Author Topic: How to steer elderly parents into "right" direction...  (Read 2498 times)

Hitachi

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How to steer elderly parents into "right" direction...
« on: October 14, 2014, 03:59:14 AM »
This concerns some friends of mines parents....
Background:
Age 77 and 70. Both parents have had well payed jobs, have relatively well pensions. Live in a house that has appreciated well since they relocated. Mortage about half of house value now.
Very little savings if any, maybe 10-20 thousands us dollar in cash. Huge car loans, by new car every 2-3 year and take a 50% loss EVERY time. Spends all of their pension every month, not saving anything. However gives cash each month to one divorced daughter and pays for her 2 daughters activities that she can not otherwise afford. Don't know the exact amount but atleast 500-700$ a month. Daughter is not well of financially, singe and blew a 20 000 dollar lottery win (yes lightening can strike anyone obviously) in less than two years. Don't have anything to show for it except some souvenirs bought in the Caribbean on vacation.

Both parents like to invest in the stock market but don't have the patience to sit out a downturn. Invested heavily with some inheritence money -99 and sold it all in -01 promising never to invest in stocks again. Again could not "afford" to sit aside the market and invested heavily between -04 and -07, sold it all in -08. Calling me everyday to aks if I had seen what a horrible beating  the stock market had taken. Answered everytime the same, no I haven't just wait and it will rise again. MAybe not today but in a year or two. Always got the same answer, we are to old, we can not afford to wait, its better to sell of now and save what can be saved.

Another retired neighbour that had been working as a bank clerk at the cash register without any financial responsibilyty whatsoever was Warren Buffet in their eyes, they belived in every word this lady without any clue at all said. Of course they sold everything and again lost almost half of what they had.

I told them to not invest if they don't have the patience to wait. They said that they would not invest again since they are to old and they need their money now, not in the future. I found this very smart due to their age, health situation and what ever small funds they had left.
I know that her husband does not want to go into the stock market again, he says he is almost 80 and investing long term is for the younger people. His wife agrees but reluctantly..
 I know that she is weak and receptable for "make money fast" schemes, she even said that she wanted to start daytrading! I know that she buys and sells some stocks but for small amounts. Maybe 4-5 thousands dollars eachtime but not very often. When asking how it goes she always complains that she times it wrong... I belive this is a form of gambling addiction since she has been gambling alot when she was younger but still she doesn't make any big losses.

Of course she has trouble staying out of the market since the last year have been very well with rising stocks. Her solution since she doesn't have any big money left? Selling the house, taking a rental apartment and investing the profits in the stock market. Now, at this time!
Her daughter thinks its a great idea that cant go wrong. Personally I think the daughter is just hoping for a bigger inheritence about 10 years from now.. Sad but true.
I have asked her if it is so clever to do that at this moment. Ok, sell the house and move to an apartement if your husband cant deal with all work that a house demands but do not invest it in the stockmarket at this time, specially not when you know your previous expeirence and selling always low and buying high. I advised them to rather sell and have the money in cash, travel, spend some of the money before you are to old, live life now but don't invest it now at this stage.
Problem is that she is still listening to her former neighbour that is now 80+ and thinks that she can gives her great advice on stocks.

I really don't want them to sell the house and gamble the money away, rather they spend the money while they still can. How to get them to understand that investing for the future is not for them when they don't have the nerves to wait out a downturn without hurting their feelings? I really belive that if they suddenly have a large amount of cash they will be conned out of it from some slick investortype. Their daughter always seems to date some "entreprenuer" that strangely always also seems to be short of cash.
They do ask me for advice, but more on what type of stocks to buy...
How to help them to not loose all their money?

NewbieFrugalUK

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Re: How to steer elderly parents into "right" direction...
« Reply #1 on: October 14, 2014, 07:34:45 AM »
Hmm,  tricky situation! You seem very emotionally involved in their poor financial decisions. I would a) give up trying to influence them as they never listen or b) try very tough love - lay out their history of poor decisions as firmly as possible in your explanation of why they should not do this.  B is the approach I have to take with my own parents, who refuse to believe the idea that if something sounds too good to be true... They have made some awful decisions over the years.  Yes, they get upset and offended with me, but it does help them moderate the more insane schemes sometimes (buying a picture framing business, that was going busy, for example).
The other thing you should bear in mind in that much as you obviously care for these people, they are not your responsibility,  and, as adults, they will eventually do whatever they want. Good luck!

NewbieFrugalUK

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Re: How to steer elderly parents into "right" direction...
« Reply #2 on: October 14, 2014, 07:36:10 AM »
Sorry that last post should read going 'bust' not going 'busy'

deborah

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Re: How to steer elderly parents into "right" direction...
« Reply #3 on: October 14, 2014, 01:10:25 PM »
You should look into annuities. As you age, new annuities give more income, and you can still can get them with value at the end. For example, if I took out an annuity, I would get half the income my parents would for the same amount of money and the same terms and conditions. As you are in a different country, the rules will be different, but check them out.

Hitachi

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Re: How to steer elderly parents into "right" direction...
« Reply #4 on: October 15, 2014, 05:40:45 AM »
Hmm,  tricky situation! You seem very emotionally involved in their poor financial decisions. I would a) give up trying to influence them as they never listen or b) try very tough love - lay out their history of poor decisions as firmly as possible in your explanation of why they should not do this.  B is the approach I have to take with my own parents, who refuse to believe the idea that if something sounds too good to be true... They have made some awful decisions over the years.  Yes, they get upset and offended with me, but it does help them moderate the more insane schemes sometimes (buying a picture framing business, that was going busy, for example).
The other thing you should bear in mind in that much as you obviously care for these people, they are not your responsibility,  and, as adults, they will eventually do whatever they want. Good luck!

Yes, I actually feel sorry for them. They think they are doing the smart thing and listens to totally the wrong people. Both of them had sucessfull careers and were smart in their proffesion, therefore it makes me sad to see that they are in the risk of being ruined just become some smooth talker presents them with some shady investement ideas. They are also in that age where they (Not everyone) starts to forget things and so, it is also a reason for worry.

However I have decided to let them play it out they way they want. I don't want to be seen as someone that interfers with others business. They are adult and would be hurt if I talked about all their financial shortcommings. They ask me constantly why I don't buy a new car, or if i cant afford one why I don't lease one... I have money to buy a car in cash if I wanted to but I don't want to! Not as long as my old Volvo is still running good. When it dies i will buy another 3-5 year old car and keep it for atleast 5 years.
I have told them every time they ask me about investements what I think of the subject and given them advice that they never actually follows. This woman is not satisfied with a 4% return on invested money, she wants unrealistic amounts, just because some stocks have risen 30-40% in the last year she thinks that there are always some stocks that will rise with that amount and that it is just a question of picking them.
If they bankrupt themselves I'll have to help them but I hope that they won't.