Author Topic: In-laws retiring with little money...  (Read 6809 times)

jeromedawg

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In-laws retiring with little money...
« on: February 01, 2019, 01:48:58 PM »
Hey all,

So my in-laws are in the process of selling their restaurant business. They are just waiting for the close of escrow which should be sometime in the next week or two hopefully. They are both 73 and are terrible money managers. I don't know how they managed to survive running the restaurant for so long barely just skating by on it. In any case, on one hand we are happy they are done working themselves into the ground. On the other hand, we are concerned about their future. We think they may have somewhere between $100-$200k worth of savings max in various accounts and cash. The rough details around the restaurant sale are that it's selling for $180k and $60k of it is seller-financed over the course of two years. What's scary is that they allowed the new potential owner to take over *before* the close of escrow so now we're just crossing our fingers that this new owner doesn't decide to back out at the last minute.
Anyway my wife has been helping them with calculations on other things they need to wrap up outside of escrow, including a lawsuit someone filed against them over handicap spaces in the parking lot area behind the restaurant (which I don't even know why they're taking the responsibility for when they're leasing the restaurant space). Anyway, she's estimating that there's around $75k worth of expenses related to this, income taxes, and other post-sale restaurant stuff they still have to take care of. To pile on top of that, my wife is currently on the phone right now and apparently someone followed them to their restaurant from a quick trip to the bank and broke into their car - not sure what they took but I don't think there was in anything in there of value...

I just feel bad for them - their whole lives they've worked 12hr+ days every day of the year and it has barely amounted to anything. Part of it can be attributed to the fact that they are too trusting of people (to where they will blindly sign contracts or other things) and easily throw their money by being frivolous and not frugal-minded. I feel bad for my wife, in that there's constantly one thing after the other (like the whole thing with their car just getting broken into) and she often has to help them especially with the administrative stuff... they don't speak English super well so they often have to contact her for help with these things.

In any case, their biggest 'asset' right now is probably their home, which they still owe mortgage payments on but is about halfway paid off. But there's some equity in that if they were to sell. Being in SoCal though, if they did that there wouldn't be that many options as far as where they could move other than to one of those 55+ up communities which might be the only option if they want to be closer to us. Currently they're over an hour away so it would be nice for them to be closer to and see their grandkids.

Anyone dealt with parents in a similar boat or situation? What are some things you did that helped them out the most?

frugaldrummer

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Re: In-laws retiring with little money...
« Reply #1 on: February 01, 2019, 02:05:39 PM »
First I suggest you check out the Ultimate Retirement Calculator on the Financial Mentor site - it's a simplified but pretty functional and easy to use calculator that can help you sketch out various scenarios.

Some things you would need to know:
Do they receive Social Security benefits? If so, what is the total amount? (Unfortunately many restaurant owners in the past didn't report all their cash earnings and as a result may not receive as good a Social Security benefit as you might expect).

How much equity in their home?

Could they buy a new place in a 55+ community outright? Or would they be better off renting?

What are their medical expenses and Medicare supplement costs?

What is their social life like? Would moving closer to you take them out of an ethnic community where they are comfortable?

Find out the basics then run a few different "what if" scenarios with the calculator to show them.

jeromedawg

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Re: In-laws retiring with little money...
« Reply #2 on: February 01, 2019, 02:41:52 PM »
First I suggest you check out the Ultimate Retirement Calculator on the Financial Mentor site - it's a simplified but pretty functional and easy to use calculator that can help you sketch out various scenarios.

Some things you would need to know:
Do they receive Social Security benefits? If so, what is the total amount? (Unfortunately many restaurant owners in the past didn't report all their cash earnings and as a result may not receive as good a Social Security benefit as you might expect).

How much equity in their home?

Could they buy a new place in a 55+ community outright? Or would they be better off renting?

What are their medical expenses and Medicare supplement costs?

What is their social life like? Would moving closer to you take them out of an ethnic community where they are comfortable?

Find out the basics then run a few different "what if" scenarios with the calculator to show them.


Great questions and resources! I'll check those sites out.

They do get SSN and I think it might be somewhere between $1000-$1500 per month.

They probably could sell their place now and downsize. They bought the home at $525k in 2004 and it's the Zillow estimate says $630k, so if they get anywhere near that roughly around $100k in appreciation? Actually, I was wrong about the equity now that I look at their loan. It looks like the current principal balance is $226k rounded up, so they actually would lose money as far as I can see. This is a 30 year fixed loan BTW so maturity date is 12/1/2034 (by this time they would be 88... if they both pass before that the house and I'm assuming the debt would be passed on to my wife and my brother-in-law 50/50) The only benefit is that they had a loan re-modification within the past 8 years I believe. Their currently monthly payments are $2180.xx and they are 'house-hacking' by renting out two rooms for around $700 each from what I know. So if they can continue with that, they should be OK I guess.

I'm not sure how much they pay in medical expenses but I think they have Medicare and likely don't pay too much - will have to ask my wife.

They are relatively comfortable where they are but most of their friends don't live that close to them. If they moved closer to us, they wouldn't be that much closer to most of their friends either. Their friends are sort of spread out throughout Los Angeles but I think most of them are in the east LA area.
« Last Edit: February 01, 2019, 02:46:06 PM by jeromedawg »

jeromedawg

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Re: In-laws retiring with little money...
« Reply #3 on: February 01, 2019, 04:41:47 PM »
My calculations on equity were off, as I think I factored in too much. Per google: "Start by taking the market value of the home and then subtracting the balance of any existing mortgage on the property. If, for example, you had a house with a market value of $200,000 and a mortgage balance of $150,000, your home equity would be $50,000."

