Author Topic: Moms retirement  (Read 3448 times)

bigredball90

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Moms retirement
« on: January 17, 2018, 12:31:20 PM »
My mom is wanting to retire ASAP, but... she has very little savings maybe 30k.  Currently working as a school teacher with no debt and saving everything she can.  Good news is she has a house, and will probably be fine when she gets her inheritance.  Shes 61, 45-50k a year. 

My biggest questions would be what percentages should she be at im leaning 70/30. She has a 403b through the school, im just not sure if we should use an ira, or a roth.  Any suggestions would be great.

Zamboni

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Re: Moms retirement
« Reply #1 on: January 17, 2018, 12:41:35 PM »
She needs to max the 403b and fund the Roth . . . at least that's what I would do if I was her.

It won't be as big of a dent on her paycheck as she thinks on the 403b because it's pretax, so her tax will decrease, but it will be a dent. I say try the "max option" for one month and see if she can survive on what is left over.

The portfolio split is probably less important at this point than actually getting her to contribute as much as possible to savings.

uwp

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Re: Moms retirement
« Reply #2 on: January 17, 2018, 12:50:05 PM »
Does she have a pension? any idea on Social Security?
More info needed.

bigredball90

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Re: Moms retirement
« Reply #3 on: January 17, 2018, 01:48:32 PM »
No pension.  SS 768 at 62 or 1186 at 66.  She needs 2k a month right now. 
Forgot to ask earlier were moving her 403b (30K) from her old job over to vanguard is it a better idea to convert to a roth with it?  Currently can save 500 a month.

Ive been figuring out how to do my FIRE but, was a little un prepared for helping her out to!  Thanks! 

SwordGuy

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Re: Moms retirement
« Reply #4 on: January 17, 2018, 02:06:42 PM »
No pension.  SS 768 at 62 or 1186 at 66.  She needs 2k a month right now. 
Forgot to ask earlier were moving her 403b (30K) from her old job over to vanguard is it a better idea to convert to a roth with it?  Currently can save 500 a month.

Ive been figuring out how to do my FIRE but, was a little un prepared for helping her out to!  Thanks!

So, at about age 71, are you going to kick in $1000 a month when she runs out of money? 

Because that's her only workable retirement plan short of cutting expenses to about $1350 to $1400 a month.  Or winning the lottery or marrying someone with money.

I'm sure someone will chime in if I'm wrong.  I sure as hell hope I am.

bigredball90

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Re: Moms retirement
« Reply #5 on: January 17, 2018, 02:35:59 PM »
Nope not kicking in anything.  Best I can tell is shes working till her inheritance comes in, not really a way to guess when that will happen. 

Biggest thing right now is how to handle her investments.  She wants me to handle everything how I see fit basically.

Another Reader

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Re: Moms retirement
« Reply #6 on: January 17, 2018, 02:41:02 PM »
At 61, she has only nine years to RMD's on her retirement accounts.  She will need to take more than the RMD on what she is likely to have then to live on.  I would not sacrifice money to taxes today not to pay them later.  Her taxes are probably close to zero anyway once she retires.  A rollover to a traditional IRA makes more sense to me.

I am surprised at the lack of a pension.  Is the school a private school? 

Without any type of pension, she has no other regular income above Social Security unless she converts her assets to income.  With savings of $30k, that just won't work.  She needs to work as long as she can and contribute every dime she can squeeze out to her retirement accounts.  Every year she can work past her full retirement age will mean an increase in the Social Security annuity of 8 percent, non compounded, until she is 70.

What guarantee of an inheritance does she have?  Is it possible the inheritance could disappear before she gets it because of the future decedent's bills?  Might this person live a long time?  It's not a good idea to count on an inheritance before the check arrives.

I hope she can rely on you and any siblings you have to help her clean her finances up now and contribute when she needs financial assistance.  She will need your help.

Frankies Girl

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Re: Moms retirement
« Reply #7 on: January 17, 2018, 02:52:34 PM »
You keep mentioning that she has a 403b, but you're not giving us any numbers other than 30k in savings. In order to give you any real workable answers, you need to get a real assessment of what amounts of money she has, where it is located (types of accounts and company it is held with like "Vanguard" or "Valic") and what - if anything - it is invested in, (like "class A shares of stock ABC, bond fund XYZ...).

It also sounds like you're saying the 30k she has is IN this 403b, but "in savings" and not actually invested. Or is it an annuity? Money market? Green eggs and ham? We need more info to help.

So:

Savings account (?): ????
403b account: ????
House value:????
House mortgage still outstanding (?): ????
ANY OTHER ASSETS?
Inheritance details? Sure thing, or just "she expects to inherit" someday? Amounts if sure thing?



