SIL retirement puzzle

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gips
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SIL retirement puzzle

Post by gips » Wed Nov 13, 2019 12:44 am

My SIL has declared herself retired. Here are the salient facts:
Age: 63
Current Income: $2,400/month from ssdi
Pension at 65: $1,100/ month
Savings: $413k in high yield savings accounts
Expenses: $4k/month
Debt: none
Home: none (lives with family)
Car: none

Questions:
1. How much can she afford to spend on a home?
2. How much on a car?
3. Suggested asset allocation?

Thanks !
Last edited by gips on Wed Nov 13, 2019 2:37 am, edited 1 time in total.

HomeStretch
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Re: SIL retirement puzzle

Post by HomeStretch » Wed Nov 13, 2019 1:19 am

IMO SIL’s portfolio is borderline to support retirement at age 63 and will not fund house and car purchases. Her safest route is likely to continue to work and to continue with her current free(?) living and transportation arrangements with family

From age 63-64, SIL will need to withdraw $38k from her portfolio (24 months @ $1.6k/mo) for monthly expenses of $4k in excess of income of $2.4k.

This leaves a portfolio balance before returns of $375k (= $413k - $38k) at age 65. At age 65, using a 4% estimated “safe” withdrawal rate for a portfolio invested 60/40 equity/bonds, SIL could withdraw $15k (= $375k x 4%) per year from her portfolio.

At age 65 and on, SIL will need to withdraw $6k/year from her portfolio for monthly expenses of $4k in excess of income of $3.5k. This leaves SIL with $9k/year (= $15k - $6k) for housing and transportation expenses. This assumes SIL’s monthly income receives cost-of-living increases to keep up with inflation in expenses.
Last edited by HomeStretch on Wed Nov 13, 2019 1:20 am, edited 1 time in total.

mhalley
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Re: SIL retirement puzzle

Post by mhalley » Wed Nov 13, 2019 1:20 am

Zero. At an optimistic 4% safe withdrawal rate, 413k can only generate $1376 a month. What’s the SS outlook?

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gips
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Re: SIL retirement puzzle

Post by gips » Wed Nov 13, 2019 2:52 am

Thanks for the replies. The current income is from ssdi
shouldn’t it work like this on a $400k portfolio:
4% withdrawal: $16k
ssdi + pension: $42k
Total income: $58k
Total expenses: $48k

Let’s say she spends $200k on home:
4% withdrawal: $8k
ssdi + pension: $42k
Total income: $50k
Total expenses: $48k
Last edited by gips on Wed Nov 13, 2019 3:25 am, edited 2 times in total.

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celia
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Re: SIL retirement puzzle

Post by celia » Wed Nov 13, 2019 3:19 am

The living expenses of $4,000 a month seem quite high if she is Single and living with relatives for free. Does she have a budget? Can she get her expenses down to $3,000 a month?

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gips
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Re: SIL retirement puzzle

Post by gips » Wed Nov 13, 2019 3:27 am

celia wrote:
Wed Nov 13, 2019 3:19 am
The living expenses of $4,000 a month seem quite high if she is Single and living with relatives for free. Does she have a budget? Can she get her expenses down to $3,000 a month?
Thanks for your reply but it really doesn’t have anything to do with the my question. She has to move out of her current situation hence the questions about what she can afford.

anonsdca
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Re: SIL retirement puzzle

Post by anonsdca » Wed Nov 13, 2019 5:25 am

gips wrote:
Wed Nov 13, 2019 2:52 am
Thanks for the replies. The current income is from ssdi
shouldn’t it work like this on a $400k portfolio:
4% withdrawal: $16k
ssdi + pension: $42k
Total income: $58k
Total expenses: $48k

I don't think so, I would be thinking about it like this:

$413k portfolio:
@ 3.25% brings: $13.4k income
ssdi + pension: $42k
Total income: $55.4k
Total expenses: $48k

Balance $7.4K annually or $619/mo reserves

That is a very nice monthly/annual cushion if she could just stay where she is. Sounds like she cant and that is where it gets dicey for me.



Let’s say she spends $200k on home:
4% withdrawal: $8k
ssdi + pension: $42k
Total income: $50k
Total expenses: $48k
Not sure where she lives, but I am actively in the market for a nice townhome and I can pull the trigger on a 3/2 for $130-$160 where I live. It is a low cost area, but given your $200K est. for a house she might be also. I would try to get this amount down. I pulled some numbers at $175K for the house but either your way, or mine, gives almost zero wiggle room and no reserves. If she can stay where she is that is the best deal.

