Help with parents retirement plan

[frugledoc]

In anticipation of being asked for help by my parents.

Both 70, married to each other.  Very antimustachian.
Her pension - awful annuity paying 3k per year for 7 more years. Somehow no entitlement to state pension.
His pension - 18k per year mix of state pension and single person life annuity.
Other assets, property 400-500
Cash 40k
Cars 15k

Expenses 80k per year mostly on luxuries,travel, golf, drink, food, entertainment

Stated goal: live it up till age of 77 then survive on rice and beans till death.

Any ideas?

[former player]

Income £21k, expenditure £80k? My only ideas are -

1. Do not commingle your finances with theirs.  Lend no money, provide no advice: they will end up bankrupt or convicted of fraud, or both, and will take you down with them if you let them.

2.  Disown them.  Or emigrate, perhaps to Australia.

[frugledoc]

Income £21k, expenditure £80k? My only ideas are -

1. Do not commingle your finances with theirs.  Lend no money, provide no advice: they will end up bankrupt or convicted of fraud, or both, and will take you down with them if you let them.

2.  Disown them.  Or emigrate, perhaps to Australia.

Lol, agree with you.  I love them but they are deliberately depriving themselves and will need to take personal responsibility.

They have been openly critical of my family’s choice to save, invest and live modestly.

[londonbanker]

Good luck with that. Unfortunately we don’t chose our parents, and unless they were abusive and never gave you any love as a child, I think it is virtually impossible to let them finish their lives in utter misery and poverty.
I have the feeling they will need you to help them in retirement. I’d start having a brutal conversation about imagining their own life on rice and beans from age 77... and get them used to the thought of living sub 30k a year...

[frugledoc]

Another thing they did was sell their business and associated property to my sister and BIL for next to nothing (then spent the cash over the next few years).  Sis and BIL are doing very well financially from business so I will be expecting them to be first in line for any bail outs given they have been the sole beneficiaries of my parents assets.

[londonbanker]

Another thing they did was sell their business and associated property to my sister and BIL for next to nothing (then spent the cash over the next few years).  Sis and BIL are doing very well financially from business so I will be expecting them to be first in line for any bail outs given they have been the sole beneficiaries of my parents assets.

Not my place to comment on what is fair or not, but it might be a blessing in disguise, as this gift to your sis and bil came with a linked responsibility to fund a £59k annuity (80-21) to your parents... or it might be a source of tension between you and your sis if they ever asked you for participate in funding your parents lifestyle eventually.
I do hope you haven’t shared your desire to FIRE or made it look like you were in a position to help financially...

[former player]

I do hope you haven’t shared your desire to FIRE or made it look like you were in a position to help financially...

Yes!  There's your answer: time for the big confession.  All these years while you have been preaching spending modestly and investing for the future you have in reality been living modestly because of your out of control gambling habit.  You've been a total hypocrite, you apologise profusely for misleading them all this time, and you have less than nothing left to help them out with.

[PhilB]

Dignitas?

[frugledoc]

I do hope you haven’t shared your desire to FIRE or made it look like you were in a position to help financially...

Yes!  There's your answer: time for the big confession.  All these years while you have been preaching spending modestly and investing for the future you have in reality been living modestly because of your out of control gambling habit.  You've been a total hypocrite, you apologise profusely for misleading them all this time, and you have less than nothing left to help them out with.

Thanks will remember to use this!

They probably know I’m well off but would be very surprised if they ever found out the true figure. It will be a closely guarded secret.

Sister and BIL are mega spenders too (brand new Volvo sc90, luxury holidays, Michelin starred restaurants, aspire to send 2 young kids to private secondary school) so even though their wealth comes from my parents generosity I’ve no idea how they’ll feel about funding them.

[vand]

There's nothing you can do from an investment/allocation perspective that is going to shift the needle more than an millimetre or two.

The big gains are going to be educating them about their unsustainable level of spending. Even cutting down to £50k makes a big difference to how long their money will last.

The house is the obvious emergency fund. Is this intended to be passed onto your or your sis? I can easily see them borrowing against it in future.

[frugledoc]

There's nothing you can do from an investment/allocation perspective that is going to shift the needle more than an millimetre or two.

The big gains are going to be educating them about their unsustainable level of spending. Even cutting down to £50k makes a big difference to how long their money will last.

The house is the obvious emergency fund. Is this intended to be passed onto your or your sis? I can easily see them borrowing against it in future.

I think my parents are slightly deluded and think there will be an inheritance but I agree that the house will need to be remortgaged/sold in the near future as they are still intent on YOLO.

