Author Topic: Parents with no retirement plan - should we buy their house?  (Read 5290 times)

SadParentsAndSiblings

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I love my parents. They are selfless people. They spend most of their free time volunteering at their local church, babysitting for neighbors and friends, and supporting family members. For all of the good, there is a horrible truth; my parents are awful with money. As far back as I can remember, they've complained about money. Growing up it was common for my siblings and I to overhear them arguing over their finances while we were supposed to be fast asleep. It's always been a problem for them, and now that they are in their late 50s I feel like it's becoming my problem.

Their money issues are caused by pretty typical reasons; they spend way more than they should. As the old adage goes, "You can either be rich or act rich." They choose to act rich. They have a beautiful waterfront home -- read "a large mortgage" -- in a growing city, car loans for brand new vehicles, and just a lot of unnecessary shit. They also have the somewhat admirable habit of being far too generous with gifts, which I would really respect if they could actually afford it!

Recently they've mentioned in casual conversation that they don't have any plan for how to retire. Being 30 and almost FI, this is really tough for wife and me. We want to help my parents out financially so that they can retire in the next few years, but we are not sure how to best do that. They seem too stubborn to change their spending habits, and so the thought of just giving them a money-gift scares me. The top option is my mind right now is that in 5 or so years, my wife and I offer to buy their house. This would give them an influx of cash that, if properly invested, would provide them with a steady stream of income.

Has anyone here purchased their parents home? How'd that go? Any feedback or insight would be appreciated!

For what it's worth I have siblings, but I don't see either of them being in a situation to help in the next 10-odd years. In fact, their own financial issues are worthy of a separate post. :(
« Last Edit: June 01, 2018, 05:42:16 PM by SadParentsAndSiblings »

plainjane

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Re: Parents with no retirement plan - should we buy their house?
« Reply #1 on: June 01, 2018, 05:56:31 PM »
This sounds like a bad idea.
Where do you anticipate your parents will live when you buy their house?
What makes you certain that your parents would properly invest the money and not just draw down on principle?

Your parents are in their 50s. My parents are in their 70s and still working (their choice, the house was paid off in the 80s).

If you feel really strongly about this, start saving or investing money that you plan to gift them when they need it and start asking.

SadParentsAndSiblings

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Re: Parents with no retirement plan - should we buy their house?
« Reply #2 on: June 01, 2018, 06:05:53 PM »
I should clarify that the plan would be to buy their house and to let them continue to live in it.

> What makes you certain that your parents would properly invest the money and not just draw down on principle?

I'm not certain, but that'd be part of the conversation I'd have with them. Ideally, I'd manage the money for them.

ixtap

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Re: Parents with no retirement plan - should we buy their house?
« Reply #3 on: June 01, 2018, 06:26:28 PM »
I should clarify that the plan would be to buy their house and to let them continue to live in it.

> What makes you certain that your parents would properly invest the money and not just draw down on principle?

I'm not certain, but that'd be part of the conversation I'd have with them. Ideally, I'd manage the money for them.

No.

This might work for some families where the parents ask for it, but it is not something for you to pursue. Around here, we usually tell parents to not treat their children like this, even. If you offer them money, you don't get to attach strings to it.

Frankies Girl

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Re: Parents with no retirement plan - should we buy their house?
« Reply #4 on: June 01, 2018, 08:52:53 PM »
So your parents frittered away all of their money on living in the now - buying things without thinking about the future, indulging in fancy things even when they had to go into debt to do so, lived their lives so that the threat of money problems were so terrible that you grew up hearing them arguing so often about money that it is a vivid memory.

Now you propose bailing them out of their too expensive house, so they can quit working "in a few years," meaning while in their 50s, which is super early retirement age, usually meant for those hard working people that save, budget and stuff (i.e. not like your parents). You literally are going to reward a lifetime of their terrible, irresponsible behavior.

And how long do you think they'll last paying for their lifestyle after they're no longer working, even without a mortgage payment? And what about insurance, taxes, cars, eating out, buying things for others (which they shouldn't be doing if they have no money saved for the regular bills anyway), and all the other stupid spending decisions they've made... they're suddenly going to become perfect budget masters that count every penny of their pension/social security, which they won't even be able to draw on until 62-ish and that's if they make the stupid decision to draw early? What are they going to use to pay for their expenses if they're not working and they don't choose to invest the buyout, or draw it down so fast they run through it in a few years? Because you buying their house isn't going to fix things; you're just kicking the can down the road a bit and the problem is still quite THE Problem, and won't get better if they don't figure out how to be responsible, frugal adults on their own.

I get you love your parents. But you are not responsible for their mistakes, nor should you bail them out of easily correctable behavior. Bailing them out without helping them to fix the underlying issues that got them into this mess is like slapping a bandaid on a broken leg - they'll be back before you know it, hand out and expecting more and more from you and soon feel entitled to your economic support. It's called "enabling" and it never, ever works.