ARoseByAnyOtherName
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Re: SIL retirement puzzle

Post by ARoseByAnyOtherName » Wed Nov 13, 2019 5:54 am

gips wrote:
Wed Nov 13, 2019 3:27 am
celia wrote:
Wed Nov 13, 2019 3:19 am
The living expenses of $4,000 a month seem quite high if she is Single and living with relatives for free. Does she have a budget? Can she get her expenses down to $3,000 a month?
Thanks for your reply but it really doesn’t have anything to do with the my question. She has to move out of her current situation hence the questions about what she can afford.
Actually it has everything to do with your question. If she gets her expenses down she can afford more.

Can she reduce her expenses?

chw
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Re: SIL retirement puzzle

Post by chw » Wed Nov 13, 2019 6:00 am

celia wrote:
Wed Nov 13, 2019 3:19 am
The living expenses of $4,000 a month seem quite high if she is Single and living with relatives for free. Does she have a budget? Can she get her expenses down to $3,000 a month?
My thought as well, unless expenses are related to medical premiums/copays & deductibles.

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RickBoglehead
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Re: SIL retirement puzzle

Post by RickBoglehead » Wed Nov 13, 2019 6:05 am

Don't know that we can figure out anything you can't. Simply add to the budget a mortgage payment (assuming she will qualify) for a house in her area, and an inexpensive car payment. Then the rest sits in high yield savings because she cannot risk losing it, and you hope that she can control her costs. Simple math, no?

But. she should rent an inexpensive apartment, not buy a house.

I take the statement "declared herself retired" and the fact that she has to move as the family not agreeing with her decisions and trying to show her she should not be buying a house. Good luck. The word "declared" implies you won't succeed.
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Re: SIL retirement puzzle

Post by Dottie57 » Wed Nov 13, 2019 6:28 am

RickBoglehead wrote:
Wed Nov 13, 2019 6:05 am
Don't know that we can figure out anything you can't. Simply add to the budget a mortgage payment (assuming she will qualify) for a house in her area, and an inexpensive car payment. Then the rest sits in high yield savings because she cannot risk losing it, and you hope that she can control her costs. Simple math, no?

But. she should rent an inexpensive apartment, not buy a house.

I take the statement "declared herself retired" and the fact that she has to move as the family not agreeing with her decisions and trying to show her she should not be buying a house. Good luck. The word "declared" implies you won't succeed.
Agree. Stay in an inexpensive apartment. I think she is in a place where she needs to cut expenses. What her health ins payments? She is on SSDI, what will her SS be?

SIL needs to be realistic. She will have added property tax, house insurance and maintenance to her budget if she buys ahouse.

Planner01
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Re: SIL retirement puzzle

Post by Planner01 » Wed Nov 13, 2019 6:48 am

My MIL retired around the same age with less. $350k in retirement savings which she put in an annuity and then started collecting spousal widow SS. She bought a house in cash for $132k and it’s living comfortable. She definitely has to budget as money is a little tight but doable.

So maybe if your SIL lowers her expenses she can withdraw a little bit of her cash and buy a small and inexpensive home and live on the withdrawals of the rest of her money. It will require very careful budgeting every month.

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JoeRetire
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Re: SIL retirement puzzle

Post by JoeRetire » Wed Nov 13, 2019 7:38 am

gips wrote:
Wed Nov 13, 2019 12:44 am
My SIL has declared herself retired. Here are the salient facts:
Age: 63
Current Income: $2,400/month from ssdi
Pension at 65: $1,100/ month
Savings: $413k in high yield savings accounts
Expenses: $4k/month
Debt: none
Home: none (lives with family)
Car: none

Questions:
1. How much can she afford to spend on a home?
Nothing.
2. How much on a car?
As little as possible.
3. Suggested asset allocation?
60/40
Very Stable Genius

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gips
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Re: SIL retirement puzzle

Post by gips » Wed Nov 13, 2019 7:56 am

Thanks everyone for their help:
- the $4k expenses represents her projected budget not her current expenses. It is conservative and as such, may be subject to reduction. It does accurately reflect hoa, taxes and utilities for a condo she’d like to purchase.