If literally all she has is 30k in a 403b and social security, then there flat out is no way for her to retire, likely ever. She's undersaved and not invested any of the savings, and the idea that she's counting on an inheritance is scary as hell since as was pointed out, she may never get one unless the person she expects to get this from is already dead so the money is definitely coming to her, or the inheritance is in a trust that is 100% guaranteed to pass to her within X number of years.

I do have to question if she is actually eligible to get social security also. Public school teachers don't pay into SS, they pay into state teacher pensions usually. Unless I'm mistaken (which is definitely possible), she is only eligible for SS through spousal angles. Or she may not be a public school teacher?

 

MDM

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Re: Moms retirement
« Reply #8 on: January 17, 2018, 03:12:12 PM »
We need more info to help.
+1

bigredball90, see How To: Write a "Case Study" Topic.  That's the information needed for you and your mom to get good, specific suggestions.

bigredball90

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Re: Moms retirement
« Reply #9 on: January 17, 2018, 03:17:25 PM »
She was a private school teacher for a while then quite to help with a family business (SS from this I guess), when that failed she went back to a public school maybe 6 years in now but was not a full time teacher for all of it, and it was in a different state prior to moving a couple of years ago.  Im having her double check the pension she doesnt think she has one, but may be able to buy her years? 
Savings account (?): 2k
403b account: 30k, being moved to vanguard from her previous school, it is invested I believe in a target date fund
House value:? Not hers yet, but around 250k
House mortgage still outstanding (?): just learned of 30k (payed off by a family member so 500 a month till gone)
ANY OTHER ASSETS? old car
Inheritance details? Sure thing, or just "she expects to inherit" someday? Amounts if sure thing?  Basically a sure thing shes already in the house

At 61, she has only nine years to RMD's on her retirement accounts.  She will need to take more than the RMD on what she is likely to have then to live on.  I would not sacrifice money to taxes today not to pay them later.  Her taxes are probably close to zero anyway once she retires.  A rollover to a traditional IRA makes more sense to me.
  Ok roll over to a traditional and shove as much as she can into her 403b, then Traditional IRA of possible


I hope she can rely on you and any siblings you have to help her clean her finances up now and contribute when she needs financial assistance.  She will need your help.
Unfortunately Im the only one with any financial sense (and Ive just started getting that figured out myself), and my siblings will more than likely not be able to help. 

bigredball90

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Re: Moms retirement
« Reply #10 on: January 17, 2018, 03:18:00 PM »
We need more info to help.
+1

bigredball90, see How To: Write a "Case Study" Topic.  That's the information needed for you and your mom to get good, specific suggestions.

Thanks, Ill go check it out

Another Reader

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Re: Moms retirement
« Reply #11 on: January 17, 2018, 04:13:36 PM »
The not paying into Social Security while she taught may mean she gets a reduced amount.  Read up on GPO.  If she paid into a pension plan instead of Social Security, her benefits are likely going to be significantly less, even if she does not receive a pension.  Does her current employer participate in Social Security?

Once she is vested in whatever the current school's plan is, she may be able to buy some of her time.  That varies widely.

Was your mother married for ten years or longer?  She could be entitled to Social Security on her husband's record.  If she is widowed, the benefits differ from a divorce.

No inheritance is a sure thing until the executor deeds the house to her.  There could be all kinds of claims on the estate that she knows nothing about.  Does she think she is getting anything other than the house?

As you can see, there are a lot of issues here that are going to take time to sort out.  It's good that you are starting now, while your mother can make changes that will increase her income in retirement.

ETA:  Get your mother signed up for a "My Social Security" account at the Social Security website.  Get her earnings history - the years she paid in will be there, as will the gaps.  Have her contact the former employers for the gap periods to see if there is a pension or lump sum for whatever she paid in to that system instead.
« Last Edit: January 17, 2018, 04:17:46 PM by Another Reader »

YoungInvestor

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Re: Moms retirement
« Reply #12 on: January 18, 2018, 04:57:24 AM »
If there's no pension, she likely won't retire until she gets that inheritance. Not if she's only saved 30k in all of her life.

At least I don't see how that would be possible without a drastic reduction in expenses. He current current net worth is within a small sized correction of 0$.

Zamboni

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Re: Moms retirement
« Reply #13 on: January 18, 2018, 09:22:02 AM »
Even if she has a house to live in, and until she has an exact amount of inheritance deposited into her personal bank accounts, she has to keep working unless she is physically unable to work or at least can get the maximum social security payout.

I know this is not what she wants to hear, but it is true.