They are capable of working? Then they work. They want to spend money, they need to earn it. If they don't have enough? Then they do without some of their fripperies.

Next time they hint that they don't have a dime saved, you ask them if they would like your help in figuring out exactly how bad the picture is, what they could do now - sell fancy house and get a small house or rent a reasonable apartment, work options, how to save and invest, what they can expect from social security, basic budgeting.

If they want help, THAT is what you give them - actual, real help. NOT A BAILOUT. They learn nothing from being given gobs of money or you buying their stupid house and don't think it's going to end there. If they truly want help, then give them real, actionable advice and support. That is what you offer ANY relative or friend. Your wallet is closed, unless it is an emergency. You tell them that you love them, but money creates a terrible mess in relationships and you don't want this to drive a wedge between you and this most certainly will cause long term worry and resentment if you have to provide constant financial support. 

And you tell them that you're unable to provide living expenses or or long term financial support. Offer then a few thousand if they get into a desperate situation, but honestly this is not something you need to get into, and you need to make sure they understand that they can't expect you to become their sole supporter due to their lack of planning.

The ONLY time I'd say it was a good idea to give money (large sums anyway) would be a true emergency. An accident, an unexpected and desperate situation that no one could avoid... not this sort of thing at all.


calimom

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Re: Parents with no retirement plan - should we buy their house?
« Reply #5 on: June 01, 2018, 11:07:02 PM »
Agree with Plainjane and Frankie's Girl. Seriously, this is a situation of their own making, as wonderful a couple as they may be.

I say let them toddle along to age 70 or so. If they ask for your financial advice, give it to them, but it's unlikely they'll seek it out. If their jobs are not overly strenuous they may well be able to work till 70 or beyond. It's not the most unusual thing in the world. And they'll probably buy new financed cars in the meantime, deeming the 4 or 5 year old vehicles not up to par and get a whole new monthly payment thing going on. As stupid as it is, it's their problem, not yours.

At some point they may be forced to reevaluate their situation. They may choose to downsize and have a reality check on what their SS benefits can bring them, plus decide to live in a smaller house or condo. In the meantime, your money is your money. FIRE, travel the world, live frugally and be the loving offspring that you are.

elliha

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Re: Parents with no retirement plan - should we buy their house?
« Reply #6 on: June 02, 2018, 03:07:38 AM »
Your parents are grown ups who are capable of making their own decisions. Just like they hopefully let you make your own decisions at one point you should let them make theirs. If they don't plan to retire or they are just starting with making arrangements now that is their choice and you can help them for example by suggesting what to invest in and such or by showing them that if they save x amount a month and invest it they still may be able to have a decent sum towards retirement in 15-20 years. They may take you up on your offer to help or they may say that they think things will turn out great anyway or something like that and they you leave it and let them be adults. If they would be in their late 60s now and desperate to retire I would understand your thinking more but I am still against becoming your parents' parents unless they are not mentally sound and this is necessary to protect them. I strongly believe parents should be shown love, respect and consideration and while this suggestion is considerate and loving it is not respectful as it is disqualifying their judgement. Yes, their decisions were not optimal but it is not extreme and they have at least some time to do something about it and I think trying to get them to do that should be priority number 1.

LouLou

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Re: Parents with no retirement plan - should we buy their house?
« Reply #7 on: June 02, 2018, 05:23:41 AM »
The top option is my mind right now is that in 5 or so years, my wife and I offer to buy their house. This would give them an influx of cash that, if properly invested, would provide them with a steady stream of income.

I understand where you are coming from (I have a wonderful, spendthrift parent as well), but this is a terrible idea.

The reality is, if they valued retirement or financial stability, they would have made very different choices.  They will not suddenly value those things when it is your money.  Their spending bothers you now, but it would bother you even more if you were funding it.  You also say you would manage the money - would you really want to be in a position to constantly deal with their requests for distributions ("My car is five years old and I need a new one!" "We need $$$$ for Christmas gifts!"). Ultimately, connecting yourself financially to your parents would probably harm your relationship.

Something else to realize is that they are adults, and they are allowed to make their own choices. They like nice things, and they like those nice things enough to keep working.  You can talk about your values and plans, but if they don't care that is their business.

My mom is similar - very generous, great mother and grandmother, terrible with money.  She is healthy and able to work, and she spends all that she earns. Currently, she is our live in nanny.  She provides excellent care for my kid, and in exchange we give her a stipend and room/board.  She also cleans homes for a few people for extra money.  She spends every dime, as she has always done. (One of her friends recently said, "no living expenses? Your bank account must be huge!" haha, no.)

