Author Topic: Should my mom retire?  (Read 1556 times)

mrmoolaman

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Should my mom retire?
« on: March 09, 2019, 06:25:53 PM »
Here's the details:

My parents are not MMM followers (yet)!

My dad is retired from a government job, monthly pension: $2600 after tax. He also receives an additional disability payment of $1000 after tax for next 9 years (until he's 65). (So yes, he's early retired!)

My mom works three days per week and makes $3000 per month after tax. Some bonuses as well but nothing to count on.

They also still receive rent payments from two children living at home. $500 dollars total. (Don't say to increase this as this is my rent payment :))

Total monthly income: $7100. This would drop to $3100 if mom retired. If, however, my dad dies then the disability payment ends and the pension is cut in half.

Current assets:
House worth 850k (92k mortgage balance)
TFSA: 95k
RRSP: 45.6k

Liabilities:
House mortgage: 92k @ 3.4% with 26 years remaining. Monthly payment is $376

Expenses (roughly, they're bad at budgeting):
Water and garbage: $41/month
House maintenance: $75/month (not really enough)
Truck maintenance: $50/month
Truck Insurance: $200/month
Truck Gas: $100/month
Entertainment: $100/month (never enough)
Clothes: $50/month
Gifts: $75/month
Car Gas: $195/month
Car repairs: $292/month
Car Insurance: $162/month
Mom work clothes: $108/month
Property tax: $231/month
Timeshare Expense: $75/month
Holidays: $75/month (never enough)
Cell Phones: $90/month
Donations: $600/month
Groceries: $700/month
Smoking: $400/month (Dad's being trying to quit for as long as I can remember)
Life insurance: $200/month
Electric: $126/month
Gas: $52/month
Cable/Internet: $160/month
House insurance: $85/month

Total: $5700/month (This is lower than income but somehow the money doesn't pile up too drastically in the chequing account.)

They also contribute $1100 monthly to their TFSA accounts.

For me looking at it, I feel like the house feels like a big asset, but it can't be relied upon in retirement because it's just a place to live.
I think they need a fresh set of eyes to take a look at it and tell them where to cut the crap!!

In short, can my mom retire, or if not, what kind of game plan do they need to enact to make it happen.

Thanks!




Villanelle

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Re: Should my mom retire?
« Reply #1 on: March 09, 2019, 06:56:46 PM »
Total is $7100, she makes $3000, so wouldn't it decrease to $4100, not $3100??

Also, since the written expenses are $5700 but they don't have $1300 leftover every month (or maybe it's $200, after the $1100 TFSA you mention), clearly those expenses aren't accurate.

The investment accounts would only throw off about $5600/yr (with the 4% rule applied).  Assuming they will have $4100 if your mom quits, they need $1600/month, so now, they don't have enough.  However, if they get rid of the $1100 investment and cut that missing $200, it's close.  But the other issue is that your dad's disability goes away.  What does their SSI situation look like?

To me, it seems like it she can't quit yet, but perhaps could cut down to 2 days, unless they want to trim the budget. 
 

mozar

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Re: Should my mom retire?
« Reply #2 on: March 10, 2019, 06:55:09 PM »
What kind of job pays  you 3000 a month for three days a week? She should hold on to that for as long as she wants to.

Linea_Norway

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Re: Should my mom retire?
« Reply #3 on: March 11, 2019, 06:23:58 AM »
Liabilities:
House mortgage: 92k @ 3.4% with 26 years remaining. Monthly payment is $376

Expenses (roughly, they're bad at budgeting):
Water and garbage: $41/month
House maintenance: $75/month (not really enough)
Truck maintenance: $50/month
Truck Insurance: $200/month
Truck Gas: $100/month
Entertainment: $100/month (never enough)
Clothes: $50/month
Gifts: $75/month
Car Gas: $195/month
Car repairs: $292/month
Car Insurance: $162/month
Mom work clothes: $108/month
Property tax: $231/month
Timeshare Expense: $75/month
Holidays: $75/month (never enough)
Cell Phones: $90/month
Donations: $600/month
Groceries: $700/month
Smoking: $400/month (Dad's being trying to quit for as long as I can remember)
Life insurance: $200/month
Electric: $126/month
Gas: $52/month
Cable/Internet: $160/month
House insurance: $85/month

Total: $5700/month (This is lower than income but somehow the money doesn't pile up too drastically in the chequing account.)

Is the life insurance on your father's life? In that case there is no need to worry about him passing away and losing the disability payment.

The mortgage sounds like a good deal.

The Timeshare Expense sounds like a totally optional thing. So is the high amount of donations. I think they should reduce that when your mum retires.

Your mum spends more per month on working clothes than I did in whole 2018.

Groceries is quite high. Are they paying for the children living with them (including you)? Is that reasonable, or should you also be contributing to that? I think your parents cannot count on you two living there forever. Will they rent out to others later?

Do they need a truck? Could they live with only 1 car and taking uber occasionally?

The have entertainment, in addition to cable and gifts. Sounds like a lot that could easily be trimmed a bit.

Maybe your mum can retire, but they need to adjust their expenses to the new income flow.

NonprofitER

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Re: Should my mom retire?
« Reply #4 on: March 11, 2019, 07:55:06 AM »
The car and truck both seem to have astronomical insurance costs. Is there a reason their insurance is so high?
Somehow their vehicles are costing almost ~$1,000 a month between high repair bills, gas, and insurance.
I think there is a lot of room for improvement there!

slow hand slow plan

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Re: Should my mom retire?
« Reply #5 on: March 11, 2019, 12:26:07 PM »
You should pay more rent or let her move and downsize. 500 combined rent from two "kids" is so under market it is a disservice you are doing to them.

Playing with Fire UK

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Re: Should my mom retire?
« Reply #6 on: March 11, 2019, 01:00:09 PM »
You should pay more rent or let her move and downsize. 500 combined rent from two "kids" is so under market it is a disservice you are doing to them.
+1

If you add the amount that they are subsidising your rent that is a LOT of donations. If downsizing is an option it would free up a lot of funds for retirement.

mm1970

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Re: Should my mom retire?
« Reply #7 on: March 11, 2019, 02:40:05 PM »
Does she want to retire?  Sounds like a pretty sweet gig to me.

ChpBstrd

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Re: Should my mom retire?
« Reply #8 on: March 13, 2019, 12:48:46 PM »
They have almost $1M in assets. Unfortunately, this is mostly tied up in housing.
They spend $68,400 per year.
Your mom has a $1,300/mo ($15,600/year) pension to count on in the hypothetical event of her retirement and your dad's death..
The earnings gap is $68,400-15,600=52,800.
Their sustainable withdraw rate would be $40k/year if they sold the house and put it all in the market.

So the answer is, she could retire if they could drop their spending by about $13k, sell the house and find somewhere cheap to live, and invest their total $1M portfolio. Probably not going to happen.

They won't do this because their kids need the subsidized housing. The other reason your mom can't retire is because of your dad's rate of smoking ($4800/year in cigs!). He could drop at any moment and leave the majority of the family's income cut off, or develop a major health issue that bankrupts them. This is the hair on fire emergency that needs to be addressed first and foremost, because of the financial risk to your mom.