My own Mom's story as a cautionary tale, FWIW, because I think it may be very similar to your Mom's situation. TLDR: my mom was just like your mom and she is now, 15 years later, realizing she's really out of money . . . advise strongly NOT to retire!

At 62, here is what she had:
-a completely paid off house (that she later sold for $230K)
-about $60K in savings accounts (CD's).
-an older Corolla
-personal/household items, a couple of dogs, and a cat
-her health . . . absolutely no health problems, and strong enough to work a shipping and receiving dock.
-the promise of inheriting "the farm"

About "the farm": when this promised inheritance came, it would be split 3 ways with her siblings. No idea what the farm was worth or who actually owned the farm, but she seemed certain she would eventually get some money from it. At the time, there was an arrangement for a farmer external to the family to work the farm and keep a cut of the profits for his labor, so it generated about $25K a year in income that was all put towards my Grandma's nursing home care (she was in her late 80's)

Like your mom, she had only a small amount of qualification for social security because she had been part time and/or self employed teacher for many years, only working about 15 years at low wages for other employers. I don't know exactly what she gets from social security, but it can't be much as she never earned a lot - for example, one of the full time jobs she had for about 5 years while I was in HS I know she was bringing home $300 per week. She just didn't work in jobs that paid into social security for very many years, and as far as I know she never had a 401K. No pension.

Like your Mom, my Mom was not thrilled with her low paying jobs and was anxious to quit working as soon as possible. She was also paranoid about the govt and convinced that what little she could get from Soc Sec would disappear if she didn't get what she could right away (at least this was how she rationalized her very poor decision). So, she quit working for the man and started drawing Soc Sec the first minute she could at 62.

Within a couple of months she realized this wasn't enough to live on even with her paid off house and the money she had in the bank, so she made a half hearted effort at restarting her work-from-home, self-employed hustle. This never really got off the ground due to her anachronistic tendencies like refusing to hook up an answering machine or get a mobile phone. Within 5 years, she gave up and just declared that she was fully retired. If she had waited to draw soc sec until this point, she would have been rewarded with a bigger monthly check.

When Mom got to her late 60's, Grandma died and she did inherit her share of the farm. She wanted to keep it and use her share of the small income to stay afloat, and she needed it for things like property taxes so she could stay in her home, but her siblings were anxious to sell it to augment their own retirement home purchases, so they sold. That money, however much it was, was "less that she had hoped," but it kept her afloat for another few years.

She is insanely frugal . . . which I will refrain from posting about . . . but also her savings were getting eaten up by property taxes, utilities, medicaid supplement, and food. She had no money to make home repairs, so her house starting slowly falling down around her from deferred maintenance. Based upon the money the flipper who bought her house eventually made reselling it, her home lost about $80K in value over the dozen years she lived there in her 60's and early 70's due to lack of any maintenance or upkeep. This seems to happen a lot with older people. My brother did a complete kitchen renovation for her, so her kitchen was modern and gorgeous with new custom cabinets, but everything else was falling down. By the time she moved out, for example, the interior paint was 40 years old; she refused our offer to paint everything for her during the kitchen remodel saying she doesn't like paint fumes. When the realtors suggested coat of fresh interior paint before putting it on the market, she simply said she couldn't afford it.

The sale of her home was necessitated by her running out of savings entirely. By 75, she was still healthy as a horse, but her money was completely gone. Thankfully, her small, dilapidated home was in a relatively HCOL area. By selling it and moving to a similar sized but newer home in my brother's LCOL area, she was able to clear a little liquid savings again. . . she volunteered that she's back to having $60K in the bank last time I talked to her, and she is now in her late 70's.

Her mother and both of her grandmothers lived well into their 90's, and she has absolutely no health problems at this time. She refuses to work, although she is mentally still all there and could probably get a job as greeter at the local WalMart or something similar. Her social security check is tiny and she regrets drawing it back in her early 60's now that she realizes she really does need the slightly bigger monthly check.

She tells me she has finally realized she really is just going to run out of money. Oh well.

Chrissy

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Re: Moms retirement
« Reply #14 on: January 18, 2018, 09:34:15 AM »
Bigredball90, is that Social Security amount hers or the amount she could claim from your father's SS?

If they were married more than 10 years, and then divorced, she can claim spousal benefits, which might be higher than her own.  This doesn't impact his own claim, if he's still living.

If she's a widow, she can choose his SS or her own SS, whichever is higher.  This can get a little tricky, because I believe she can even start with one and then switch to the other later... do your research.

Another Reader

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Re: Moms retirement
« Reply #15 on: January 18, 2018, 10:01:58 AM »
GPO applies to spousal/survivor benefits, if she has those coming, and WEP applies to hers.  Here is the SSA pdf on WEP. https://www.ssa.gov/pubs/EN-05-10045.pdf

It's really important to figure out the Social Security piece of the puzzle.  If hers is reduced significantly, that will be disastrous for her.