So with a $630k current estimated market value and $226k of mortgage debt, their equity should be around $404k. I think I was trying to calculate their overall net cost, which I'm pretty sure is a net negative but I guess that's similar to what some might consider a "sunk cost"

mozar

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Re: In-laws retiring with little money...
« Reply #4 on: February 01, 2019, 04:45:39 PM »
I'm pretty sure that children don't assume the debt of their parents upon passing (in the USA).
Having said that your in-laws have 100k in liquid assets, get around 1500 a month from SS, get 1400 a month from having roommates. They're fine. And better off than most people who have to live on SS alone.
So why do you spend your energy worrying about your in-laws assets? What are getting from this? It's really not even your problem. Here's an article about assuming debt:

https://www.nerdwallet.com/blog/finance/when-your-parents-die-broke/

WhiteTrashCash

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Re: In-laws retiring with little money...
« Reply #5 on: February 01, 2019, 05:05:25 PM »
This kind of story reminds me of how my grandparents ended up "retiring" to a trailer in Florida. It was really sad, but at least they were able to see rocket launches from their lot.

jeromedawg

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Re: In-laws retiring with little money...
« Reply #6 on: February 01, 2019, 05:16:05 PM »

I'm pretty sure that children don't assume the debt of their parents upon passing (in the USA).
Having said that your in-laws have 100k in liquid assets, get around 1500 a month from SS, get 1400 a month from having roommates. They're fine. And better off than most people who have to live on SS alone.
So why do you spend your energy worrying about your in-laws assets? What are getting from this? It's really not even your problem. Here's an article about assuming debt:

https://www.nerdwallet.com/blog/finance/when-your-parents-die-broke/

I'm sort of bearing the burden that my wife has grown up with and dealt with pretty much all her life in that her parents are petty naive and not completely responsible with their money. Things were a lot worse probably 5+ years ago and when we first got married in 2010. Even worse before that - there were times my wife would tell me about when they would have the power and water shut-off at their old home because her parents couldn't afford to pay it. Actually, from 2010 up to around 2013 or so, they were barely able to make rent payments on the restaurant. They caught a break when the old landlord passed away and they were sending checks that were not being deposited for over a year (not knowing he had passed). Finally, the son of the landlord inherited all the properties and once he took over and realized what had happened, 'forgave' my in-laws on their 'debt' as well as cut their rent in half (well below market) so they could afford staying in business. This is just one example of a lucky break that has led up to this point where they can hopefully stop working. They're notorious for getting screwed and walked all over, especially when it comes to finances, and they won't hesitate to lend money out to friends and family even if it's not in their own best interest. So we are just thinking ahead and trying to help where we can to safeguard them. Since Asian culture is so heavily engrained in us, particularly the part about not leaving any of your family, parents, children, etc hanging or without help where it might be needed, it would be very hard just to flip the "Off" switch and not at least say anything or look for ways to help them.

My calculations on SS were off a bit - it's actually more at $2000 a month. The $1400~ they get from the roommates probably isn't going to be for more than 5 years longer as well, since I'm not sure they'd want to continue living with roommates into their 80s. I ran some numbers through that Ultimate Retirement Calculator though and I think they'll be OK but really only if they downsize to a smaller and less expensive place in a 55+ community (fully paid for so no mortgage is owed). I think this would be favorable over renting unless they get a crazy deal on rent, which is likely not going to happen here in Southern CA. If they were to continue living in their current home and once the whole roommate situation becomes unviable, it wouldn't make sense for them to continue living there. So I think we will have to push for them to downsize whether or not they like it.
« Last Edit: February 01, 2019, 05:20:13 PM by jeromedawg »

Catbert

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Re: In-laws retiring with little money...
« Reply #7 on: February 02, 2019, 12:20:41 PM »
Don't' worry about your wife inheriting debt.  Their estate would have to pay debts before disbursement any assets.  Basically the house would be sold and mortgage paid off before turning over what's left to the heirs.   The only rub is if your wife wants to keep the family home.

Cassie

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Re: In-laws retiring with little money...
« Reply #8 on: February 02, 2019, 09:12:41 PM »
They donít seem to be in that bad of shape.

Dicey

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Re: In-laws retiring with little money...
« Reply #9 on: February 02, 2019, 09:31:17 PM »
I know it's farther away, but my parents moved to the Del Webb in Beaumont (Solera). It was a nice community and the houses were really affordable, the amenities were nice, and they made loads of new friends. They lived there for a decade (they moved from Riverside) until they passed away and absolutely loved it. Further east is Sun City Palm Desert. Amenities galore and lots of houses at slightly higher, but still quite reasonable prices. You can ping me for more details, if you wish.

chasesfish

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Re: In-laws retiring with little money...
« Reply #10 on: February 03, 2019, 05:18:51 AM »
They don't seem to be in that bad of shape, especially compared to what my mother is staring at.

A few suggestions you have and haven't seen:

- Culturally they probably only save in cash or cash-like vehicles.  I'd recommend taking their nest egg and buying a single life annuity.  Convert the $120k immediately to $670 to $800/mo depending on how long they want the guarantee and if its joint.  Its a life insurance company product, but is essentially reverse life insurance, put in a lump sum today in exchange for a higher monthly income stream guaranteed by an insurance company.  The major discount brokers sell them.  That isn't an asset that has to be spent down for medicaid if one of them needs nursing care.

- Their roommate situation is awesome, turning their house into essentially a "golden girls" house.  More elderly folks need to do that for the financial and social interaction.  Bravo for them.

Unique User

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Re: In-laws retiring with little money...
« Reply #11 on: February 03, 2019, 06:47:10 AM »
My mother "retired" to the Palm Springs area with nothing more than a paid for mobile home in a 55+ community and SS.  She'll be 75 this year and continues to work around 15-20 hours a week providing home care for those more elderly than she is.  There is a huge demand in the area, she can pick and choose assignments and take time off whenever she wants.  It's pretty easy work - she goes in, does laundry, makes sure they take their meds on time, provides simple meals, runs a vacuum, takes them to appointments, etc.  Mobile homes in her area near Cathedral City are cheap - like $70k for unrenovated and $125k for renovated.  Your in-laws sound like they are in good shape, but I'd agree with others on having them move.  If they are a soft touch, having people in their house that they might be persuaded to "help" financially might not be a good idea.   

Cassie

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Re: In-laws retiring with little money...
« Reply #12 on: February 03, 2019, 09:38:13 AM »
Spartana, I am shocked how reasonable those are. It looks nice.

Dicey

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Re: In-laws retiring with little money...
« Reply #13 on: February 03, 2019, 09:51:16 AM »
www.lwsb.com. 2 miles from the beach, and costs approx $400/month association fees after purchase of apt with cash - which range in price but around $150k for a one bedroom.. Not an "old folks home" though but an active 55 plus community. My Mom lived there.
This is an even better suggestion! My aunt lives nearby and has a huge social network. One of her groups of friends is LW based. It's a bunch of women on limited incomes who call themselves "The Peanut Butter and Jelly Club". They are all about frugal fun. One year they decided to save up for a trip to Hawaii. They all went together and had a great time.