She plans to move to a resort city and live it up.  She can of course do that.  She will not retire, as she will always spend her income.  BUT When she is not able to work anymore and/or becomes sick, she can move in with us and I will take care of her.

Long story short, you can help your parents when they really need you, and you can respect their choices.  Giving them money, managing their money, buying their nice house for them, etc is probably not the best way to do that.

Letj

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Re: Parents with no retirement plan - should we buy their house?
« Reply #8 on: June 02, 2018, 05:57:52 AM »
Itís your parents; help them if doing so would not hurt you financial security.  Not everybody is wired to think about their future or meticulously plan their lives and itís often not a deliberate choice for them to put off the future. So they werenít great stewards of money; well so are billions of people with similar traits. There really isnít much you can do to change their behavior. My mother is similar but I wouldnít let her suffer for mistakes sheís made with money when I have the means to easily help. Life is messy and we just arenít perfect beings who always make th best choices. Itís why in many places, the government forces people to save; think Singapore for example.

DeltaBond

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Re: Parents with no retirement plan - should we buy their house?
« Reply #9 on: June 02, 2018, 06:25:59 AM »
For one, their in their 50s, still plenty of time for them to make some solid changes.

For two, why not help them make those changes - and remember, baby steps.  Money is emotional, and at their age, the habits are strong.

Teach them to fish, ya know?

DeltaBond

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Re: Parents with no retirement plan - should we buy their house?
« Reply #10 on: June 02, 2018, 06:36:35 AM »
Oh, and one other thing - if you DO help them with those changes, maybe don't start with their spending habits.  Instead start with their saving habits and investing habits.  That can be treated like a bill, and can be a lot easier for people to stomach, rather than not spending in their usual way.

COEE

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Re: Parents with no retirement plan - should we buy their house?
« Reply #11 on: June 02, 2018, 06:52:12 AM »
This is called Economic Outpatient Care.  Usually the other way around (wealthy parents providing for children well into adulthood.)  You can read about it in "Millionaire Next Door".  https://www.amazon.com/Millionaire-Next-Door-Surprising-Americas/dp/1589795474

Our generation is starting to see so much of this - particularly on this forum.  My wife and I are seeing this with our parents as well.  We've decided not to support our parents so far - and we probably never will for a couple of reasons.  1) Giving them money is not going to change any habits.  2) They've made their bed.  3) Offering to help may really offend them.  4) Any "influx of cash", as you put it, would likely be seen as a raise and it would all be pissed away as well.

It's hard to watch.  Painful at times.  Especially when I know I can sign a check and resolve many of their problems.  But I know it's not in their best interest. 

Your parents are in their late 50's.  If you start providing EOC now, expect to do so for the next 30+ years.  Can you handle that?  You're fooling yourself if you think your parents will let you handle their finances.

Gone Fishing

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Re: Parents with no retirement plan - should we buy their house?
« Reply #12 on: June 02, 2018, 07:08:51 AM »
No. 

pbkmaine

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Re: Parents with no retirement plan - should we buy their house?
« Reply #13 on: June 02, 2018, 07:25:41 AM »
DO NOT DO THIS. Put aside money instead for their future needs.

Sun Hat

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Re: Parents with no retirement plan - should we buy their house?
« Reply #14 on: June 02, 2018, 07:35:59 AM »
My mom is similarly bad with money, and just retired at 67. Against better judgement I offered to either give her money to supplement her retirement savings or buy her house and let her continue to live in it, but she was WILDLY offended.

The advice in the above posts is good, even though it's hard to see our parents in a tough position. I'm going to have to revisit Frankie's Girl's post to remind myself of why I should stay out of my mother's finances.

That said, when they get to be old enough that continuing to work is seriously impacting their health, it might be worthwhile to suggest that they sell the waterfront house to downsize into something "easier to manage" and use the windfall/reduction in expenses to retire. Waterfront property in a growing city will usually increase in value at a good rate. This way, you're helping, but with their own money.

Noodle

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Re: Parents with no retirement plan - should we buy their house?
« Reply #15 on: June 02, 2018, 08:02:47 AM »
No.

Your parents are adults and capable of making their own choices, good or bad. It may someday come to a point where they aren't capable of managing their own affairs and you have to step in, and it wouldn't hurt to have a plan already talked out with your spouse about what you will do at that point (and maybe have some of the money you are thinking about putting into their house tucked away and accruing interest for that contingency).

Down the road, you would still have the option of buying their home if at that point you felt like it was the right choice.


SadParentsAndSiblings

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Re: Parents with no retirement plan - should we buy their house?
« Reply #16 on: June 02, 2018, 11:26:31 AM »
There are too many good replies here to address all of them, but thank you to everyone who left feedback. The general overwhelming consensus here is "No" and there are some really compelling points against it. You've all convinced my wife and I not to pursue this house purchase.