- her nephew’s aunt passed away and she has been living there rent free for a 1.5 years. Her nephew has decided to sell the house in the spring so she has to move.

when she retired, she had no plan, didn’t know she could collect disability, but it’s worked out in her favor. I didn’t think she should have retired but tbh, her ssdi payment is probably more than her paycheck, so from a purely financial viewpoint, looks like I was wrong.

I’m a little confused. Most members agree that a 3-4% withdrawal rate is workable, why doesn’t it work in my sil’s scenario? Isn’t the math exactly the same except on a smaller scale?
Last edited by gips on Wed Nov 13, 2019 8:03 am, edited 1 time in total.

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Nestegg_User
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Re: SIL retirement puzzle

Post by Nestegg_User » Wed Nov 13, 2019 8:19 am

since you gave little info, I used Wyoming as state:

300 k into SPIA for 63 F gives 1413/mo

1413 + 2400 ==> 3813/ mo
(to get the 1100/mo until 65 (which is 13.2 k/yr), assuming early-ish 63, would be about 20 k from stash)
so then would get the added 1100/ mo, so now:
4913/ mo or just under 59 k/yr

{and now only an emergency reserve of about 90 k}

there's just not enough for purchase of a residence, she needs to rent

[trailer in cheyenne for 20k at 3801 Atkin (see realtor.com)... in town, couple of blocks from grocery, etc so no need for car....].... that's about the best I can find, but would then drop reserve to only 70k

I used SPIA since there isn't **any** wiggle room, hence no allocation was given
Last edited by Nestegg_User on Wed Nov 13, 2019 8:26 am, edited 1 time in total.

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gips
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Re: SIL retirement puzzle

Post by gips » Wed Nov 13, 2019 8:24 am

Thanks, why does she need an annuity rather than a 4 per cent withdrawal rate and a 60-40 (or 40-60) portfolio.

I’d she purchases a place, the liquid funds become equity...they are not lost. So perhaps we or my BIL have her write a note against the equity. Or a reverse mortgage.
Last edited by gips on Wed Nov 13, 2019 8:27 am, edited 1 time in total.

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teen persuasion
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Re: SIL retirement puzzle

Post by teen persuasion » Wed Nov 13, 2019 8:26 am

gips wrote:
Wed Nov 13, 2019 7:56 am
Thanks everyone for their help:
- the $4k expenses represents her projected budget not her current expenses. It is conservative and as such, may be subject to reduction. It does accurately reflect hoa, taxes and utilities for a condo she’d like to purchase.

- her nephew’s aunt passed away and she has been living there rent free for a 1.5 years. Her nephew has decided to sell the house in the spring so she has to move.

when she retired, she had no plan, didn’t know she could collect disability, but it’s worked out in her favor. I didn’t think she should have retired but tbh, her ssdi payment is probably more than her paycheck, so from a purely financial viewpoint, looks like I was wrong.

I’m a little confused. Most members agree that a 3-4% withdrawal rate is workable, why doesn’t it work in my sil’s scenario? Isn’t the math exactly the same except on a smaller scale?
It wasn't clear that the $4k budget included housing expenses, I'd read it as current expenses with no housing cost, no car.

Part of the disconnect is also reading between the lines: when I read SSDI, I assume poor health= higher future health expenses, modifications needed for aging, etc. No house or car means there's no home equity to fall back on in old age as an extra source of funds. Living with others for free = new expenses increasing budget. Disability = little ability to keep home costs down thru DIY/sweat equity = hiring help. Thus renting might be better than buying (and avoids spending a big chunk on a house).

Then there's the issue that the pension doesn't begin for several years, so she needs a larger withdrawal until it begins. That will reduce her savings, drawing off more than 4% in the beginning, so 4% of the remainder is smaller.

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gips
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Re: SIL retirement puzzle

Post by gips » Wed Nov 13, 2019 8:32 am

teen persuasion wrote:
Wed Nov 13, 2019 8:26 am
gips wrote:
Wed Nov 13, 2019 7:56 am
Thanks everyone for their help:
- the $4k expenses represents her projected budget not her current expenses. It is conservative and as such, may be subject to reduction. It does accurately reflect hoa, taxes and utilities for a condo she’d like to purchase.

- her nephew’s aunt passed away and she has been living there rent free for a 1.5 years. Her nephew has decided to sell the house in the spring so she has to move.

when she retired, she had no plan, didn’t know she could collect disability, but it’s worked out in her favor. I didn’t think she should have retired but tbh, her ssdi payment is probably more than her paycheck, so from a purely financial viewpoint, looks like I was wrong.