FINate

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Re: In-laws retiring with little money...
« Reply #14 on: February 03, 2019, 09:53:27 AM »
Based on the numbers provided, they should be fine IF they take action sooner rather than later.

With the sale of the restaurant (loss of that income, plus little equity to cash out) there's a real possibility of their finances leaking away as they attempt to maintain their lifestyle.

They have an opportunity to get on firm financial footing but need to downsize to a lower cost of living, either by moving to a LCOL area, or going to a reasonably priced 55+ community. Either way, they should sell the house and invest the proceeds. There's a danger they spend the money on and RV or boat or fancy trips ("we earned it!") but they really can't afford these if the goal is to have a dignified retirement.

With ~400k to invest and $2k/month SS, they should be fine. The biggest way you guys can help them is probably getting their finances setup up such that they have a steady stream of income to live on.

jeromedawg

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Re: In-laws retiring with little money...
« Reply #15 on: February 03, 2019, 02:03:00 PM »
Thanks all! Yes, 'downsizing' to Leisure World either in Seal Beach or Laguna Woods is what is currently what we have been thinking about as the most viable option long-term (whether they want to or not, but I don't think they'll have much of a choice when it comes down to it). The roommate situation is great but I don't know how sustainable that really would be more than 5 years out. And part of it too is them being closer to us so they can see and visit with their grandkids. After running some numbers, it does seem like they're not as in bad shape as I originally expected. But they still need to be conservative and wise about their spending. They tend to "leak" money left and right and I think since getting married we have helped them in little ways that has resulted in a good amount of savings. There were a lot of responses since my last reply so thanks for all that - I'm still reviewing and re-reading but just wanted to drop a line to thank everyone for the tips.

lhamo

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Re: In-laws retiring with little money...
« Reply #16 on: February 03, 2019, 02:09:30 PM »
Another option to consider is getting them on the waiting lists for subsidized/low income senior housing options.  Here in Seattle, the waiting lists are typically 1-2 years, longer for high-demand areas.  It doesn't prevent a move to someplace like Leisure World in the meantime, but opens up another option should money get tight down the road.  Many places will allow you to decline an offer of space once or twice before they kick you to the bottom of the list, though you'd have to check the requirements for different places.

mm1970

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Re: In-laws retiring with little money...
« Reply #17 on: February 04, 2019, 10:51:19 AM »
Spartana, I am shocked how reasonable those are. It looks nice.
. Yes in a area where median housing cost in the $700k range its a steal. Most apts (co-ops) are bought by younger (55 - 65) working very active people. Lots of snowbirds and Lots of FIRE types too. The guy who bought my Moms place was a 55 year old single childless surfer dude who quit his job to surf full time and was looking for a inexpensive place to live. The guy who lived next door lived and worked in Oregon half of the year and wanted a place for the winter in SoCal. Her other next door neighbors were college teachers who had a big house in Palm Desert but wanted a weekend beach place. Another neighbor spent 6 months in their camper truck in Mexico to kite board in different places. The list goes on and on like that. There were older frailer people there of course (although you can't move in there unless you are healthy and need a doctors note saying that), but since it wasn't a place that had elder care it was just like any apt or condo full of older active adults.

I lost a few minutes on that website.  Pretty cool idea.  And, the weird thing is that ... well my spouse is 50 and I'm not far behind.  So, I guess we're getting old.  (Our kids are young though, so I'm assuming showing up at 55 with 13/19 year old kids would be a no go, ha!)

Cassie

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Re: In-laws retiring with little money...
« Reply #18 on: February 04, 2019, 12:45:04 PM »
They have too much money to qualify for low income senior housing.

lhamo

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Re: In-laws retiring with little money...
« Reply #19 on: February 04, 2019, 01:17:48 PM »
They have too much money to qualify for low income senior housing.

Not necessarily.  Here in Seattle some places only look at monthly income, not assets.  Since they basically will only have SS coming in, they might meet the cutoffs.

For example, here are the income limits for one community run by one of the largest local providers:

https://www.housing4seniors.com/communities/seattle/south-seattle-downtown/the-terrace/qualifications

Just over 51k annual max for two people. 

They won't know what the requirements are unless they start looking.  And many people don't start looking early enough because they have assumptions that are not in line with the facts.

oldladystache

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Re: In-laws retiring with little money...
« Reply #20 on: February 04, 2019, 02:02:58 PM »
 I've been living in LWSB for 4 years. Feel free to ask any questions. You didn't mention their nationality but if they are Korean they'll feel right at home. There are a lot of other nationalities represented, many Asian.

All kinds of good information about the details of Leisure World Seal Beach: https://www.sealbeach-retirementcommunity.info/frequently-asked-questions

jeromedawg

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Re: In-laws retiring with little money...
« Reply #21 on: February 04, 2019, 03:16:22 PM »
I've been living in LWSB for 4 years. Feel free to ask any questions. You didn't mention their nationality but if they are Korean they'll feel right at home. There are a lot of other nationalities represented, many Asian.

All kinds of good information about the details of Leisure World Seal Beach: https://www.sealbeach-retirementcommunity.info/frequently-asked-questions

Haha thanks - they're Chinese but Korean cultured. Although they tend to have more Chinese friends and in particular friends who are of the same cultural background ("Han Hwa" is what they refer to themselves which is the short-hand form of "Chinese in Korea" AFAIK). Anyway, I think most of their friends live in regular homes and are very well-off, which doesn't help. But I think they're starting to get a reality check with what they can afford. The only consolation, and this might be pretty big, is that one of my FIL's younger brothers lives in Cerritos/Cypress, so LWSB would be super-close for them. Although, I'm not sure how much they'd really be "hanging out" and what not. If they were to move to Laguna Woods, they'd be super close to us but they would have few friends and other relatives close by. So we'll have to just see how things progress... I have a feeling they're going to want to stay in the Valley for a good amount of time at least until they get tired of renting out the other rooms as well as being bored and not being any closer to their grandkids. I think they have a desire to continue working though, so they may actually stay in touch with the new owner of the restaurant and ask if they can work in the back or the kitchen (my FIL has always cooked for the restaurant. My MIL would likely be helping with packing food/expediting orders). They're deathly afraid of being bored out of their minds with nothing to do. They are not the type of people who are adventurous or willing to really explore, which adds to their perception that they'll just be stuck inside a home/condo with nothing to do.

jeromedawg

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Re: In-laws retiring with little money...
« Reply #22 on: February 04, 2019, 03:17:31 PM »
They have too much money to qualify for low income senior housing.