A lot of people here seem to feel that they dug their own grave and now must lie in it. It's hard work to reach FI, and if you don't put in the time you shouldn't reap the rewards. I understand that, but these are my parents. They truly were and are great parents and did a lot for me financially growing up. I wouldn't have graduated from college debt-free without them. Sure, they didn't have the foresight to save much for their own retirement, but they definitely set me up for success.

A lot of what MMM and many other FI bloggers preach is that the pursuit of FI isn't entirely about money; it's about maximizing happiness. It's about having the freedom to pursue things that bring you joy. It's about eliminating stress, and making the world a better place. What brings me happiness is knowing that my loved ones are taken care of both emotionally and physically. Finances can play a big role in that.

My wife and I totally agree that my parents are not capable of changing their spending habits unless they are forced to do so by their own financial situation. That's not our burden to bear and we get that. As their child, I do feel compelled to help in some way at some point because helping them will bring me joy.

debbie does duncan

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Re: Parents with no retirement plan - should we buy their house?
« Reply #17 on: June 02, 2018, 11:45:22 AM »
Somehow you believe enabling their bad behaviour will make you happy. Well you certainly learned that from your parents.
Reread what Frankies Girl said until it sinks in.

Raenia

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Re: Parents with no retirement plan - should we buy their house?
« Reply #18 on: June 02, 2018, 12:15:28 PM »
My wife and I totally agree that my parents are not capable of changing their spending habits unless they are forced to do so by their own financial situation. That's not our burden to bear and we get that. As their child, I do feel compelled to help in some way at some point because helping them will bring me joy.

It's ok to want to help them at some point, but that point is not until they've realized they have a problem and start looking for solutions - real solutions, not "bail us out" solutions.  It should come after they've realized and accepted that they can't keep this up, and need to make changes.  If they have a health issue, by all means help them with it.  Don't enable their overspending by subsidizing their lifestyle.

Awesomeness

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Re: Parents with no retirement plan - should we buy their house?
« Reply #19 on: June 02, 2018, 12:49:39 PM »
You have a good heart and good intentions thatís for sure.  I think itíd be great for you to continue on your FI path with the idea that you will help your parents when the real need arises.  Doesnít sound like thereís a need now.

Thinking something along the lines of an inlaw suite in your home they could live in. Maybe buy a rental property now with the idea that your parents could occupy it someday. A cheap small property that could be set up for aging parent later, cheap utilities, easy maintenance, itís near you etc.

KBecks

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Re: Parents with no retirement plan - should we buy their house?
« Reply #20 on: June 02, 2018, 12:58:56 PM »
Honestly, don't interfere in your parents' finances unless they ask you for help with it.  You could say something like, I read this book and it really helped me, and pass them a personal finance book.  But I think you should not make your parents any offers, unless they really need help.  You are the kid, it is unlikely they will listen to your advice.

Awesomeness

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Re: Parents with no retirement plan - should we buy their house?
« Reply #21 on: June 02, 2018, 01:30:18 PM »
Give them a sizable monetary gift today.  No strings attached.  Explain itís for paying for your college and setting you up for success.   This way itíll bring you joy today.  Iíd share too how you are so close to FI.  That might get them thinking at least and maybe a chance to have real conversations about their retirement.  Theyíll probably tell you what they do with those funds and youíd get a feeling how it would have gone if you bought their house, just on a smaller scale. This way youíd get that joy today and still could plan to be there for their needs. 

Money does weird things to people and Iíd hate to think theyíd just start using you as a piggy bank. My mind canít help going negative about people. Personally Iíd just take care of future needs and buy a nice dinner here and there but you know how this gift would land with them better than me. Good luck.

plainjane

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Re: Parents with no retirement plan - should we buy their house?
« Reply #22 on: June 02, 2018, 06:28:46 PM »
Give them a sizable monetary gift today.  No strings attached.  Explain itís for paying for your college and setting you up for success.   This way itíll bring you joy today.  Iíd share too how you are so close to FI. 

This is also probably a really bad idea. We have many stories on these boards of people then expecting that such money will be readily available for future sob stories. And then there will be resentment.

austin944

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Re: Parents with no retirement plan - should we buy their house?
« Reply #23 on: June 02, 2018, 07:14:44 PM »
Every day, send your parents links to stories and videos about retired people living in poverty, like this:

https://www.youtube.com/watch?v=vGqoxJCTTxg
https://www.youtube.com/watch?v=Wf9xmicMgjM

Introduce them to retired people living in poverty.

They must want to change their habits.  Any solution that does not start with this requirement is doomed.

