be prepared for, or that might spur a discussion about downsizing.

If they really have nothing, then you might want to study up on their state's Medicaid program and qualification.  It's not pleasant, but It's even less pleasant when done in real time, as the need occurs.  The general guidance on LTC insurance is that it's applicable for wealth between $500k and $2.5M.  Above that, you can effectively self-insure.  Below that, and either the premiums or the care would eat up everything.  (I just use this as an example.  With their age and your father's condition, you probably wouldn't find any kind of acceptable LTC coverage)

My Mom went through a school of hard knocks learning on this with her sister, then with my stepdad.

1. Their pensions are not joint, but my mom is listed as his beneficiary if he passes. I didn't realize that there was the possibility of losing that if something happens to him. I'm definitely going to look into this.

2. The house is in decent condition, but they do spend quite a bit on maintenance, which I can't control. They don't listen to me when I try to reason with them. They are currently in the process of getting new flooring, and they don't understand the importance of paying off the mortgage first. I just found out that they took out a 2nd on the house, so they've been paying that off as well. I don't think I'll be able to convince them to sell the house at this point. I sense that they don't see any alternative to their housing situation, so they're trying to do some updates when possible. It's very frustrating.

3. I'm definitely going to look into Medicaid here in CA. I suspect that they'd eventually need to spend down their assets in order to qualify here in CA. I'll just have to save on my own just in case it's not enough to cover any care they may need in the future.

Thanks for all of your advice!

[4tify]

I don’t know if this is a “good” strategy or not but I’m in a similar situation. I feel like my mother’s debts are between her and her creditors. And when it comes to the latter you’d be surprised how little power they have once you don’t care about credit scores and they can’t collect anything when there’s nothing extra. I would ratchet down repayments to the bare minimum to conserve resources. Once they die the debts are wiped off the books so you don’t have to worry about that. Any way to take out a HELOC on their home?

My mother is an out of control spender too and I have taken control of her bank account and shut down her debit card when she had spent too much shopping online. That ruined her credit but also solved the problem of acquiring more debt.

Do you have a POA on them? Very important for if/when you need to make decisions.

As for investing it’s a challenge. I have been slowly adding to a separate “in case” fund in VTMFX. She doesn’t know about this btw. Its actually done quite well and if I never use the funds they will revert to my nest egg when mom is gone. If she needs the money for hearing aids or LTC etc that’s where I’ll pull from. It’s impossible to know how much she’ll need so I just keep slowing adding every month like I did while building my stash. I figure I’ll max out around 50k if it gets to that. And if there’s a downturn I’ll pull from my cash reserve just as I would in RE.

Hope that helps!

I don't have a POA on them (yet). My mom is still in decent health, but I do see things declining soon, so I'm trying to make preparations before there's a real emergency. Do you mind if I ask how you setup your separate "in case" fund? Is it a taxable account, or did you add money to a retirement account or savings account? I'm definitely going to start doing this, but I don't know what kind of account would enable me to access the funds if need be.

I started a HYSA for her a couple of years ago, and I setup automatic contributions of $100, but she can't access the account without me, and she doesn't know what the balance is. I also can't access the account without her, so it works out. The money is out of sight and out of mind, but it's not growing very much.

Hi sorry have the been on here for awhile. As I said above my “in case” fund is in VTMFX. Its in a taxable account and is a relatively tax efficient fund. It’s completely liquid and I’m the sole owner so I have control over how (or whether) it’s spent.