Not necessarily.  Here in Seattle some places only look at monthly income, not assets.  Since they basically will only have SS coming in, they might meet the cutoffs.

For example, here are the income limits for one community run by one of the largest local providers:

https://www.housing4seniors.com/communities/seattle/south-seattle-downtown/the-terrace/qualifications

Just over 51k annual max for two people. 

They won't know what the requirements are unless they start looking.  And many people don't start looking early enough because they have assumptions that are not in line with the facts.

I thought this was generally the case as well, in that it's based on income and not asset levels...hence "low income" ...? But maybe I'm missing something or perhaps there are different laws in different states, cities, etc..

Cassie

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Re: In-laws retiring with little money...
« Reply #23 on: February 04, 2019, 06:32:16 PM »
In our state you have to have no more than 2k assets. My friend was turned down because her sister left her 10k.

Linea_Norway

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Re: In-laws retiring with little money...
« Reply #24 on: February 05, 2019, 07:35:12 AM »
Maybe your wife could offer to handle their finances and only pay them an allowance? Maybe this would stop the leaking towards relatives and friends.

If they can indeed work PT in a local restaurant, this would be a good deal and provide some extra income.

jeromedawg

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Re: In-laws retiring with little money...
« Reply #25 on: February 05, 2019, 09:39:10 AM »
Maybe your wife could offer to handle their finances and only pay them an allowance? Maybe this would stop the leaking towards relatives and friends.

If they can indeed work PT in a local restaurant, this would be a good deal and provide some extra income.

I don't think they'd allow her to do that unless they were in really bad shape. Both of them tend to be pretty headstrong when it comes to giving money to their siblings - they've done it all their lives as "obligation" to taking care of their "family" to the detriment and neglect at times of themselves and their own immediate family. You can call them generous or foolish, or a combination of both I suppose. I think they're starting to realize, however, now that they don't have income they can't just go throwing money around wherever they want to. I think it's hard for them to put themselves first - for decades the first priority in their lives has always been the restaurant. So this is a huge transition.

Anyway, I think they only place they'd want to work PT is for the new owner at their "old" restaurant - so that might be another factor that keeps them where they are.

Laura33

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Re: In-laws retiring with little money...
« Reply #26 on: February 05, 2019, 11:57:56 AM »
If they are bad with money, the last thing you want is for them to have big chunks of money that they can access to fritter away and live beyond their means.  My preferred option would be to sell the house and restaurant, put some of the money into an emergency fund for things like major vehicle maintenance or medical expenses, and then put the rest of the money into an immediate annuity that would provide them a steady source of income.  And then set up automatic transfers from their bank account to the emergency fund each month so that it is automatically replenished when it is used and they don't get used to spending that money on something else. 

But if they resist moving, then they should hang on to the renters as long as possible to minimize their expenses, and then set up the same annuity/EF option described above with whatever assets they do have.  In this case, though, the EF will need to be larger to cover periodic home maintenance and repairs.

You can probably help them the most by doing the annuity research for them -- it is very, very easy for even savvy people to get taken for a ride in the annuity market, so guiding them to a reasonable product that will not rip them off would be a tremendous gift to them.

jeromedawg

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Re: In-laws retiring with little money...
« Reply #27 on: February 05, 2019, 12:11:58 PM »
If they are bad with money, the last thing you want is for them to have big chunks of money that they can access to fritter away and live beyond their means.  My preferred option would be to sell the house and restaurant, put some of the money into an emergency fund for things like major vehicle maintenance or medical expenses, and then put the rest of the money into an immediate annuity that would provide them a steady source of income.  And then set up automatic transfers from their bank account to the emergency fund each month so that it is automatically replenished when it is used and they don't get used to spending that money on something else. 

But if they resist moving, then they should hang on to the renters as long as possible to minimize their expenses, and then set up the same annuity/EF option described above with whatever assets they do have.  In this case, though, the EF will need to be larger to cover periodic home maintenance and repairs.

You can probably help them the most by doing the annuity research for them -- it is very, very easy for even savvy people to get taken for a ride in the annuity market, so guiding them to a reasonable product that will not rip them off would be a tremendous gift to them.

I agree. Surprisingly, they have like 2-3 CDs open that they can't touch, so I think they're showing some glimpses of 'responsibility'

I'm unfamiliar with annuities but generally understand the high-level concept. Are there specific companies or recommendations as far as where to start looking? Is it a good idea to use an agent?

six-car-habit

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Re: In-laws retiring with little money...
« Reply #28 on: February 05, 2019, 09:24:52 PM »
  If you are going to investigate Annuities this might be a good read first. I've found his information and calculators quite helpfull, he has a good style of presentation.  Todd Tressider at Financial - Mentor [.com] .  Link to a short book he wrote, I'm sure you can find reviews before you purchase it.
  https://financialmentor.com/educational-products/ebooks/variable-annuity-pros-cons

chasesfish

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Re: In-laws retiring with little money...
« Reply #29 on: February 06, 2019, 01:21:54 PM »
@jeromedawg - The annuity mentioned a couple times is known as a Single Installment Life Annuity.  Its essentially the reverse of life insurance sold by a life insurance company.

Life Insurance = Put a monthly/annual payment in then get a check at death
SILA = Put a lump sum in up front and get a monthly check until death

Its the original annuity product and the only one people in the personal finance space will endorse.   Its a really boring product.

Unfortunately the term annuity now includes all these exotic products that include a combination of a lump sum, investment products, tax deferrals, and high fees.  Thanks IRS + Insurance Salespeople.

Fidelity's website is the best place to check, they have a "Guaranteed Income Estimator" calculator that will give an idea on payout per investment.  .  I'd stick with the discount brokerage firms to buy one.

jeromedawg

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Re: In-laws retiring with little money...
« Reply #30 on: February 12, 2019, 12:19:02 AM »
Thanks all... the more I think about it, the more it seems that an annuity would make the most sense once my in-laws downsize from their current house (where they're renting rooms) to a smaller condo that would cost less than the equity they have in their current place. Then taking the difference from that and maybe any existing funds they've accumulated or grown, sans a decent sized 'emergency' lump sum fund, they put that money towards an annuity for their guaranteed monthly payments.