« Last Edit: June 02, 2018, 07:24:13 PM by austin944 »

COEE

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Re: Parents with no retirement plan - should we buy their house?
« Reply #24 on: June 02, 2018, 07:39:10 PM »
A lot of people here seem to feel that they dug their own grave and now must lie in it. It's hard work to reach FI, and if you don't put in the time you shouldn't reap the rewards. I understand that, but these are my parents. They truly were and are great parents and did a lot for me financially growing up. I wouldn't have graduated from college debt-free without them. Sure, they didn't have the foresight to save much for their own retirement, but they definitely set me up for success.

I said that they made their bed.  Implying that they have to sleep in it.  The good news is that at any age they can chose to start making their bed in the morning so that the bed is comfortable that evening.

It's worth noting that parents often times will make really good decisions for their children, but not such great decisions for themselves.  Much how your parents did for you education, but have made poor financial decisions for themselves.

These things are okay, and have come to pass over millions of years of evolution.  Sacrifice of ones-self is what helps us evolve as a species.  Parents are hardwired to sacrifice themselves for their children.  A great example is that many many people have immigrated to the US - not so they could have a better life, but so that their children can.  It oftentimes takes one or two generations of hardworking parents in the US before the family has a college graduate in the family.

Another important factor is that some cultures really encourage taking care of parents as they age - even to the point of several generations living together in the same home, while other cultures take great offense.  Weigh this as a factor as well.

Villanelle

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Re: Parents with no retirement plan - should we buy their house?
« Reply #25 on: June 02, 2018, 08:12:48 PM »
You can't want this more than they do, and it sounds like they don't want it bad enough to do anything about it.  So  if you do something to save them some money, they will just waste that savings like they do everything else, and then you'll be poorer, too.


pbkmaine

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Re: Parents with no retirement plan - should we buy their house?
« Reply #26 on: June 02, 2018, 08:39:14 PM »
You can't want this more than they do, and it sounds like they don't want it bad enough to do anything about it.  So  if you do something to save them some money, they will just waste that savings like they do everything else, and then you'll be poorer, too.

Yes.

Awesomeness

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Re: Parents with no retirement plan - should we buy their house?
« Reply #27 on: June 02, 2018, 08:58:24 PM »
Give them a sizable monetary gift today.  No strings attached.  Explain itís for paying for your college and setting you up for success.   This way itíll bring you joy today.  Iíd share too how you are so close to FI. 

This is also probably a really bad idea. We have many stories on these boards of people then expecting that such money will be readily available for future sob stories. And then there will be resentment.

Possibly yeah. Hence my piggy bank comment. 


But the op knows his parents better than we do and surely has a good idea how this would all go down. Maybe he pays off one or both of their newer cars. If theyíre grateful and it makes them happy then he gets that joy of giving that to them. 

Imma

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Re: Parents with no retirement plan - should we buy their house?
« Reply #28 on: June 03, 2018, 02:05:49 AM »
If you really feel like at some point in the future you want to help them out financially, that's your choice. They still sound quite young, and you're nearly FI. I would probably mentally set aside a certain sum in case you want to buy a house for them in the future, then wait how things turn out. Your parents are still young enough (and I assume healthy enough) to work so I wouldn't want to offer them the money now.

If they can't work anymore at some point in the future, and you want to buy their home, I think it would be better if they'd buy an annuity for them instead of you managing their investment or them spending the money in a short period of time. I know that an annuity is a sub-optimal investment for someone on MMM, but for the average person with a spending problem, an annuity is a good investment. You know exactly what your income will be over the next X years. This annuity combined with their social security and a free place to live should be enough for them to live on in retirement.

Miss Piggy

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Re: Parents with no retirement plan - should we buy their house?
« Reply #29 on: June 03, 2018, 11:37:19 AM »
Your parents seem like the perfect target market for a Dave Ramsey class. Are you familiar with his "teachings"? I would suggest looking into local offerings (generally at a church, so perhaps Mom and Dad would appreciate that), starting with Financial Peace University. Perhaps you could suggest that all four of you take the class together.

renata ricotta

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Re: Parents with no retirement plan - should we buy their house?
« Reply #30 on: June 03, 2018, 11:49:00 AM »
I totally get where you are coming from -- I wouldn't let my parents suffer in their twilight years, even if their suffering was totally their fault and avoidable.  I think the bigger problem, as many have noted and you seem to realize, is that buying their house would probably not actually get the result you seek (financial security for your parents + a continuing happy relationship). 

I really liked this blog post by jlcollinsnh, about how buying a house for his mother was ultimately a more expensive and more relationship-wearing way to reach his goal (security for his aging mother) than other options, including just straight up giving her cash.  http://jlcollinsnh.com/2014/02/20/case-study-10-should-josiah-buy-his-parents-a-house/

As he notes, another wrinkle is the relationship with your other family members.  Even if this worked out totally great for your parents and your relationship was still great, others in your family might not see it that way.  If their great waterfront house ended up being a really good investment over the years, your siblings/cousins/uncles and aunts/neighbor's dogs might view it as you snatching away your parents' long-term investment in exchange for a paltry short-term payout.  Fair or not, they could view it as you exploiting your parents or snatching away all of their assets for yourself alone instead of being divided equally in their estate. 

