Divorced after 35 years [Insurance, housing, portfolio help]

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Divorced after 35 years [Insurance, housing, portfolio help]

Postby mollymillions » Fri Jan 25, 2013 4:56 pm

Hello Bogleheads,
I am looking for financial advice to give my mother. She has recently completed divorce proceedings after being a stay-at-home mom for about 35 years. I am concerned about her, as her financial prospects are very limited and she is 55 years old.

Here are the financial details:
For the last 4 years or so she has worked a menial job making around $18k/year (no benefits). This is not expected to increase significantly.
In the divorce settlement she is receiving $100k in an IRA, and $90k in cash
She currently has a private health insurance plan that costs around $600/mo. This plan covers her and some of her younger children. She can't really afford this now, so we need to look at options for health insurance (she does have some moderate preexisting conditions).
She has no other assets or debts.

I want to advise her on what she should do with her current savings. I was thinking to perhaps fully-fund a ROTH and maybe a normal IRA, since she'll be able to access that money in 4 years if she needs it. Also, what should she do for housing now and in retirement? Should she try to purchase a small, cheap house? (real estate in our area is very, very cheap) Or should she plan to rent for the rest of her life?

Any suggestions would be much appreciated!

**Edits to address questions:
Her husband (yes, my father) made roughly $70k-$100k per year over the last 15 years or so. He works as an independent contractor doing software development. He has had trouble finding work recently, so his income for 2012 was down significantly, though I'm not sure what it was.
Their only known assets were an IRA (containing $100,000) and some land.
The original divorce decree included a small alimony, half of the land, half of the IRA, and some other considerations. The proceedings lasted 1.5 years, during and after which the husband refused to pay what was ordered, even after contempt of court proceedings were initiated. He then appealed to the state court, which ordered mediation. During mediation the settlement that was worked out was half of the IRA (the $50,000 mentioned above) and a $90,000 cash lump sum, which I assume he will pay for by taking a HELOC on the land, which he will be keeping.
Wages here for menial jobs are low (minimum wage is the federal $7.25, and most unskilled jobs are minimum wage). As I mentioned my mother has not had job for over 30 years and has virtually no marketable skills, which is making it difficult for her to find a job with a reasonable salary.
My mother currently lives with my family in our spare bedroom. We are in no hurry for her to leave, but she would like to have her own place someday.
The "younger" children currently covered under her insurance are the three that are still in college. They are all over the age of 18 and we are looking into health insurance options for them. My mother had a bad car accident back in October, and she is receiving ongoing treatment for injuries, which complicates the insurance problem. She was hit by a driver who ran a red light, so eventually she should receive some kind of settlement related to that, but we do not anticipate it to be very large (after lawyer and doctor bills we expect her to get $5,000-$10,000). That may not be over with for a year or two though.
Luckily, my mother is very frugal and responsible. She is also very open to advice from me. Thank you all for your comments :)
Last edited by mollymillions on Wed Feb 13, 2013 11:29 am, edited 3 times in total.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby ddunca1944 » Fri Jan 25, 2013 7:26 pm

She has recently completed divorce proceedings after being a stay-at-home mom for about 35 years. I am concerned about her, as her financial prospects are very limited and she is 55 years old.

I am surprised that her divorce settlement did not include alimony. Or did it? Does she have no other income than the $18000 earnings?

She currently has a private health insurance plan that costs around $600/mo. This plan covers her and some of her younger children. She can't really afford this now, so we need to look at options for health insurance (she does have some moderate preexisting conditions).


I concur completely. She cannot afford $600/mo for health insurance. How old are the "younger children"? Assuming they are not in school and under age 26, they need to cover their own health ins. At 55, your mother is 10 years away from Medicare eligible (assuming they don't raise the age).
I'd start with the state. Some states have basic healthcare coverage at very reasonable rates. If yours doesn't then I'd check online for a quote. She might consider a high deductible plan (depending on the nature of her preexisting condition)

I want to advise her on what she should do with her current savings. I was thinking to perhaps fully-fund a ROTH and maybe a normal IRA, since she'll be able to access that money in 4 years if she needs it.

I would set aside about $10000 for an emergency fund (if she is helping the younger children, that is not an emergency)). Then I'd fully fund a Roth. I'd be inclined to hold off any other decisions right away. Probably put the rest in a laddered CD for a year or so.

Also, what should she do for housing now and in retirement? Should she try to purchase a small, cheap house? (real estate in our area is very, very cheap) Or should she plan to rent for the rest of her life?