As of now they are going to be receiving monthly payments from the new restaurant owner as they agreed to seller financing which will go on for two years. I think that will help them during this transitionary period and allow them some room to breathe and figure out what they need to do and take care of, hopefully. For the time being, I think they're OK in the current house but we're going to have to have a talk with them about budgeting and making sure they don't go hog-wild. Most of the lump-sum they're getting from the sale is, unfortunately (or perhaps fortunately, depending on how you look at it) going towards paying back-taxes and various other debts - my wife estimates that they will only be left with about 20% of the proceeds. At the very least, they shouldn't be tempted or as tempted to go off and make some extravagant "treat yo-self" purchase... again, hopefully. They're currently in Taiwan/Korea, attending to some urgent family matters and business, but hope they'll be refreshed from that to where when they come back they'll have a clear perspective. Of course, we are still waiting and hoping for escrow to close before they return.


On a slightly different note, does anyone have recommendations for good banks and credit cards that might be good for people like my in-laws?
They are currently with a Korean bank which my wife and I despise as far as customer service goes, but my in-laws are very comfortable there. The problem is with the various up-charges they have to deal with... supposedly they get a lot of fees waived but we don't really know and it just seems like more overhead than it's worth. Really, any bank where there are tellers that can speak Chinese or Korean would be sufficient for them IMHO.
« Last Edit: February 12, 2019, 12:21:51 AM by jeromedawg »

lhamo

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Re: In-laws retiring with little money...
« Reply #31 on: February 12, 2019, 10:47:57 AM »
I personally hate them and Im not sure their fee situation would be different than the Korean bank, but you could look at HSBC if they have branches in your area.  They have been expanding in the US to try to corner the rich Chinese market.

jeromedawg

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Re: In-laws retiring with little money...
« Reply #32 on: February 12, 2019, 01:34:27 PM »
Do your in-laws need to buy or can they just rent? That will give them greater flexibility as they age and more available cash too. There are tons of really nice lower cost age 55 plus apt complexes out there and that might be a better option for them. Plus it may allow you and your wife to somewhat take control of their money if needed.

Laguna Woods has rental.places of all sorts - including houses, condos, apts - and they are much cheaper than most rentals in the OC area. Plus they can use all the facilities which are pretty awesome. Do a Zillow search of places for rent there and you'll get a good idea of price and amenities.  https://www.zillow.com/laguna-woods-ca/apartments/

Thanks! At first I thought Laguna Woods/LWSB were all buy-in only but that wouldn't make sense if you think about it. It might make more sense for them to rent so we'll definitely look into that. Thanks for the suggestion!

EDIT: I just looked at the prices briefly per the link you sent and it looks like the lowest available rent is $1590... now, I haven't rented in a while myself, so I guess I have very little frame of reference, but is that considered "cheap rent" around here in the OC/LA? As it is, with them renting out both rooms in their 3 bed home in Chatsworth and subsidizing their mortgage, they're left with roughly paying around $600-700 per month. I think what it will come down to is their monthly expenses, really. We'll have to run some scenarios through the calculator to see what would make the most sense. I like the idea of just downsizing them (if we can find a good deal) simply for the purpose of eliminating another large monthly expense.   


I personally hate them and Im not sure their fee situation would be different than the Korean bank, but you could look at HSBC if they have branches in your area.  They have been expanding in the US to try to corner the rich Chinese market.

Funny you mention that - I just got a flyer in the mail with a bonus for opening an account with them haha. I had an account when them when they had an offer that produced decent interest years ago, but closed it after they stopped that. I'm not sure I'd recommend HSBC. We were close to getting them on with US Bank particularly for their then-business. I feel like Chase would make sense, outside of most peoples' utter hatred for large institutions. Admittedly, I've been with Chase for a really long time and just find it easy/convenient in dealing with them largely due to the number of branches and access they have. The local branches in my area there's at least 2-3 people who fluently speak Mandarin as well.
« Last Edit: February 12, 2019, 01:43:48 PM by jeromedawg »

Finances_With_Purpose

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Re: In-laws retiring with little money...
« Reply #33 on: February 12, 2019, 10:26:06 PM »

I'm pretty sure that children don't assume the debt of their parents upon passing (in the USA).
Having said that your in-laws have 100k in liquid assets, get around 1500 a month from SS, get 1400 a month from having roommates. They're fine. And better off than most people who have to live on SS alone.
So why do you spend your energy worrying about your in-laws assets? What are getting from this? It's really not even your problem. Here's an article about assuming debt:

https://www.nerdwallet.com/blog/finance/when-your-parents-die-broke/

So you don't have as much of a financial question/issue as a relationship question/issue.  Your fears are about what may go wrong in the future, based upon a history of bad financial management, being walked over, signing bad deals, and generally making poor financial decisions.

You're getting a lot of advice here about what someone could do with $X in the bank, or in an annuity, but if someone manages things poorly, it doesn't matter whether that's cash in the bank (worse, in fact) or a future payment stream....this could still very easily end poorly. 

For those reasons, I recommend this.  Not more money advice. 

You need to consider boundaries.  Have some hard conversations now.  Talk to them - and *your wife*!!! - about what you'll do if they make poor decisions. 

One thing you mention that I would *NOT* do at all costs: convince them to move closer to you because it's convenient to you or your kids.  While fine, normally, it may put them out some financially or worse, further entangle your finances (either really, or in their perception), leading to expectations that you'll take care of them financially when they do what they have always done and end up in a hole.  Until they can manage their affairs well, don't suggest or do anything that makes them *more* dependent upon you. 

(And guess what: if you take them in as dependents, one day, they'll still make bad financial decisions absent an unlikely - especially in one's seventies! - heart and habit change.) 

Realize one thing, too: you can't make people do things they're unwilling to do.  What you can control is the boundaries you set with them.  And the expectations.  You can communicate clearly, and up-front, about what can and will happen.  And talk about the future. 

And there's another thing here: if you push them to something, like an annuity, you take responsibility for it (in their minds, at least).  You also take responsibility if it all goes wrong.  Even if it's largely their mistake.  (E.g., selling an annuity income stream off to cover a bad decision/debt, or big medical bills from some unexpected event, like necessary nursing care.) 