My plan for my parents, if they end up in a bad financial situation (not a huge risk, they are pretty financially responsible) is to 1) encourage them to downsize if and when it makes sense, 2) subsidize their living expenses directly (via covering bills rather than just cash, which I agree seems odd), or, if it's really extreme/they have serious health issues, 3) invite them to live with me and take care of them.  That way, I can function as a fairly secure safety net that will keep them from any truly horrible outcomes, paying them back for all of their financial generosity that set me up well in life, but without intertwining our investments at all. 

Cassie

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Re: Parents with no retirement plan - should we buy their house?
« Reply #31 on: June 03, 2018, 01:14:11 PM »
As someone in there 60ís I can tell you that most parents will figure out how to make it work once they want to retire and will not take $ from their kids.  They have a great asset in the house and can use that in the future.

Catbert

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Re: Parents with no retirement plan - should we buy their house?
« Reply #32 on: June 03, 2018, 02:42:57 PM »
I'm in my mid-60s to put my thoughts in perspective.  First of all I agree with everyone else that there is no reason for you to buy their house or otherwise subsidize their lives at this point.  Second, I can't image taking money or advice about money from much younger relatives even if I needed the help. 

It's hard to tell how really bad their financial situation is.  Many people who aren't great with money can have a paid off house and be able to live on SS/pensions when the time comes.  They're fine even if that means downsizing, getting a reverse mortgage, and working longer than they want.  Then there are people who aren't great with money who've used their house as an ATM and have no equity, worked under the table so limited SS, and are forced to retire for medical or involuntary downsizing.  If your parents are the latter situation you may need to help at some point.

When the time comes there may be lots of things you can do depending on the situation.  One thing I've heard of, although never saw in action is a family funded reverse mortgage.  With that you pay your parents a monthly sum in exchange for an ever growing mortgage against their home (it could be interest free if that's how you want to handle it).  When they die or otherwise vacate the house it's sold, you get paid back and the remain goes to them or split among heirs.   This would work best if you are an only child so no one else will get their nose out of joint.  Definitely get a lawyer to write a contact.


chasingthegoodlife

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Re: Parents with no retirement plan - should we buy their house?
« Reply #33 on: June 03, 2018, 03:18:13 PM »
One more thing to consider about buying their house - is it a property they could comfortably age in?

After years working in community aged care, I think one of the biggest things people can do for happiness in their later years is downsize to a suitably sized, easy to maintain, newish property that has limited outdoor space, is all on one level with few or no stairs at entry, has an accessible bathroom, and is close to amenities (shops, doctors etc) and social connections. Ideally, the move happens when they still have the mental and physical energy to take ownership of the process, decorate their new space, get out and about in their new neighbourhood etc.

If you don’t see their current property being right for them in their 80s, hold off and consider whether you might buy the next one.

elliha

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Re: Parents with no retirement plan - should we buy their house?
« Reply #34 on: June 04, 2018, 05:33:28 AM »
One more thing to consider about buying their house - is it a property they could comfortably age in?

After years working in community aged care, I think one of the biggest things people can do for happiness in their later years is downsize to a suitably sized, easy to maintain, newish property that has limited outdoor space, is all on one level with few or no stairs at entry, has an accessible bathroom, and is close to amenities (shops, doctors etc) and social connections. Ideally, the move happens when they still have the mental and physical energy to take ownership of the process, decorate their new space, get out and about in their new neighbourhood etc.

If you donít see their current property being right for them in their 80s, hold off and consider whether you might buy the next one.

Very true. I worked in in-home elderly care in my early 20s and that made me sure I wanted to downsize or get a place that works for me in old age as well as early as possible, in my 50s or earlier but at the latest at 65 or so. I don't want a huge house just sitting there decaying because I can't keep it up and with space I don't need. A two bed apartment or very small house would be ideal.

Villanelle

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Re: Parents with no retirement plan - should we buy their house?
« Reply #35 on: June 04, 2018, 08:02:06 AM »
I totally get where you are coming from -- I wouldn't let my parents suffer in their twilight years, even if their suffering was totally their fault and avoidable.  I think the bigger problem, as many have noted and you seem to realize, is that buying their house would probably not actually get the result you seek (financial security for your parents + a continuing happy relationship). 

