Help me help my mom not be screwed as she enters her 60s

[sununderwood]

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[frugaldrummer]

Well, my first recommendation normally would be that she get a room mate to share that 2 bedroom condo and use the money to invest or to pay down her mortgage.  However, since you said she has "serious interpersonal issues", I'm gonna guess she's not capable of accommodating a room mate?

And I'd like to say, hooray for your mom for traveling to Europe.  It may not have been the wisest thing financially, but heck, it's better than never having an adventure at all.  Still, you might sit down with her and crunch the numbers - even with the write-off as a business expense, it might be cheaper still for her to travel on her own  (for instance, I'm pretty sure my discount, shoulder-season, cheap B and B travel would be cheaper than a business-write-off, professional meeting at an expensive hotel.)  Couchsurfing could be cheaper still! (But, again, those pesky interpersonal issues might come into play).

You need to remind your mom, that some of that mileage she is getting paid on her car, needs to be put aside for repairs and eventual car replacement - it's not income to be spent.

Your mom can go online to the social security website and get an idea of what her social security payments will be like.  If she was ever married for at least 10 years, she can draw social security benefits based on her ex-spouse's earnings, if they were significantly more than hers.

Let's say, for the sake of argument, that your mom is going to work at this job until she turns 65-66 and can receive full social security benefits (I would advise against her taking the early retirement option, as it would cut her SS down by like 30%).  And let's say that her condo regains its original value in that time, so that she can at least get out of it without paying anything, or hopefully has a little equity. 

Let's say too that she saves $10 k a year on top of her current retirement savings.

She might then have enough savings to buy some inexpensive place out west somewhere, or she might continue working in some part-time capacity (insurance review, perhaps?). 

I think the best you can do is help her find out what her SS benefits will be, and talk to her about frugality options.  If she is adventurous, she might even end up being someone who retires to South America for a while, or some other such locale where her Social Security dollars will go farther.

[Blindsquirrel]

  That 2br condo is a killer, if esp if underwater. I would advise getting out from under that and either buying a cheap house or renting a cheaper place. I would go to the SSA website and get an estimate of what her SS income will be and then move forward using that coupled with what you think she can generate from investments at 4% withdrawal rate and use that as her base budget going forward. As of today, not next week. If she can get her spending inline with her probable future income she will be ok I hope. Her time horizon is short so it is a hair on fire being attacked by rabid squirrels situation. Condo fees alone can be horrible even if paid off.

[frugaldrummer]

Well, I hate condo fees too - BUT - as a single woman, the tradeoff on a condo (not having to pay for exterior home maintenance) may be a wash.  (For example, I'm 57 and own a 20 year old home.  In my future retirement planning, I have to budget for a new roof in maybe 10-15 years, eventually repainting the outside of my two-story home, some landscaping needs to be done soon, I have to maintain my sprinkler system which occasionally needs repairs, gutters may need repairs, etc.  Will all of this be more or less than a $300 a month condo fee?  Who knows.

The decision on whether or not to sell the condo now depends on her payments and rent in her area, as well as what you think will happen to home values in her area in the future.  I'd hate to see her get unhitched from real estate appreciation, only to be unable to buy a home in 10 years at retirement.  But it all depends on how much she's paying now versus renting.

[tariskat]

I thought the same as frugaldrummer - rent a bedroom, except for she doesn't sound like a people person.  A less time-intensive twist on that would be listing the place as an AirBnB rental; you can specify how long you're willing to let people stay for (maybe she can handle strangers for 3 days max), and accept or reject whoever (maybe she only wants to rent to older travelers, or young non-threatening women, etc) and just allow 2 or 3 stays a month.  Any proceeds from that can go into the house payment, or directly into retirement, etc.

Or, can she rent out the 2 bedroom and rent a smaller and cheaper apartment for herself?  My SO's duplex is underwater but he's renting it out and coming out even (or a couple bucks ahead) and using a fairly cheap service to do the landlording - they took pictures, found renters, did background checks, handle complaints, etc etc, and that has been painless so far.

[sununderwood]

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[153]

First: good luck dealing with this!

Second: floor nursing is not easy- even without your mom's people problems, I know very few nurses her age who can still handle the physical toll of the job. Nurses half her age will leave at the end of a second 12 hour back to back shift wiped.