So, don't set yourself up for failure as much in that way.  Don't push.  Discuss your boundaries.  Give them information.  But don't try and take over their situation unless you really and truly are willing to take it over - *and* they let you - and you accept responsibility for all of the bad decisions they could still make to tank things. 

Let that sink in and think it through.  Otherwise, stick to what you are willing to accept responsibility for. 

Will it hurt you if they make bad decisions and you can't realistically help them (without sacrificing your own boundaries or your own family/priorities)?  Yes.  But will it hurt less if they make bad decisions *and* feel like you led them there and are responsible?  Yeah...and I'll take the first option every time - letting them make their own mistakes with clear expectations in place. 
 
Another tip: retirees who are 65+ with money (whether income streams or money in the bank) are wearing a giant target on their backs.  Why?  Bad folks (including many salesmen) perceive - true or not - that they're easier to dupe, manipulate, and steal from.  I have had to chase away more than my fair share of scumbags from older relatives when the clear motive was to simply take someone's money.  You can depend on it, and depend on it getting worse. 

So if your in-laws have made bad financial decisions in the past, I would expect more of the same, if not increasingly more...they won't avoid all these scammers, scumbags, or schemes.  (Sadly, I've seen even more of this in native-speaking immigrant communities, where it's easier for scumbags to get away with being scummy because the victims have no real access to protection from it since they don't speak the native language as well.) 

I would have some conversations now with your wife and think through what you may do if the in-laws end up in a hole, whether small or large, and then what to communicate to them now.  Start having the conversations now, before it's a problem, so it won't be a surprise.  (And realize: you can't make them avoid it.  You can only offer suggestions.)

You will do very well here to get ahead of this in terms of dealing with it and clarifying the expectations of all involved - and you're taking steps to do exactly that.  Keep at it, and hit it harder - you're on the right track but have a ways to go still. 
« Last Edit: February 15, 2019, 07:26:48 PM by Finances_With_Purpose »

Fire2028

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Re: In-laws retiring with little money...
« Reply #34 on: February 14, 2019, 09:43:24 PM »
For banking options, I'm in northern Virginia and my local Citibank branch has a couple of Korean
speaking employees.  Everytime I go in there, I see multiple Korean parties transacting so I have the impression that Citibank caters to this clientele.  I'm Korean, btw.

iris lily

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Re: In-laws retiring with little money...
« Reply #35 on: February 15, 2019, 08:31:00 AM »
Finances with a Purpose is right on! Solid Gold infor there.

Finances_With_Purpose

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Re: In-laws retiring with little money...
« Reply #36 on: February 15, 2019, 07:29:31 PM »
Finances with a Purpose is right on! Solid Gold infor there.

Thanks @iris lily !

jeromedawg

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Re: In-laws retiring with little money...
« Reply #37 on: April 06, 2019, 10:21:40 PM »
BTW: wanted to get some current feedback on what kinds of investments would be 'advisable' or perhaps most appropriate for the age group my in-laws are in (70s)
The dust is finally starting to settle with the restaurant closing and outstanding debts, etc being paid off. At the end of the day they will probably have around $326k left between their checking account and CDs they have (with APYs of 2.55% and less).

They have a really good rate on their mortgage (2% interest and property tax and insurance are *included* in the monthly payment with just under $224k left on the mortgage...current property would probably sell for $630ish or so).

We are considering advising that they move anything not being invested into a high-yield savings, and as the other CDs mature, move those into the same savings account. Then perhaps open a 'consolidated' CD with Synchrony or something where they'll be getting a higher rate of return. These would be 1yr CDs as well, in case they need more immediate access to the funds. For the next two years, they will continue getting the monthly payments from the seller-financing they agreed to (which is 5% on $60k for 2 years)...well, assuming the new owner doesn't default :T

Would it be a better idea to put any of their money into ETFs (dividend yielding perhaps)? Since they're in their mid-70s so the risk appetite I'm thinking is probably going to be lower, but I don't know practically what this should look like as far as investments/investment types is concerned.
« Last Edit: April 07, 2019, 10:20:28 AM by jeromedawg »

Paul der Krake

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Re: In-laws retiring with little money...
« Reply #38 on: April 06, 2019, 10:41:55 PM »
There is no risk appetite at this stage of life. This the hand they have, protect it. If they go into equities at all, 10% max.

Dicey

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Re: In-laws retiring with little money...
« Reply #39 on: April 07, 2019, 12:32:07 AM »
BTW: wanted to get some current feedback on what kinds of investments would be 'advisable' or perhaps most appropriate for the age group my in-laws are in (70s)
The dust is finally starting to settle with the restaurant closing and outstanding debts, etc being paid off. At the end of the day they will probably have around $226 left between their checking account and CDs they have (with APYs of 2.55% and less).

They have a really good rate on their mortgage (2% interest and property tax and insurance are *included* in the monthly payment with just under $224k left on the mortgage...current property would probably sell for $630ish or so).

We are considering advising that they move anything not being invested into a high-yield savings, and as the other CDs mature, move those into the same savings account. Then perhaps open a 'consolidated' CD with Synchrony or something where they'll be getting a higher rate of return. These would be 1yr CDs as well, in case they need more immediate access to the funds. For the next two years, they will continue getting the monthly payments from the seller-financing they agreed to (which is 5% on $60k for 2 years)...well, assuming the new owner doesn't default :T

Would it be a better idea to put any of their money into ETFs (dividend yielding perhaps)? Since they're in their mid-70s so the risk appetite I'm thinking is probably going to be lower, but I don't know practically what this should look like as far as investments/investment types is concerned.
@jeromedawg, I hope you meant they have $226k left. OMG, how did they get a 2% mortgage? Good for them!

FINate

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Re: In-laws retiring with little money...
« Reply #40 on: April 07, 2019, 09:14:34 AM »
They have a tiny investment horizon (e.g. they need the money now) so asset allocation needs to be low risk. This doesn't necessarily mean all bonds, but likely a higher percentage of bonds or other investments relative to equities.

One option would be something like the Vanguard Target Date Fund 2015 (VTXVX) for those planned on retiring in 2015. The fund is automatically rebalanced, and the asset allocation changes as time progresses. Even if you don't use this fund, its portfolio mix is instructive: 39.75% Stocks, 60.19% Bonds, 0.06% Short-term reserves.

