Author Topic: Help me explain this to my parents.......  (Read 5284 times)

nyxst

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Help me explain this to my parents.......
« on: January 25, 2014, 09:53:16 AM »
My mom told me today that she has had $70k on a CD for the past 20 years.... Making 2% interest or less....
My dad is the sole bread winner. My mom hasn't worked since 1995ish. They are 56 and broke... My dad makes about $15/hr doing hard work meant for a 20-something's body.  He's old and tired and wants to retire.  They have a mortgage and a heloc because they don't make enough to pay their bills. They live cheap already. But they need to do something better with that 70k..... She won't listen to me AT ALL, mostly because she is stubborn, partly because she s terrified of loosing the 70k by moving it... I have to find articles with ideas to "leave lying around" so that it can be her idea instead of mine.... Anyone know the best plan for zero risk tollerence, but still earning more than inflation.... So my dad can at least slow down a little.. Poor guy.

meteor

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Re: Help me explain this to my parents.......
« Reply #1 on: January 25, 2014, 10:09:15 AM »
How can you have 70,000 and be broke at the same time?

Last time I tried to give a parent financial advice (even while I was helping them financially), they stopped talking to me for several years.   I also have a relative who cashed out their family's IRA and spent it all, because they thought the world was going to end in year 2000. It could be worse, that relative could have been your parent.

Parents don't want financial advice from their children, but they might take the advice from a sibling or mentor.

« Last Edit: January 25, 2014, 10:18:18 AM by meteor »

nyxst

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Re: Help me explain this to my parents.......
« Reply #2 on: January 25, 2014, 10:49:28 AM »
They live paycheck to paycheck, so I call that broke.  And I can't give them advice, but I can leak my advice to them or to my aunt, who can tell them her opinion. I'm upset that the are sort of loosing money (considering inflation) and was thinking maybe an annuity or something could be better for them than a 2% CD... But I don't know enough to be sure and figured picking the amazing brains in this forum could give me some better ideas :)

Jules13

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Re: Help me explain this to my parents.......
« Reply #3 on: January 25, 2014, 11:52:26 AM »
I'm by no means a financial expert, but it seems to me that at your Dad's age, if he is doing hard manual labor that is meant for a younger person, that he might not be doing it for much longer.  And who is to say he would find another job that pays what he is earning now.  So, it seems that leaving that 70k in something very low risk, like where the money is now, is probably a wiser move, considering they might need it sooner than later.  There is just not a lot out there, that is low risk that earns a much better return.  And my guess is that if it's not offered at their current bank...they probably wouldn't do it.  Good luck.

Argyle

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Re: Help me explain this to my parents.......
« Reply #4 on: January 25, 2014, 12:21:53 PM »
Annuities are very often bad deals, and even experienced people with financial know-how often have a hard time knowing whether they're a wise move.  I think your mother would be wise to steer clear of annuities.  I get that you want her to invest in something with a higher return.  Considering that this 70K is their only savings, I'm inclined to agree that they need not to imperil it.  And 2% is not bad for a safe investment in this market.  Assuming it's in a CD which will come to an end, they're wise not to pull it out (thereby losing a chunk of their interest).  Nothing they can get now will be paying 2% for a sure thing.

What they should really be doing is finding ways to live beneath their income or generate more income, and invest that extra in something like index funds.  It sounds as if they're in this situation because they're in denial, however, and that likely won't change.

gooki

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Re: Help me explain this to my parents.......
« Reply #5 on: January 25, 2014, 12:48:39 PM »
They question is, what's the interest rate on their mortgage and heloc?

If it's higher than 2% they're probably better off putting the 70k towards repaying their debt.

Exflyboy

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Re: Help me explain this to my parents.......
« Reply #6 on: January 25, 2014, 01:22:29 PM »
They question is, what's the interest rate on their mortgage and heloc?

If it's higher than 2% they're probably better off putting the 70k towards repaying their debt.

Bingo!... Frank

Peter

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Re: Help me explain this to my parents.......
« Reply #7 on: January 25, 2014, 02:30:52 PM »
I think there's only 2 possible things they could do with it. Pay off the mortgage, or buy an annuity.

Paying off the mortgage is the "safest" thing to do. In case your father can't work until the mortgage is paid off from earnings alone, they at least stand a chance to not lose the house.

If they are really irresponsible though, and you think that your dad will be able to work until the debts are paid, then perhaps the annuity is better. Having a mortgage payment over their heads may keep them in-check longer and deter spendiness . A joint annuity on 70k for the both of them at age 55 would pay about $280/month. Enough for food and heat at least...

MrsPete

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Re: Help me explain this to my parents.......
« Reply #8 on: January 25, 2014, 06:19:47 PM »
How can you have 70,000 and be broke at the same time?
If you're 56, have only 70K, and have a job situation that's not sustainable with an aging body . . . you may not be broke, but you can reach out and touch it from where you're standing.  Buy a new car and a new furnace in the same year, and that money'll essentially be gone. 

MrFrugalChicago

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Re: Help me explain this to my parents.......
« Reply #9 on: January 26, 2014, 12:45:48 PM »
I think there's only 2 possible things they could do with it. Pay off the mortgage, or buy an annuity.

Paying off the mortgage is the "safest" thing to do. In case your father can't work until the mortgage is paid off from earnings alone, they at least stand a chance to not lose the house.

If they are really irresponsible though, and you think that your dad will be able to work until the debts are paid, then perhaps the annuity is better. Having a mortgage payment over their heads may keep them in-check longer and deter spendiness . A joint annuity on 70k for the both of them at age 55 would pay about $280/month. Enough for food and heat at least...

Depends on value of the house.  If the housing market were to crash tomorrow, they would be way better of with 70k in the bank and a large mortgage (they could walk away and go rent somewhere). Whereas if the house is already very lowly priced and in not much danger of going down, paying off the mortgage is a good idea. Hard to predict future values of houses though.

nyxst

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Re: Help me explain this to my parents.......
« Reply #10 on: January 26, 2014, 08:57:36 PM »
Thanks for all the different angles brought up here! I feel a little less panicked about it. I think I'm going to ignore the 70k issue completely for now. At least I know they aren't touching it where it is.  And, if my dad doesn't make it working until social security kicks in, at least I will be able to make a good argument for them to sell the house and buy an r.v. or something :) they try to be responsible, but they are old hippies and I question their rationality a lot.... Like when my mom sends an extra payment in on the mortgage, but has to pull $ out on the heloc..   Um... What?? Haha!  They MEAN well... I'm just glad they didn't teach me too much about handling my own finances :)