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Learning, Sharing, and Teaching => Investor Alley => Topic started by: rockstache on March 09, 2015, 02:07:13 PM

Title: Starting in her mid 50s - help me to help mom
Post by: rockstache on March 09, 2015, 02:07:13 PM
I am going to start by saying that although my aunt hasn't always been too great with her money, she is an awesome aunt and mom. She always put her kids first (sometimes to her own detriment), and has just begun to realize that if she doesn't look to her own future, she might be in big trouble. She has literally NO clue where to begin, so has recently been asking for advice from me, and I really want to steer her in the right direction. She is not so much looking to retire by a certain magic age, but trying to get herself in a position so that if her body is no longer able to do the job, she will be able to retire/get a lower paying job with fewer physical demands. So here are the details as far as I know them:

-About $8k in CC debt. This is at 0% for the next two years (through the end of 2016). My inclination here is to tell her to continue paying the minimum but no more until she actually faces paying interest, and then obliterate it entirely.

-401K with her employer, which she is putting 16% into. As a waitress, she is pretty low income, and this percentage usually results in her entire check (not including tips), going straight to the 401k. Within that, I have invested her in a low cost index fund that basically follows the S&P, which was the best I could find.

-House: The house is too big now that the kids are grown, and she plans to sell and move to a small condo (with low HOA fees), within the next few years. She was paying double mortgage payments on it, but I recommended quitting this (as her income only stretches so far and she plans to ultimately sell), in favor of an IRA. She has about $140k equity in it, and owes about $80k. We haven't had it appraised recently, but are working on doing this.

-IRA - I think she should open an IRA and fully fund it, along with catch up money. I think traditional is the way to go here, but I am unsure of what funds to use. I personally have no issue with risk and go with VTSMX per Jcollinsnh, but am not sure that is the right strategy for someone so close to retirement. She will probably have to start with Target Funds, as her cash reserves are low, but she plans to be as aggressive as possible (as far as saving/investing amount, not referring to risk tolerance) in the coming years. Would like some detailed advice here if anyone has any suggestions.

That's about all I can think of, I will be glad to add more details if they are needed, and if I have them. Thanks all.
Title: Re: Starting in her mid 50s - help me to help mom
Post by: MDM on March 09, 2015, 02:22:34 PM
Those appear to be reasonable suggestions.

She should also go to, establish an online account, and determine her projected SS income.

For more detailed responses, consider a Reader Case Study - see these ( two posts (
Title: Re: Starting in her mid 50s - help me to help mom
Post by: Bicycle_B on March 09, 2015, 04:26:16 PM
For someone in your aunt's position, perhaps a 2/3 stock and 1/3 bonds portfolio would be safer instead of all stock. 

Since her funds are modest, she can get above-market security by purchasing Series I Treasury bonds ("i-bonds") for the bond portion, up to $10,000/year. They are guaranteed against inflation for 30 years, pay additional interest (though not much right now, of course) and after one year can be cashed in at will without penalty.
Title: Re: Starting in her mid 50s - help me to help mom
Post by: rockstache on March 10, 2015, 09:24:44 AM
Thanks MDM. I do know how to write a case study but I don't (and won't) have all the exact details, so that is not really an option. I am more looking for general advice on where to invest (both the vehicle and the funds), and also on anything that stands out that I might be telling her that seems unwise. Her salary is low, very low, but I will check the SSA website, although I don't expect she will have much coming from that. We are working on the expense thing, but there's not a whole lot of fat to cut, as she has always been pretty frugal. Still, I am talking to her about minimizing driving, cell phone bill, and all the other normal MMM stuff. Thanks for the comments.
Title: Re: Starting in her mid 50s - help me to help mom
Post by: The_path_less_taken on March 16, 2015, 01:55:00 PM
I was hoping more people would give you advice for this....I suck at investing in the markets but know a little about rental real estate.

Only thing I could come up with is a question about the "low wage" you mention. Any 'good' waitress can get work in a restaurant with better tips.

Well...I actually thing ageism can exist in some of that but there are dinner houses and such that don't require a micro mini or beach babe figure to work in.

Only she knows her comfort zone and regional options. I worked a Chinese restaurant in Manhattan one lunch shift (years ago) that wasn't worth the subway token, I worked the lunch shift at Sardi's in NYC that wasn't all that lucrative either. But I worked a super busy diner on the outskirts of Long Beach CA and made 3x the money, and a breakfast gig in Truckee, CA that was 4x the money... just because of regulars and volume.

Then again, mid 50's might be the time she might want to rethink waitressing and try some easier side  gigs?
Title: Re: Starting in her mid 50s - help me to help mom
Post by: rockstache on March 21, 2015, 09:30:19 AM
Thanks Path. I think one of the biggest reasons that she would be hesitant to leave is that she has a really good benefits package, something that is almost non existent in the restaurant world as I am sure you know. They have decent medical plans and a 401k with a match, and that is really rare.
Plus she has the same schedule every week (another rarity) and some good opportunities for overtime. I think the biggest problem is that she is just starting to save at this point. I am working hard with her on examining her expenses, and hopefully she will be able to see that so many of the expenses don't actually go very far in improving Her life all that much.
Title: Re: Starting in her mid 50s - help me to help mom
Post by: Paul der Krake on March 21, 2015, 09:38:45 AM
Make her obliterate her tax liability by contributing as much as possible to pre-tax accounts, including a traditional IRA. It's not like she's going to have a high tax liability in her old age, so the closer to living in a cardboard box she appears to be to the government, the better.

At this point you want to keep things as simple as possible. A target retirement fund is a good choice.
Title: Re: Starting in her mid 50s - help me to help mom
Post by: ChrisLansing on March 21, 2015, 03:30:54 PM
Hope you don't mind some non-financial advice.   

How is her general health/fitness?    At this point she may realize the biggest "Dividends" so to speak, from taking care of her health.   Finding ways to reduce expenses may also produce bigger gains than any investment she can make.  (Not that she shouldn't be investing).   Not everyone who has a modest income is frugal.   

I started in my late 50s.   I've realized that time isn't going to help me make a fortune by compounding.   It's still good to invest, but health and frugality may actually pay off the most at this stage.   
Title: Re: Starting in her mid 50s - help me to help mom
Post by: thedayisbrave on March 22, 2015, 08:32:47 AM
I know you said she plans to sell the house, but in the meantime can she get some roommates? That money can help with the housing costs, freeing up more of her income to direct toward saving/investing. 
Title: Re: Starting in her mid 50s - help me to help mom
Post by: rockstache on March 22, 2015, 11:57:09 AM
She does currently have a roommate and the rent from that does cover her mortgage payment. That is a really good situation for now, but as she gets older, the logistics of finding suitable roommates and vetting them thoroughly will eventually become more than she would like to handle. Her fitness and health are excellent, she spends most of her non working time biking or walking the beach. She also loves working outside on the yard and garden, so her hobbies are very cheap.