Another option to consider if you want everything on autopilot is the Vanguard Managed Payout Fund. It's actively managed, so the fees are higher (0.34% vs. 0.14% for the target date fund). The investment mix is different (contains commodities and alternative investments). Automatically distributes 4% annually as monthly payments.

As others have pointed out, annuities may be an option. I'm not a fan, and would be a little concerned about what kind of rate you'd get locked into with today's low interest rates.

W.r.t. bonds: Don't chase yield. Higher yield = higher risk, there is no free lunch.

Another Reader

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Re: In-laws retiring with little money...
« Reply #41 on: April 07, 2019, 09:43:43 AM »
First, I'm suspicious of that 2 percent mortgage.  I would look at that very carefully to see what type of mortgage product that is and how long the rate lasts.  With your in-laws' history, they might have been talked into something that isn't really a mortgage at all.

Second, they cannot take any risk with their small nest egg, especially at their age.  The money should be placed in short term treasuries and laddered CD's.  By shopping around, you should be able to ladder CD's from two to five years.  At the five year end of the ladder, the CD's will pay over 3 percent.  CD's with terms of a year or less are not paying good rates.  Treasuries purchased through a broker such as Fidelity or Vanguard in $1,000 increments are higher yielding.  Although they are not paying much in income tax, treasuries are exempt from state income tax.  Any money they night need in a year belongs in a high yield savings account.

For high yield savings accounts and some CD's, use www.depositaccounts.com to compare rates.  Brokers also sell CD's with no mark up.  Fidelity has the easiest listing page to navigate for new issue brokered CD's.  Often their rates are higher, but there are some better deals direct from the bank out there.

jeromedawg

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Re: In-laws retiring with little money...
« Reply #42 on: April 07, 2019, 10:12:23 AM »
BTW: wanted to get some current feedback on what kinds of investments would be 'advisable' or perhaps most appropriate for the age group my in-laws are in (70s)
The dust is finally starting to settle with the restaurant closing and outstanding debts, etc being paid off. At the end of the day they will probably have around $226 left between their checking account and CDs they have (with APYs of 2.55% and less).

They have a really good rate on their mortgage (2% interest and property tax and insurance are *included* in the monthly payment with just under $224k left on the mortgage...current property would probably sell for $630ish or so).

We are considering advising that they move anything not being invested into a high-yield savings, and as the other CDs mature, move those into the same savings account. Then perhaps open a 'consolidated' CD with Synchrony or something where they'll be getting a higher rate of return. These would be 1yr CDs as well, in case they need more immediate access to the funds. For the next two years, they will continue getting the monthly payments from the seller-financing they agreed to (which is 5% on $60k for 2 years)...well, assuming the new owner doesn't default :T

Would it be a better idea to put any of their money into ETFs (dividend yielding perhaps)? Since they're in their mid-70s so the risk appetite I'm thinking is probably going to be lower, but I don't know practically what this should look like as far as investments/investment types is concerned.
@jeromedawg, I hope you meant they have $226k left. OMG, how did they get a 2% mortgage? Good for them!

Haha yea I meant $226k lol - oops! Yea, they really lucked out during closer to the bottom of the housing bubble. I think this was like end of 2011 where my wife got a call from them saying they had refinanced to that rate with taxes and insurance folded in. Pretty unbelievable.

EDIT: you know what - I totally botched it. It's actually supposed to be around $326k that they have - not sure how I missed that!
« Last Edit: April 07, 2019, 10:20:14 AM by jeromedawg »

jeromedawg

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Re: In-laws retiring with little money...
« Reply #43 on: April 07, 2019, 10:18:05 AM »
First, I'm suspicious of that 2 percent mortgage.  I would look at that very carefully to see what type of mortgage product that is and how long the rate lasts.  With your in-laws' history, they might have been talked into something that isn't really a mortgage at all.

Second, they cannot take any risk with their small nest egg, especially at their age.  The money should be placed in short term treasuries and laddered CD's.  By shopping around, you should be able to ladder CD's from two to five years.  At the five year end of the ladder, the CD's will pay over 3 percent.  CD's with terms of a year or less are not paying good rates.  Treasuries purchased through a broker such as Fidelity or Vanguard in $1,000 increments are higher yielding.  Although they are not paying much in income tax, treasuries are exempt from state income tax.  Any money they night need in a year belongs in a high yield savings account.

For high yield savings accounts and some CD's, use www.depositaccounts.com to compare rates.  Brokers also sell CD's with no mark up.  Fidelity has the easiest listing page to navigate for new issue brokered CD's.  Often their rates are higher, but there are some better deals direct from the bank out there.


Thanks for the insight!

I just logged into their mortgage site (OCWEN) and checked the terms:

Loan Type: Fixed Rate
Interest Rate(%):   2
Length of the Loan (Months):   360
Origination Date:   11/08/2004
Maturity Date:   12/01/2034

Another Reader

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Re: In-laws retiring with little money...
« Reply #44 on: April 07, 2019, 10:31:35 AM »
If they refinanced in 2011, that should be the loan origination date.  They may have gotten a temporary or permanent reduction in the rate, but I would look at the actual paperwork to verify the terms.  Ocwen is not a mortgage servicer I would trust.  Ask the in-laws for the paperwork that Ocwen sent them.  No one gets an unsolicited call from a servicer saying the rate has been permanently lowered to 2 percent.  Don't call Ocwen though... don't want to risk waking a sleeping dog.

Looking at Depositaccounts.com, Sallie Mae is currently offering 3.00 percent on two year CD's.  Synchrony and Live Oak Banks are offering 2.80 for one year CD's.  You don't get much premium for going out longer term right now.  High yield savings are in the 2.2 to 2.3 percent range.  Treasury yields are slightly higher and are exempt from state taxes, but require a lot of management as they need to be bought every time one expires.

jeromedawg

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Re: In-laws retiring with little money...
« Reply #45 on: April 07, 2019, 10:55:18 AM »
If they refinanced in 2011, that should be the loan origination date.  They may have gotten a temporary or permanent reduction in the rate, but I would look at the actual paperwork to verify the terms.  Ocwen is not a mortgage servicer I would trust.  Ask the in-laws for the paperwork that Ocwen sent them.  No one gets an unsolicited call from a servicer saying the rate has been permanently lowered to 2 percent.  Don't call Ocwen though... don't want to risk waking a sleeping dog.