Car Jack

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Re: Moms retirement
« Reply #16 on: January 18, 2018, 01:52:10 PM »
It would certainly help to get a clear idea what this inheritance consists of.  I mean....if she's inheriting $20 million from a 103 year old uncle, then no worries.  But if it's a $15k house in Huntington, Indiana, then she's likely walking away with enough money to repair her car a few times.  That $30k savings is worth $100 a month at 4%.  I think we can assume she'll not be limiting the withdrawals to 4%.

Barring some huge inheritance, I think she'll work until she drops.

bigredball90

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Re: Moms retirement
« Reply #17 on: January 18, 2018, 07:00:19 PM »
Thank you all for the info.  Im planning on going over everything on sunday with her, and filling out the case study information.  Ill go over the SS stuff with her again I dont think my dads will be any better.  Im going to see if she can start tutoring to pick up some side cash to. 
I know the inheritance is never guaranteed till it happens but, Im very confident she will be fine when it comes but that may be 10+ years.  Im hoping showing her all the numbers will motivate her to start a side gig, and start saving more for a small chance at retiring in a few years. 
 

PDXTabs

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Re: Moms retirement
« Reply #18 on: January 19, 2018, 08:17:10 AM »
No pension.  SS 768 at 62 or 1186 at 66.  She needs 2k a month right now. 

So she should be at ~1472 by age 69, right?

Fishindude

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Re: Moms retirement
« Reply #19 on: January 19, 2018, 09:09:03 AM »
She needs to work as long as she can, retirement isn't going to work unless the inheritance is substantial.
Inheritances are never a sure thing either.  Can't count those chickens till their hatched.

I have a friend in similar situation; near 60 years old, has it in her head she's going to retire in a couple years on her teachers pension and SS, but she still has a mortgage, CC debt and car payments.  Needs to get things paid off while still working, then she could live pretty cheap in retirement.


uwp

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Re: Moms retirement
« Reply #20 on: January 19, 2018, 11:57:10 AM »
After a longer look, this isn't quite as dire as "she will never get to retire," but she will need to work to 70, possibly longer depending on inheritance and future returns.  If you got her to save more it would obviously look better.

Using your starting assumptions of $30k in the 403b + saving $500/mo now and the potential to save another $500/month when done with the mortgage (I assumed 5 years from now) and 6% growth, I have her with about 150k-175k saved by around age 70.  Or roughly $550/month with a 4% withdrawal rate.  If she delays SS to 70 that gets to ~$1,565/month.  So that is around $2,100/month total.  Obviously all very rough math, and she can't retire "ASAP," but at least you can offer her some hope of not being the 80-year-old Wal-Mart greeter.
« Last Edit: January 19, 2018, 11:58:45 AM by uwp »

Ocinfo

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Re: Moms retirement
« Reply #21 on: January 19, 2018, 01:42:09 PM »
Just went through the same process with my mom. She’s 60 with $65k in her 401k with a recently paid off house (but needs $10-15k of repairs). It’s not a great situation but isn’t dire unless something happens and she can’t work. As long as she can work until 66-67, she’ll get herself up to $2k+ per month from SS and her retirement accounts so she’ll be able to live a modest but comfortable life in a LCOL city. Any part-time work will provide fun money.


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ChpBstrd

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Re: Moms retirement
« Reply #22 on: January 19, 2018, 03:39:04 PM »
IF, and it's a big if, she inherits a $250k house, she could sell it. If she invests $200k of that money after expenses and the mortgage she could draw $8k per year from the portfolio. For a home, she would need to find someone in a similar position and become their roommate. My town is full of suffering retirees living alone in 3 BR houses, when going in together Golden Girls style is the solution.

Does she have a way to take in roommates now? That way, she could earn something from the house prior to inheriting it.

A less-appealing option would be a reverse mortgage once she inherits the house.

bigredball90

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Re: Moms retirement
« Reply #23 on: January 19, 2018, 04:55:16 PM »
She cant do any roomates now, its a full house.  It does have a finished basement that she could use as an apartment (no air b and b allowed), later on.  She would be getting the inheritance (more than likely) when it becomes available though.  I think she would rather work longer and keep the house than sell it though.  Heck I would consider buying it if im able to. 
My short term goal is to reduce her spending and increase saving, and getting the case study info filled out to get a better picture.  From there I think we can get a clearer picture and hopefully a time frame. 
Fortunately she lives close to town so a cheap electric car will be fine to get her into town and back easily once she does retire.  That will cut out gas and most of the vehicle maintenance.