Any advice on how to make sure they don’t get ripped off if remortgaging the house in their 70s.  I think there are a few financial products that do this now.

[never give up]

Sorry you’re having to deal with something like this frugledoc. Could you put a simple table together showing how quickly they will burn through their cash? Maybe sometimes something visual helps a difficult subject sink in. Even half their expenditure seems spendy, but would at least slow the tide.

I would make it clear you are not in a position to bail them out.

Good luck.

[vand]

I don't really understand the original sums..

80k/year expenses

40k cash
21k/year income

400k-500k home value - so are they already borrowing against this? If so then God help them if we have a property crash which leaves them with negative equity, huge debt and minimal income.

Unfortunately they are in the position which many retirees find themselves, with their home being by far their biggest asset. The housing market has been the golden egg that has bailed out generations of homeowners in the UK for decades, but this will not continue forever.

[frugledoc]

They had around 200k in cash but have spent it over the last few years on luxuries

[shelivesthedream]

1. Read "Playing with FIRE gets burned' in the journal section
2. Write a plan NOW for what you will and won't do for them that does not involve sending them ANY cash. For example, will have rice and beans groceries delivered weekly. Will let them move in. Will directly rent them studio flat. Will help them fill out forms for state/charitable help. Will drive them around when their car gets repossessed. Will buy them " new" car. Will Not buy them a second car when they sell the first one to go to Ibiza.

[sea_saw]

Haha OP you must feel like the definition of 'thanks, I hate it' whenever anything to do with your parents' lives comes up.

I find stories like this so fascinating. Like how is what they are doing even POSSIBLE. How can people be so determinedly impervious to reality.

If they're so upfront that their goal is to live it up until they totally run out of money at 77, I'd probably try to conversationally discuss what they think their post 77 life will look like to try to get them to articulate that in detail too.

Do you think it's sincerely deluded or are they on some level playing a game of brinksmanship with their kids?

Just. So. Boggling.

[frugledoc]

Haha OP you must feel like the definition of 'thanks, I hate it' whenever anything to do with your parents' lives comes up.

I find stories like this so fascinating. Like how is what they are doing even POSSIBLE. How can people be so determinedly impervious to reality.

If they're so upfront that their goal is to live it up until they totally run out of money at 77, I'd probably try to conversationally discuss what they think their post 77 life will look like to try to get them to articulate that in detail too.

Do you think it's sincerely deluded or are they on some level playing a game of brinksmanship with their kids?

Just. So. Boggling.

I tried to gently discuss it with my mum again and she tried to come up with some philosophical BS comment like “life flows like the sea”.

I just explained that once the money is gone it ain’t flowing back given they don’t have a job.

Also, a somewhat disrespectful comment made by my BIL (who is rich after taking over their business for next to nothing (annual income > outright purchase price of property) made me think him and sister might not be open to bailing them out either

[never give up]

I really feel for you frugledoc. I think that is a very difficult situation to have to deal with. I wish I had a magical solution for you. I’m afraid all I can offer is a word of support.

[Zamboni]

^^Following to second the plan to emigrate, perhaps to Australia.

Also, it seems like you've done your part to disabuse them of any notion that you will fund their retirement. Now resolve to be firm with your boundaries.

They are adults who continue to make their own bad choices. I'm sure this is at least partly why your BIL is hinting that they will be keeping financial boundaries with your parents as well.

[frugledoc]

My job makes it very easy to relocate to australasia, although New Zealand is our preference.  Obviously I wouldn’t do this just to get away from my parents.  My wife and I lived in NZ 10 years ago long before we had kids and always miss it.

It’s like Scotland without the shit weather

[sea_saw]

I tried to gently discuss it with my mum again and she tried to come up with some philosophical BS comment like “life flows like the sea”.

Oh dear.

I find it can really clarify things if you can get people to articulate themselves further, even when it's obvious that's what they're trying to avoid (especially then, really). Again, speaking for myself only, but the way I'd go about it is by finding a way to build on what they said (rather than shutting it down) that nevertheless moves the conversation towards specifics. Like, to that 'life flows' comment, you could say 'that's very true. Help me understand what you mean by it though, are you saying you think more money will flow your way in time? Or that you think that in five years you'll be content to live on a budget that right now you would hate?'.

I find this works better than pushing back directly. Also, the lure of agreeing and disagreeing with your suggestions can help people take a step away from pure platitudes, which clearly come from just not wanting to think about it too much.

Realistically, you're not going to be able to drastically change their financial course by chatting to them about it. But a looming crisis like this, I wouldn't be able to just shut up about. So I'd just keep mostly nudging, with occasional more srs tough talks, and plenty of private disaster prep!