Author Topic: Question about my Mother's retirement  (Read 635 times)

Sand Dreamer

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Question about my Mother's retirement
« on: April 12, 2021, 06:46:07 PM »
I am laying out the scenario the best I can with the info I have and looking for some advice to give my mom/parents.

My parents are both retired and have no debt. My mom has a pension and ss and my dad also receives ssi and they are fine with the income this provides them.  My question is this, my mother forgot about a 2nd pension she was entitled to from her very first job until and they contacted her.  She has the option of taking a full payout or monthly payments starting in May.  She is decided on taking the full buyout which she is set on that part with no willingness to change her mind on that.  What would be the best course of action in your opinion for her?  Roll it into her 401k?  Open an IRA?  She is very concerned about the market and doesn't really trust either of those options and wants to just take a cash buyout and put it in a CD.  She is set on not using this money saying she wants to leave it for me(even as I have argued that she and my father should use it and do something nice for themselves). She will have none of that discussion.  So I suppose I'm just looking for advice and ideas that would prevent the most tax implications and make her feel safest with the money.  I am also very willing to hear ideas of other options she could or should consider.  Really just anything so that I can help lead her in the best direction.  Not sure if it matters, but the sum she would be receiving is between 60-70k.  I appreciate all input.

ixtap

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Re: Question about my Mother's retirement
« Reply #1 on: April 12, 2021, 06:52:05 PM »
She can put it in a CD in an IRA account, but she will have RMD's at some point, so there will be tax implications then.

RWD

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Re: Question about my Mother's retirement
« Reply #2 on: April 12, 2021, 06:54:49 PM »
She can put it in a CD in an IRA account, but she will have RMD's at some point, so there will be tax implications then.
You beat me to it. Taxes on RMDs should be much more favorable than paying taxes all at once up front.

draco44

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Re: Question about my Mother's retirement
« Reply #3 on: April 12, 2021, 09:40:58 PM »
A CD IRA works.

Can she live on her first pension alone? It is ultimately her money, so do remember that, but the answer to this question would inform how much pressure I'd put on a relative about something like this.

One very nice thing about having her want to save rather than spend the money is that if she wants to deposit it even in a regular savings account for now but agrees to a different investment vehicle down the road, say a year from now when having the money seems like less of a big deal, the money should still be there to invest differently if desired.

cool7hand

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Re: Question about my Mother's retirement
« Reply #4 on: April 13, 2021, 03:32:23 AM »
Between the lines, it sounds like your mom might like to pass on this lump sum to her heirs. Given the concern about RMDs, you might consider talking to an elder law attorney with experience in her state's law as well about Miller Trusts.

rab-bit

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Re: Question about my Mother's retirement
« Reply #5 on: April 13, 2021, 04:36:48 AM »
Treasury I-bonds might be a good option for her because they are super-safe and have a number of other advantages. The I-bond fixed rate is 0% right now, but that is that rate above inflation (CPI-U) so they are guaranteed to maintain purchasing power relative to the CPI-U and they are also tax-deferred. The purchase limit is $10K per year per social security number so if she and your father each purchase $10K per year they could buy $60-70K in I-bonds over 3-4 years (they could leave the money in CDs in the meantime). You can go to treasurydirect.gov to get more information.
« Last Edit: April 13, 2021, 04:40:56 AM by rab-bit »

Sand Dreamer

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Re: Question about my Mother's retirement
« Reply #6 on: April 13, 2021, 05:03:02 AM »
Thanks everyone for such detailed and helpful answers.  I definitely don't want to pressure her into doing anything she doesn't feel comfortable with.  I lurk on this site pretty often and know there are a lot of very well versed individuals on matters such as this.  I think the IRA CD sounds like the best option for her as far as her feeling secure with where the money is.  Thanks again.

ysette9

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Re: Question about my Mother's retirement
« Reply #7 on: April 13, 2021, 06:43:43 PM »
Could you talk her into a bond fund instead of CDs? Or TIPs or a balanced fund or something? It is sad for me to hear about older people putting their money in “safe” CDs. My grandmother did that for year and inflation massacred her portfolio. She could have had SO much more to leave to heirs (or donate to charity or spend) if she had even chosen 30% stocks/70% bonds.