I really liked this blog post by jlcollinsnh, about how buying a house for his mother was ultimately a more expensive and more relationship-wearing way to reach his goal (security for his aging mother) than other options, including just straight up giving her cash.  http://jlcollinsnh.com/2014/02/20/case-study-10-should-josiah-buy-his-parents-a-house/

As he notes, another wrinkle is the relationship with your other family members.  Even if this worked out totally great for your parents and your relationship was still great, others in your family might not see it that way.  If their great waterfront house ended up being a really good investment over the years, your siblings/cousins/uncles and aunts/neighbor's dogs might view it as you snatching away your parents' long-term investment in exchange for a paltry short-term payout.  Fair or not, they could view it as you exploiting your parents or snatching away all of their assets for yourself alone instead of being divided equally in their estate. 

My plan for my parents, if they end up in a bad financial situation (not a huge risk, they are pretty financially responsible) is to 1) encourage them to downsize if and when it makes sense, 2) subsidize their living expenses directly (via covering bills rather than just cash, which I agree seems odd), or, if it's really extreme/they have serious health issues, 3) invite them to live with me and take care of them.  That way, I can function as a fairly secure safety net that will keep them from any truly horrible outcomes, paying them back for all of their financial generosity that set me up well in life, but without intertwining our investments at all.

I definitely wouldn't let my parents live on the streets either.  (Almost no chance, but the ILs...)  But I also wouldn't just throw my good money after their bad.  (Not that you are saying you would, I'm just piggy backing off your post.)  If they are in that situation, it would be time for basically a complete financial take over.  They get a small month "fun" allowance, and all the rest of their finances and bills come over to me.  If they can't accept that, then they are *choosing* to live on the streets.  Why anyone would simply hand over fistfuls of cash to people who have proven they are irresponsible with money is beyond me.  If you can't handle your own money responsibly, you don't get to try again with mine.  I will pay your bills, but they are going to be reasonable bills.  That means moving into a small 2 bedroom apartment in a safe but not fancy neighborhood.  It means going down to one modest car (most likely).  It means getting $300 a month to blow, and that's it, even if that's 1/10 of what you are spending now.  When it's gone, it's gone, and you don't get a credit card or access to an account with more, without going through me.   And if you blow through the grocery money I give you, you start getting grocery store gift cards.  I'd make sure my loved one was cared for, but the more irresponsible they are, the more control they are going to have to surrender.  If they don't like it, they are making a choice to be homeless, just like they made the choice to be broke. 

Sibley

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Re: Parents with no retirement plan - should we buy their house?
« Reply #36 on: June 04, 2018, 08:36:07 AM »
This is an application of what I think I'm going to call the law of expected consequences, which can be applied to all sorts of situations.

Explanation:
When you're a kid, if you don't play nice on the playground, the other kids don't want to play with you. So you go whining to your mommy, and mommy says that if you want the kids to play with you, you have to be nice. You begin to learn about expected consequences - be nice, or the kids don't want to play.

As a grown up, this still applies. If you have an adult who is nasty, manipulative, etc and they drive away their friends and family, then end up alone and in trouble when they get old, everything freaks out. However, this is an expected consequence.

It works for finances too. If you make poor decisions for years, the expected consequences are that you will be poor when you're old. Again, everyone freaks out. But it's a natural, expected consequence of decades of bad financial management.

I'm facing this with my parents. They've spent decades making bad decisions, and they're going to be poor. Doesn't help that work isn't going to be possible for my dad, and my mom hasn't worked in 30 years plus is in poor health. I will make sure they have food, shelter, medical care, etc. I will help them stretch their budget as far as possible, and get whatever help they qualify for. But I'm not going to subsidize eating out or cigarettes.

OP, your parents will have to sell their house and drastically downsize their lifestyle at some point. You can sympathize. You can offer to help with the process if you choose to. But, they made their bed. You can't prevent them from lying in it.

Cassie

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Re: Parents with no retirement plan - should we buy their house?
« Reply #37 on: June 04, 2018, 08:47:26 AM »
They are adults and will figure it out. A few of my friends ran out of money so moved into very nice low income senior housing.  They have had to adjust their lifestyle to the money they have each month and have done that. No one needed their kids to state the obvious or manage their money. People figure it out when they need to.

Lady SA

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Re: Parents with no retirement plan - should we buy their house?
« Reply #38 on: June 04, 2018, 10:10:59 AM »
If you are really worried, I would secretly set some cash aside in an investment account and have that be the "support parents if necessary" fund. That way, if a true emergency arises (like medical bills or illness, etc) you have something on-hand that isn't part of your stash to help. But I would echo the other comments that you should delay this help for as long as possible and you should really avoid subsidizing your parents in any way. Like I said, it sounds like your parents have nothing saved for medical crises or long-term care, so that is where I would focus my attention (in secret).

This is DH's and I's plan: we are still entirely focused on building our stash since we are just starting out. But DH's family really struggle with money and have almost nothing saved. His dad also has back issues that we think will devolve into a disability at some point. But, like your parents, his parents have made choices that means they will have to work longer than most to stay afloat. They spend money as soon as it hits their bank account. Like you said, they are lovely people and we really love them, but I can absolutely see us becoming a constant life-line if they get bailed out by us even once.