I’m a little confused. Most members agree that a 3-4% withdrawal rate is workable, why doesn’t it work in my sil’s scenario? Isn’t the math exactly the same except on a smaller scale?
It wasn't clear that the $4k budget included housing expenses, I'd read it as current expenses with no housing cost, no car.

Part of the disconnect is also reading between the lines: when I read SSDI, I assume poor health= higher future health expenses, modifications needed for aging, etc. No house or car means there's no home equity to fall back on in old age as an extra source of funds. Living with others for free = new expenses increasing budget. Disability = little ability to keep home costs down thru DIY/sweat equity = hiring help. Thus renting might be better than buying (and avoids spending a big chunk on a house).

Then there's the issue that the pension doesn't begin for several years, so she needs a larger withdrawal until it begins. That will reduce her savings, drawing off more than 4% in the beginning, so 4% of the remainder is smaller.
Well dang, sorry for the confusion, I see I should have been clearer. Anyhow, I have a spreadsheet that models the withdrawals and, while the asset balance does fall for two years, once the pension begins, it starts to rise as income > expenses.
Last edited by gips on Wed Nov 13, 2019 8:35 am, edited 1 time in total.

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Nestegg_User
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Re: SIL retirement puzzle

Post by Nestegg_User » Wed Nov 13, 2019 8:35 am

gips wrote:
Wed Nov 13, 2019 8:24 am
Thanks, why does she need an annuity rather than a 4 per cent withdrawal rate and a 60-40 (or 40-60) portfolio.

I’d she purchases a place, the liquid funds become equity...they are not lost. So perhaps we or my BIL have her write a note against the equity. Or a reverse mortgage.
because the indicators are flashing "red zone" and there's no wiggle room.... she can't afford further reductions
and, at least the payments would be for lifetime
and the income from the 300 k SPIA would be higher than 4% of 400 k while still leaving a small reserve

(also I'd already taken out the ~20 k to get her the 1100/ mo to 65 and be able to get the pension )

.... so you now want to reverse mortgage a newly purchased condo (with it's additional cost (you couldn't get the full amount... they want their cut; condos would be very difficult to get a reverse mortgage on as they would need a full review of reserves of the HOA, etc and wouldn't be near the numbers of a SFH since they need to include the risks of other condo owners etc) or get the family to write a note?



best bet is still: RENT

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Re: SIL retirement puzzle

Post by deltaneutral83 » Wed Nov 13, 2019 9:02 am

gips wrote:
Wed Nov 13, 2019 8:32 am
Well dang, sorry for the confusion, I see I should have been clearer. Anyhow, I have a spreadsheet that models the withdrawals and, while the asset balance does fall for two years, once the pension begins, it starts to rise as income > expenses.
I think the confusion is that you may be viewing this strictly as a math equation rather than a behavioral issue. Not enough spreadsheets in the world can rectify a poor financial decision made hastily. You even brought up a reverse mortgage before the hypothetical property is purchased? Not good. While you are mathematically correct about an annuity, people do not buy annuities because they are mathematically favorable. It protects against poor decisions and market risk by supplying a monthly income for life in the case of a SPIA which I bet a lot of BH reading this thread would consider in this situation and these #'s.

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Re: SIL retirement puzzle

Post by runner540 » Wed Nov 13, 2019 9:25 am

deltaneutral83 wrote:
Wed Nov 13, 2019 9:02 am
gips wrote:
Wed Nov 13, 2019 8:32 am
Well dang, sorry for the confusion, I see I should have been clearer. Anyhow, I have a spreadsheet that models the withdrawals and, while the asset balance does fall for two years, once the pension begins, it starts to rise as income > expenses.
I think the confusion is that you may be viewing this strictly as a math equation rather than a behavioral issue. Not enough spreadsheets in the world can rectify a poor financial decision made hastily. You even brought up a reverse mortgage before the hypothetical property is purchased? Not good. While you are mathematically correct about an annuity, people do not buy annuities because they are mathematically favorable. It protects against poor decisions and market risk by supplying a monthly income for life in the case of a SPIA which I bet a lot of BH reading this thread would consider in this situation and these #'s.
+1
There is very little margin here. If she has the $400k in high yield savings, how is she going to react if (when) the value drops by 10 or 15% (reasonable scenario in the next few years given 40/60 allocation)? What if her new home "needs" a $25k renovation?
She already has shown that she makes impulsive decisions ("declaring" herself retired), and there is very little margin to cut expenses or get additional work given disability.