After such a major life change, I would not make any commitments right away - like buying a house. Where is she living now? Does she live alone? Many communities have resources for over 55 individuals on limited incomes. You can google "senior housing + your county, state" for a starter. In our county, there are some very nice apartments that charge 1/3 one's income (subject to imcome limitations, of course)

Good luck to her and kudos to you for being a resource
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby ddunca1944 » Fri Jan 25, 2013 7:33 pm

One more thing: in 5 years (at the age of 60 and assuming she does not remarry), she may qualify for Social Security - based on the spousal benefit. I'd find out now what her expected benefit would be. If she does draw it at 60, the amount will be reduced from the full benefit, but it is worth finding out about.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby sscritic » Fri Jan 25, 2013 7:36 pm

While it will be a few more years, try and find out what your father(?)'s social security situation is. From the size of the settlement, it doesn't look like he was a high earner, but your mother may benefit by being his "wife" when the time comes. [A divorced wife gets a wife's benefit]
You are entitled to wife's or husband's benefits as the divorced wife


P.S. 62 not 60; she is divorced, not widowed. When the ex does die, she will be a widow.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby awval999 » Fri Jan 25, 2013 7:39 pm

I believe your mother may qualify for expanded Medicaid and/or large subsidies coming in 2014 when the health care exchanges open up due to the Affordable Care Act.

I'm thinking for healthcare that Medicaid is going to be a strong possibility for your mother.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby MnD » Fri Jan 25, 2013 8:49 pm

awval999 wrote:I believe your mother may qualify for expanded Medicaid and/or large subsidies coming in 2014 when the health care exchanges open up due to the Affordable Care Act.
I'm thinking for healthcare that Medicaid is going to be a strong possibility for your mother.


Only 11 months out till the above so definitely something to look into and plan for.

Can the $50K IRA ownership be transferred to your mother intact? A regular IRA in her name has fairly strong disincentives not to tap before retirement age, so that could be a positive.

How do you think your mother will handle the 50K and especially the 90K?

I don't know your Mom's financial personality but I can tell a story and outcome.
My MIL had a very similar annual income and also received two lump sums similar in size to this on two occasions. In each case the lump sums were vaporized within a couple years with nothing of value to show for it, not even used for a reliable car purchase which she needed badly. I believe a great deal of it was given or "loaned" to friends and adult family members of hers with similar low incomes when they had financial woes. She did not purchase any real estate and continued to rent.

In retrospect she should have bought a small reliable vehicle and bought an inexpensive small condo (newer or updated) with predictable and low upkeep and utility costs.
If anything was left, it should have been used to purchase a single premium immediate lifetime annuity. She did none of those things and ended up with nothing of value.

Absent that and short of turning the funds over to us to invest and dole out, I don't think she would have been able to resist tapping an IRA, Roth IRA (these are very liquid) and certainly not cash (since we know exactly how that worked out).

Hopefully your Mom is better with lump sum cash than my MIL and good luck!
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby Calm Man » Fri Jan 25, 2013 10:14 pm

This is so unfortunate. I always "beg" women to not become stay at home moms as if they ever have to enter the job market they can't for the most part. I hope your mom makes out well and I am sure you will help her as much as possible.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby Atilla » Fri Jan 25, 2013 10:20 pm

Right off the top I'd advise you to give your mom $600 a month to cover her insurance expense. Family comes first - honor your mother- so if you can at all do it...step up.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby MnD » Sat Jan 26, 2013 11:21 am

Calm Man wrote:This is so unfortunate. I always "beg" women to not become stay at home moms as if they ever have to enter the job market they can't for the most part. I hope your mom makes out well and I am sure you will help her as much as possible.


She has a job which will be lightly taxed plus $140K incoming, possibly some spousal SS benefits in a few years, the kids sound like they are grown and due to ACA both she and they can get their their own lower cost health insurance in less than a year, and she lives in a zip code where real estate is extremely inexpensive. Also no mention of consumer debt. If the lump sum is deployed properly I can forsee this situation having a very decent outcome and things such as future marital status and income are not carved in stone. I've certainly heard way worse.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby SC Hoosier » Sat Jan 26, 2013 12:12 pm

Calm Man,

As a husband whose asked a wife to stay home and raise children, including schooling them, i have to assume the full responsibility of providing for all of us. I realize that my wife is giving up income potential. I love her and feel that the income sacrificed is worth the children being trained by a woman of integrity, intelligence and character, which is why I married her. We are still able to live on far less than we earn. I wouldn't trade places with anyone.

SC Hoosier

I don't think that women that choose to work are wrong. I just felt strongly about this and am willing to forgo her income to get it.
Last edited by SC Hoosier on Sat Jan 26, 2013 4:05 pm, edited 1 time in total.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby janelane » Sat Jan 26, 2013 1:27 pm

Calm Man wrote:This is so unfortunate. I always "beg" women to not become stay at home moms as if they ever have to enter the job market they can't for the most part. I hope your mom makes out well and I am sure you will help her as much as possible.



Gotta agree Calm Man. Some people look at me cross-eyed when I say, barring caring for a critically ill relative, I'll never give my ability to earn an income. Divorce is a very real possibility; "happily ever after" doesn't always work out. My mother always worked, and I never felt cheated. On the contrary, I have a very loving relationship with my mother, my stepfather, and my biological dad. Also, my siblings and I are all successful.