Looking at Depositaccounts.com, Sallie Mae is currently offering 3.00 percent on two year CD's.  Synchrony and Live Oak Banks are offering 2.80 for one year CD's.  You don't get much premium for going out longer term right now.  High yield savings are in the 2.2 to 2.3 percent range.  Treasury yields are slightly higher and are exempt from state taxes, but require a lot of management as they need to be bought every time one expires.


Good idea - I'll see if they can find the original paperwork for all that. *Hopefully* they still have it.... I don't know if they got a call or if they originally sought it out and called in themselves - it was a company by the name "Litton Loans" before it OCWEN bought them in mid-2011. Then the refinance occurred around November if I recall.

So how would you generally split the total amount of funds they have between 1yr, 2yr and 5yr CDs? Currently it looks like my FIL sort of "laddered" some CDs but they're all one year just different start/end dates.


EDIT: my wife says that their CPA handled all the refinancing and what not. Guess we'll have to ask him for the paperwork
« Last Edit: April 07, 2019, 11:21:58 AM by jeromedawg »

Another Reader

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Re: In-laws retiring with little money...
« Reply #46 on: April 07, 2019, 05:54:51 PM »
In your shores, I would get that paperwork.  Litton was not a good company to do business with.  They were responsible for a chunk of bad loans and were not noted for playing fair with borrowers.  Plus in the earlier stages of the meltdown, one approach to the problem was to delay payments rather than permanently reduce them.  The loan could be accruing the difference in interest, resulting in a balloon payment at the end. 

I would split the money by when they might need to have access to it without penalty.  Since there is currently no premium for going out five years, I would buy a number of $10k CD's for one, two and maybe three years, splitting the rest between high yielding savings and US treasuries bought at auction through a broker with terms less than a year.  There is a thread over at early-retirement.org on this topic, although you won't want to chase yields at obscure credit unions with complicated membership requirements.  Link to the last page as of today, look back to see some of the deals.  http://www.early-retirement.org/forums/f28/best-cd-and-mm-rates-thread-2019-please-post-updates-here-95956-17.html

jeromedawg

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Re: In-laws retiring with little money...
« Reply #47 on: April 08, 2019, 04:10:54 PM »
In your shores, I would get that paperwork.  Litton was not a good company to do business with.  They were responsible for a chunk of bad loans and were not noted for playing fair with borrowers.  Plus in the earlier stages of the meltdown, one approach to the problem was to delay payments rather than permanently reduce them.  The loan could be accruing the difference in interest, resulting in a balloon payment at the end. 

I would split the money by when they might need to have access to it without penalty.  Since there is currently no premium for going out five years, I would buy a number of $10k CD's for one, two and maybe three years, splitting the rest between high yielding savings and US treasuries bought at auction through a broker with terms less than a year.  There is a thread over at early-retirement.org on this topic, although you won't want to chase yields at obscure credit unions with complicated membership requirements.  Link to the last page as of today, look back to see some of the deals.  http://www.early-retirement.org/forums/f28/best-cd-and-mm-rates-thread-2019-please-post-updates-here-95956-17.html

So my FIL seems to want to just bury his head in the sand - said he doesn't have the documentation and neither does the CPA. smh... I guess we'll let them be and they can deal with it when SHTF. I have a feeling after reading around from all the horror stories, that they may very well have signed up for a loan with a balloon payment and don't care to think about it as long as they can continue making their payments now.

Unless there's some other way they can obtain the documentation without "tipping" OCWEN off.

Curious... even if they did care enough to obtain a copy of the documentation, etc, what would they really be able to do if OCWEN comes back and says they owe a $200k balloon payment?


EDIT: I just found the doc - it's actually uploaded on their portal in an inconspicuous place for all signed and recorded documents. It *is* a balloon payment :( as per the following... "YOUR LOAN, AS AMENDED BY THIS LOAN MODIFICATION AGREEMENT, IS A Twenty Two (22) YEAR SHARED APPRECIATION LOAN. A BALLOON PAYMENT OF PRINCIPAL EQUIVALENT TO 25% OF THE APPRECIATION OF THE PROPERTY WILL BE REQUIRED AT MATURITY. YOUR MORTGAGE WILL SECURE AS A FUTURE ADVANCE ANY AMOUNT OF THE 'SHARED APPRECIATION AMOUNT' ACCRUING OR APPLIED IN THE FUTURE"

and then this "BALLOON DISCLOSURE" on another page:
"THIS BALLOON DISCLOSURE is made this 1st day of December, 2011, and is incorporated into and shall be deemed to supplement the "Modification Agreement (the "Agreement") of the same date given by the undersigned Borrower. The Agreement contains a balloon feature that requires the Borrower to make an additional payment based on the future appreciation of the Property. This means that even if I make all payments full and on time, the loan will not be paid in full by the final payment date. A single balloon payment will be due and payable in full on 12/1/2034, provided that al payments are made in accordance with the loan terms and the interest rate does not change for the entire loan term. The balloon payment may vary depending on the Shared Appreciation Amount as determined at the time of maturity"

**facepalm**

So according to that alone, it seems like they'll be out 25% of the appreciated price from the re-modified loan amount and gross sale amount.
« Last Edit: April 08, 2019, 06:25:12 PM by jeromedawg »

Another Reader

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Re: In-laws retiring with little money...
« Reply #48 on: April 08, 2019, 06:31:49 PM »
That was not atypical of the loan modifications early on.  Especially with the sleazy servicers.  The in-laws likely won't be around in 2034, but when they or their heirs sell, the actual lender is going to get a nice payday.

jeromedawg

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Re: In-laws retiring with little money...
« Reply #49 on: April 08, 2019, 08:19:04 PM »
That was not atypical of the loan modifications early on.  Especially with the sleazy servicers.  The in-laws likely won't be around in 2034, but when they or their heirs sell, the actual lender is going to get a nice payday.


So it sounds like they basically just signed away the loss and it's a sunk cost at this point. I've seen some lawsuits here and there but doesn't seem like they're very successful and even then probably not much to get out of them anyway. Do you think it's better for them to sell the place as soon as they can and downsize into a 55+ community or something like that, rather than waiting to pass it on to in their estate?