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JoMoney
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Re: SIL retirement puzzle

Post by JoMoney » Wed Nov 13, 2019 9:27 am

Total value of cars should be less than half annual income.
Housing rent/mortgage should ideally be less than 1/3 annual income.

A 63 year old has an expected lifespan of 22.7 years.
At a 2% interest rate, $413k (HY savings) amortized over 22.7 years is about $1,900 a month (if they were considering this, a SPIA might be an alternative to making withdrawals from a savings account).

1900+2400= $4,300 a month or $51,600 a year
So cars should be kept below $25k by the rule of thumb
And housing should be kept under $1,500 a month

When pension kicks in she'll have a lot more room in spending.
I have no idea what asset allocation is appropriate for her willingness to accept risk. Since she's already in high-yield savings it sounds like she doesn't have much willingness to accept risk.
Last edited by JoMoney on Wed Nov 13, 2019 9:34 am, edited 1 time in total.
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Topic Author
gips
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Re: SIL retirement puzzle

Post by gips » Wed Nov 13, 2019 9:34 am

:happy I'm not suggesting a reverse mortgage on a newly purchased condo. Instead, I'm pointing out that the $ spent for the condo have been converted to equity which can be tapped. If a reverse mortgage is a bad idea, then my BIL and my wife can have my SIL write a note against the condo equity.

anyhow, it's become clear given the preponderance of replies against a condo purchase that I'm thinking about this the wrong way. Unfortunately, I'll never convince her to rent...her parents drummed into their kids that "renting was throwing away money".

back to the drawing board...thanks for the help!

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Re: SIL retirement puzzle

Post by deltaneutral83 » Wed Nov 13, 2019 9:37 am

Don't forget the elephant in the room of ACA until medicare for the next 12-24 months. Even with heavily subsidized premiums an out of pocket max in and/or out of network will crush the budget. Not sure how healthcare works with someone who has been ruled disabled though.

RubyTuesday
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Re: SIL retirement puzzle

Post by RubyTuesday » Wed Nov 13, 2019 9:38 am

Realistically, using (most of) nest egg to purchase a SPIA likely provides best outcome. It would likely pay 5.7% or higher. Rent, maybe even renting with roommate for lower cost and companionship.

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Re: SIL retirement puzzle

Post by TN_Boy » Wed Nov 13, 2019 9:51 am

deltaneutral83 wrote:
Wed Nov 13, 2019 9:02 am
gips wrote:
Wed Nov 13, 2019 8:32 am
Well dang, sorry for the confusion, I see I should have been clearer. Anyhow, I have a spreadsheet that models the withdrawals and, while the asset balance does fall for two years, once the pension begins, it starts to rise as income > expenses.
I think the confusion is that you may be viewing this strictly as a math equation rather than a behavioral issue. Not enough spreadsheets in the world can rectify a poor financial decision made hastily. You even brought up a reverse mortgage before the hypothetical property is purchased? Not good. While you are mathematically correct about an annuity, people do not buy annuities because they are mathematically favorable. It protects against poor decisions and market risk by supplying a monthly income for life in the case of a SPIA which I bet a lot of BH reading this thread would consider in this situation and these #'s.
My take is rather different from most of the responses thus far.

On the SPIA, given that most/all of her monthly needs will be met by SSDI and pension (is the pension COLA'ed?) it seems like a bad idea to annutize. She has plenty of income.

It would be much better to figure out how to live modestly on the pension and SS income and pull a conservative percentage from the portfolio, which should be invested in something not a high-yield savings account.

Though I understand the point being made about behavior. But aside from people guessing that she is impulsive, I'm missing in this thread evidence of how she is a big spender.

How good is the spending estimate that OP is giving? Why so high? Surely she understands that expensive vacations and lots of dining out are bad ideas given her financial status?

400k is a good nest egg. It seems tiny to many on this forum, but across the US population, it's not bad - as best I can tell, her net worth is in the 70th percentage for her age, plus she will have 3.5k a month income! This is only a problem if the SIL can't handle money. And if she can't handle money, she will get into trouble with twice the net worth and income.

What she cannot safely do is go out and spend 200k on a house and 30k on a car. A modest 100k+ townhouse might be okay. And a 10k to 15k used car.