In a few years, once our FU/FI money is in place, we will be able to begin setting aside some investments in a separate account that we will mentally separate from our net worth because that is money we are setting aside to help with the inevitable surgeries that FIL will need down the line, maybe help with some medical bills, and also saving for long-term or end-of-life care for them. That can get incredibly expensive incredibly fast, and I know they will have nothing in the bank to pay for higher quality care. So that is the point that DH and I will step in, and because this money has been intended for this purpose and it isn't counted in our retirement stash, we aren't sacrificing our own future.

We aren't telling the ILs about this plan. This is just a safety net that we feel better having in place, and if they REALLY need it, it essentially doesn't impact us at all. And if they end up adjusting and not needing the safety net at all, then at the end of the day, we will end up having a bit of extra cash that we weren't expecting. I count that as a win-win. Perhaps a similar plan would work well for you and your wife. Take the downpayment you were considering using to buy their house and invest it yourself to help pay for their medical care in a few years. Then you can choose at your discretion how much to pull from this account to help with the various things that pop up.

frugaliknowit

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Re: Parents with no retirement plan - should we buy their house?
« Reply #39 on: June 04, 2018, 01:27:00 PM »
"Recently they've mentioned in casual conversation that they don't have any plan for how to retire".

How did you respond when they made that declaration?  Did you ask them or do you know what assets they have?  Are you just assuming they have "zip" or close to it?

NoraLenderbee

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Re: Parents with no retirement plan - should we buy their house?
« Reply #40 on: June 04, 2018, 02:10:04 PM »
perhaps you should consider a reverse mortgage. The bank (you) pays them $X per month for Y number of months, at the end of which (or, more likely, when they die) the bank owns the house. The $X is monthly income to them for their living expenses.

jlcnuke

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Re: Parents with no retirement plan - should we buy their house?
« Reply #41 on: June 04, 2018, 07:34:22 PM »
I moved my parents near me when they couldn't work anymore. I did so by talking to them and coming up with a plan where I bought their retirement home. It's "our" house now. I plan to retire there myself after they pass, but it eliminated their primary expense for their retirement and allowed them to be more comfortable in their retirement while taking care of the home for me until I take it over.

Linea_Norway

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Re: Parents with no retirement plan - should we buy their house?
« Reply #42 on: June 05, 2018, 05:12:02 AM »
Here is a good read about the subject of helping parents financially:

https://forum.mrmoneymustache.com/journals/playing-with-fire-is-getting-burned/

The message is: Keep your wallet closed, as it will hit back on you.
But offer to help them by taking control of their economy, if they ask for it.

jim555

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Re: Parents with no retirement plan - should we buy their house?
« Reply #43 on: June 05, 2018, 06:08:06 AM »
Pack up and move, leave no forwarding address, problem solved.

ambimammular

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Re: Parents with no retirement plan - should we buy their house?
« Reply #44 on: June 05, 2018, 07:35:44 AM »
Your folks are in their late 50s, not their 70s. There's no reason for you to finance their lifestyle. When they casually mention they have no plans for retirement, casually mention you can help them make plans. If you feel you must, invest a portion of your spare dollars for a secret "bail-out fund."

When your folks get to the point where their lifestyle is no longer sustainable, they'll have to change.
Let them.

If they have emergencies, use your bail-out fund.

You can't fund their unquenchable wants. Don't feel guilty for closing in on ER when they are so far from it. Their values are different than yours.

Cassie

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Re: Parents with no retirement plan - should we buy their house?
« Reply #45 on: June 05, 2018, 09:19:43 AM »
Also if they sell their home and rent and one of them end up in a nursing home they will have to spend all their money to pay for their care. This leaves the healthy spouse in poverty. If they keep the house that is allowed for the other spouse to keep living in it.

frugalgirl

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Re: Parents with no retirement plan - should we buy their house?
« Reply #46 on: June 07, 2018, 12:53:29 PM »
The next time that your parents complain about money or say they have no retirement plan, offer to help them look over their finances.  I did this last year when my parents--in their 80s--said they were running out of money.  They weren't looking for a handout, but they did want someone to buy their house.  I was shocked at their credit debt and the level of withdrawals from their IRA.  They had also signed onto a funeral plan which they couldn't afford.  I helped them organize their income and obligations, drew up different withdrawal scenarios for them, and developed a plan to get out of debt.  A year on, they have significantly less expenditures, withdrawal at about 1/2 the rate they were previously, and will be debt free by the end of the year.  The only thing I did for them financially was to promise to pay for their funerals so that they would let go of the funeral plan. 

I am capable of buying my parent's house, paying off their debts, etc. but I think they are a lot happier not being bailed out by their child.  They still feel in control of their finances and that makes a huge difference to them.