I point this out only because if it does turn out that she needs to continue working (and is not at the wellness job due to a move or whathaveyou), hospital nursing might be doubly out for her. However, there are tons of things nurses can do besides the floor. Insurance was mentioned, and case management is an obvious option for a desk job, but there are whole seminars devoted to alternative career choices.

This was just posted this week, actually: http://news.nurse.com/apps/pbcs.dll/article?AID=2014140114004#.UthXfni9LCQ

[sununderwood]

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[Another Reader]

First, if your mom was born in 1954, her full retirement age is 66, not 65.  Every year she is able to delay beyond 66 adds to her monthly payment up until 70.  The longer she is able to work, the better off she will be.  Run the numbers and see how much this can help her.

Second, what type of IRA does she have?  Is it sponsored by her employer?  If it is not a 401k, it's probably a SIMPLE IRA.  She is allowed to contribute up to $14,500, including her catch-up provision.  In her shoes, I would cut every unnecessary expense to get as close to the maximum contribution as possible.  Her employer can kick in another 3 percent, for a total of approximately $16,000 a year.

Third, where does she want to retire?  It's possible to purchase a relatively inexpensive condo in a retirement community in Arizona.  If there is equity in the Maryland condo, that could cover something inexpensive.  Living on $1,450 a month would be tight with a free and clear condo, but doable.  If she could work for 7 years and save $16,000 a year, she would have $112,000, plus the accumulated earnings.  If she's not a good budgeter, she could purchase an annuity through Vanguard.  With something closer to $2,000 a month between the annuity and a later Social Security start date, she could be more comfortable. 

Staying in the Maryland condo is just not feasible with her potential retirement income.

The more you can do to help her help herself now, the less you will have to help her later. 

[sununderwood]

removed for personal info

[frugaldrummer]

Well, you can lead a horse to water, but you can't make them drink.  Still, you never know when you may have planted a seed of an idea.

I have a friend like your mom - she gets SO anxious talking about her finances, because she has a deep-seated conviction that she can never get ahead, the result being that - she never gets ahead!

Still, for the sake of YOUR peace of mind, here's a little rough back-of-the-napkin math to look at:

Your mom makes $53k now.

Subtract about $5k for income taxes, $5k for car payments and insurance (just a Wild A** Guess here), and $12k for condo mortgage payments (you didn't specify whether that $1k/mo payment was just the mortgage or covered principle/interest/taxes/insurance). 

That means, that outside of housing and car, she's living on about $31k/year or less.

Now, let's guess that there's maybe $6,000/year of fluff in that budget (the Europe trips, cable tv, current savings contributions,  whatever her vices are).

So, if she had a paid condo, and a paid car (or lived somewhere with good public transit), she could live pretty comfortably (similarly to her current lifestyle without the fluff)  on about $25k/year.

Now - let's suppose your mom stays in her job and her condo and works until she hits full retirement age at 66 years of age.  Let's also say that by that time her condo has increased somewhat in value so that she has enough between the equity in the condo, and her savings, to buy an inexpensive condo or something outright in a less expensive area. 

Her social security at that time would be $1420/mo x 12 = $17,040 a year, giving her a shortfall of $25k - $17k = $8k/year.  She might be able to make up that $8k/yr shortfall by working part-time at some low-stress job, or ramping up her thrifting resales, or running some other cottage business.

If, instead, you apply the same parameters but she works until she is 70 to maximize her social security - her payments would be $1874/yr (rises 8% for each year delayed)and her annual income would be $22,488.  That would leave her with a shortfall of just $2522/year.

Another option is, she decides to retire to a foreign country where her dollars will go farther.  Ecuador is popular right now :
http://money.usnews.com/money/blogs/On-Retirement/2012/04/17/the-best-place-to-retire-overseas-on-a-budget

and according to this article, would fit her retirement budget.

I applaud you for looking at this stuff now, at your young age - you will never end up in a precarious position like your mom.  IF you think you could tolerate her, you might look at our own future housing purchases with the possibility in mind that she might come to live with you at some point (a house with a granny flat, perhaps?). 

[BPA]

Hey there.  I was super worried about my mom too when it came to retirement, but she's okay.  In fact, she's way happier now than when she was working.

She has always been extremely frugal.  She now lives on between $1400 and $1500 (Canadian versions of SS) a month and had less than $2k saved for retirement when she retired.  She rents a nice one bedroom apartment in a good area, walks or takes the bus for transportation, and belongs to the YWCA and a book club for socializing.  She has never been happier.

Frugality may be your mom's answer.