But really, given that her income and assets are probably higher than most US retirees, I'm not following some of the despair. She lacks the money for a luxurious lifestyle. Unless she is living in a high-cost area, she obviously has enough for a comfortable lifestyle.

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gips
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Re: SIL retirement puzzle

Post by gips » Wed Nov 13, 2019 9:53 am

deltaneutral83 wrote:
Wed Nov 13, 2019 9:37 am
Don't forget the elephant in the room of ACA until medicare for the next 12-24 months. Even with heavily subsidized premiums an out of pocket max in and/or out of network will crush the budget. Not sure how healthcare works with someone who has been ruled disabled though.
her employer has allowed her to continue medical benefits for $76 per month. she worked in health care, benefits are very good, we believe this will continue until she's 65.

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teen persuasion
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Re: SIL retirement puzzle

Post by teen persuasion » Wed Nov 13, 2019 10:03 am

It appears she has no separate emergency fund, so I'd want to segregate some of her savings as a dedicated EF, say 12 months of expenses. If they are $4k/month, that leaves $365k to invest. Less if you subtract the extra $1100/month until the pension kicks in.

Is the pension inflation adjusted? If not, its purchasing power will decline with time, so more income will be needed from other sources.

I wouldn't want to divert any of her savings to big purchases like a house or car at all, she needs as much as possible invested to keep giving her an income.


I'm also having trouble wrapping my head around a single person having $4k/month in expenses. We spend half that; that's 4 people, one in college, one in HS. We have 3 cars (and repairs + insurance + gas), and a house (no mortgage, but taxes + utilities + repairs).

OP mentioned that SSDI is likely more than she earned, so I'm left wondering what her current expenses ARE. I'd begin with that as a baseline, and add on for housing and transportation. Renting, could she stay within her current income (SSDI + < 4% of retirement investments)? If not working, does she need a car, or would taxis/ride-sharing work? When pension starts, reevaluate budget.

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Re: SIL retirement puzzle

Post by Wiggums » Wed Nov 13, 2019 10:41 am

The situation is that she had to move. I get that, but that doesn’t mean to rush into home ownership.

I am not sure that the 4% SWR rate holds water without a 60/40 portfolio. She does not have that.

I would not feel comfortable locking into a condo with money being so tight. No control over HOA fees, condo insurance, property taxes, etc. there are so many costs to home ownership.

If this doesn’t work out, you said BIL or wife would take equity and provide her cash?

My opinion is that you should weigh several alternatives and select the best one. This decision does feel rushed to me, but I understand why.

HomeStretch
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Re: SIL retirement puzzle

Post by HomeStretch » Wed Nov 13, 2019 10:53 am

gips wrote:
Wed Nov 13, 2019 7:56 am
I’m a little confused. Most members agree that a 3-4% withdrawal rate is workable, why doesn’t it work in my sil’s scenario? Isn’t the math exactly the same except on a smaller scale?
In my post above, my opinion was SIL could not afford a $200k house with a $413k portfolio as her numbers are just so tight. Her pension (does it receive COLA?) doesn’t start for 2 years, so she will need to draw $38k (more than 4%) from the portfolio for 2 years so at age 65 the portfolio withdrawals at 4% are $9k or $750/month. A car payment, a special condo assessment, a health crisis, etc. could easily surpass the $750/mo cushion. Will family provide support if her $750 cushion is not adequate?

The additional information that SIL must move and the $4k includes home ownership expenses is helpful. Would a rental be more affordable? Or, as another poster asked, is there a way to reduce $4k monthly budget to provide more monthly cushion/lower portfolio withdrawals below 4% for a few years?

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Watty
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Re: SIL retirement puzzle

Post by Watty » Wed Nov 13, 2019 11:19 am

A couple of things that may not have been mentioned.

1) Depending on the nature of her disability her life expectancy could be reduced, or not. This could also impact her ability to live on her own, or she might need special living arrangements. It might also make an annuity a very bad idea.

2) Some people don't realize that they can collect Social Security benefits of a spouse's account if they were ever widowed or divorced after ten years of marriage. If either of those apply then make sure she looks into that.

3) I don't have a clue how it works with SSDI insurance but she might be able to delay starting her normal Social Security until she is 70 to get a larger benefit amount then. It could make a lot of sense to live on her other money to delay starting her normal Social Security if her life expectancy is fairly normal.