Luckily, my guy supports my career. He's sweet enough to listen to my nerd out about usability and design when I come home :happy . Then again, his mother also works, so a working mom isn't an alien concept to him.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby ginyah » Sat Jan 26, 2013 5:00 pm

I'm a little confused. Are there young children still in the house? Is she getting child support for them? Does their father have health insurance? Does he carry his children on his policy? I am so sorry your mother is going through such a heartbreaking and difficult experience. Did your mother have a lawyer for her divorce proceedings? Many of these issues should have been included in the divorce decree. Even her share of his retirement should have been enumerated (including all the details of his Social Security benefits). I wish both your mother and you all the best in resolving these complicated issues. I only wish there were easy answers.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby sscritic » Sat Jan 26, 2013 5:11 pm

Calm Man wrote: I always "beg" women to not become stay at home moms as if they ever have to enter the job market they can't for the most part.

I am not sure this is true. Unskilled women should be able to get unskilled jobs. Skilled women should be able to get skilled jobs. The ones who are in trouble are the women who are neither skilled nor unskilled.

My daughter is a dentist. She is staying home to take care of her kids. She also takes continuing education classes to keep her license. The dentist whom she worked for (who is also my dentist) keeps asking when she will come back to work. The dentist's wife used to be a high powered lawyer before she stayed home to raise the kids. Now she is a sociology professor.

Skills are skills, especially the ones that allow you to learn. I do agree that if you don't know how to read by age 30, you probably still won't know how to read when you are 60.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby livesoft » Sat Jan 26, 2013 5:14 pm

If I read between-the-lines here, the values of the IRAs are not remarkable, so it is likely that the family did not earn a lot of money, so the Divorcee is not used to a high-level of expenses.

Thus, I would say that she should figure out a way to live on her income of $18K a year and continue to pay for health care at $600 a month which to me is cheap. She should reduce her other expenses. She can invest the IRA money in a Target Retirement or Lifecycle fund and not spend it until needed in retirement.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby chicagobear » Sat Jan 26, 2013 5:51 pm

It sure seems like she should be able to get a better job than $18,000 a year. 55 is not all that old.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby Grt2bOutdoors » Sat Jan 26, 2013 7:05 pm

chicagobear wrote:It sure seems like she should be able to get a better job than $18,000 a year. 55 is not all that old.


We don't know the demographical region the OP's mother is from and the general economic situation has caused a tremendous amount of under and unemployment. It is entirely plausible that it the most she can earn today. There is plenty of age discrimination going around these days.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby William4u » Sat Jan 26, 2013 7:21 pm

MnD wrote:I don't know your Mom's financial personality but I can tell a story and outcome.
My MIL had a very similar annual income and also received two lump sums similar in size to this on two occasions. In each case the lump sums were vaporized within a couple years with nothing of value to show for it, not even used for a reliable car purchase which she needed badly. I believe a great deal of it was given or "loaned" to friends and adult family members of hers with similar low incomes when they had financial woes. She did not purchase any real estate and continued to rent.

In retrospect she should have bought a small reliable vehicle and bought an inexpensive small condo (newer or updated) with predictable and low upkeep and utility costs.
If anything was left, it should have been used to purchase a single premium immediate lifetime annuity. She did none of those things and ended up with nothing of value.

Absent that and short of turning the funds over to us to invest and dole out, I don't think she would have been able to resist tapping an IRA, Roth IRA (these are very liquid) and certainly not cash (since we know exactly how that worked out).

Hopefully your Mom is better with lump sum cash than my MIL and good luck!


I've seen a version of this story happen over and over. MnD's advice is good here.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby mollymillions » Sun Jan 27, 2013 2:43 pm

Thank you everyone for the encouragement and advice. We will wait on making a housing decision for now, and will check into the SS and insurance issues.

I made some edits to my post to address some questions. If anyone has anything else to add please do!
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby Calm Man » Sun Jan 27, 2013 2:52 pm

SC Hoosier wrote:Calm Man,

As a husband whose asked a wife to stay home and raise children, including schooling them, i have to assume the full responsibility of providing for all of us. I realize that my wife is giving up income potential. I love her and feel that the income sacrificed is worth the children being trained by a woman of integrity, intelligence and character, which is why I married her. We are still able to live on far less than we earn. I wouldn't trade places with anyone.

SC Hoosier

I don't think that women that choose to work are wrong. I just felt strongly about this and am willing to forgo her income to get it.


I think maybe she should work and you stay home. Seriously, I cannot understand why it is almost the woman who ends up in this position. Or is it in your case that you are highly educated or trained and she isn't? Also SC, believe me, should the marriage end in divorce, I doubt you will be going to the judge and offering the maximum.
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Re: Divorced after 35 years [Insurance, housing, portfolio h

Postby ddunca1944 » Sun Jan 27, 2013 2:55 pm

mollymillions wrote:Thank you everyone for the encouragement and advice. We will wait on making a housing decision for now, and will check into the SS and insurance issues.

I made some edits to my post to address some questions. If anyone has anything else to add please do!


mollymillions,
Thank you for the added info - and kudos to you for sharing your home with your mom. All the best to you both.
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