4) I am not surprised that there was a lot of resistance to her buying a house since so many people live in areas where housing is expensive. A big question is how much housing costs in her area. I know of areas where you can by a passable house or condo for less than $100K so if she happens to live in an area more like that then buying something might not be all that bad an idea. It would not be for everyone but in some areas you can buy a duplex for around that and then rent out the other unit so that might also be a possibility to consider.

5) On buying a car. In some areas a car is pretty much a necessity so there may not be any way around that. The answer as to how much to spend is "as little as possible" but you need to look at more than just the purchase price and consider the total cost of ownership over five or ten years. It seems like everyone wants a five year old Corolla or Civic so to me those are way too expensive for what you get, and when I have looked at it most desirable used cars all seemed too expensive. If she would be spending $10K on some used car with 50k miles it might make sense to bite the billet and spend $15K on a new base model inexpensive car like a Hyundai Accent that would come with a good warranty including a 10 year powertrain warranty.

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celia
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Re: SIL retirement puzzle

Post by celia » Wed Nov 13, 2019 12:22 pm

gips wrote:
Wed Nov 13, 2019 9:34 am
Unfortunately, I'll never convince her to rent...her parents drummed into their kids that "renting was throwing away money".
You could probably say that about most of her other expenses too!

gips wrote:
Wed Nov 13, 2019 9:53 am
her employer has allowed her to continue medical benefits for $76 per month. she worked in health care, benefits are very good, we believe this will continue until she's 65.
It's more likely that she is on COBRA which only lasts for18 months after one leaves the company.

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gips
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Re: SIL retirement puzzle

Post by gips » Wed Nov 13, 2019 1:25 pm

here's more info:
- I've asked her son to provide an xls download from her bank account so we can understand current spending.
- I believe she can cut at least $500/month from the conservative budget we put together. that would provide an extra $6k per year. It's been good to get feedback that the current budget is high, thank you all!
- she is not on cobra
- She refuses to rent and has the support of her BIL in this stance. It's a non-starter. The only option that I can see is that she purchases a place or moves in with us. So the only real option is she purchases a place and the only real question is how much can she spend. I'm gathering the answer is "as little as possible".
- As mentioned a couple of times, we and her BIL will take a note against the house if she gets into a cash crunch. If necessary, we can write a note for the entire equity - liquidation costs if she passes away.
- Her son has just started his career but is involved in this decision. He's very smart, does risk modeling for a living, so he understands all the risks we've identified. In the end, it's going to be their (SIL and nephew) decision and he's going to have to step up to support his mom if this goes south. He's been good at controlling her spend since she retired and is putting pressure on her to spend as little as possible on a home.
- her savings are in a high yield savings account but I've made the point she needs equities exposure to support a 4% withdrawal rate. Hence the asset allocation question in my original OP.
- She doesn't know if the pension has a cola.
- we're not really in a rush, we've been talking about this for over two years but now that she has to be out of the house by march, she's started actively looking for a place to live.
- I'm not really sure how she got certified as disabled. There isn't a physical disability and there aren't any real ongoing costs involved with the disability.

thanks,

soccerrules
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Re: SIL retirement puzzle

Post by soccerrules » Wed Nov 13, 2019 1:50 pm

gips wrote:
Wed Nov 13, 2019 9:34 am
:happy I'm not suggesting a reverse mortgage on a newly purchased condo. Instead, I'm pointing out that the $ spent for the condo have been converted to equity which can be tapped. If a reverse mortgage is a bad idea, then my BIL and my wife can have my SIL write a note against the condo equity.

anyhow, it's become clear given the preponderance of replies against a condo purchase that I'm thinking about this the wrong way. Unfortunately, I'll never convince her to rent...her parents drummed into their kids that "renting was throwing away money".

back to the drawing board...thanks for the help!
i have not read all the replies. Any chance she can add a roommate if she buys condo and have someone else pay her rent? this might also help if the individual is of similar age--they could share a car as well.
Don't let your outflow exceed your income or your upkeep will be your downfall.

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gips
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Re: SIL retirement puzzle

Post by gips » Wed Nov 13, 2019 2:04 pm

Thanks, a roommate is a great idea but I don’t think she can live w someone and I don’t think anyone can live w her. I’ve raised the suggestion to my wife and her son to let them run with it.

HomeStretch
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Re: SIL retirement puzzle

Post by HomeStretch » Wed Nov 13, 2019 2:07 pm

From the additional information you posted, it sounds like buying a home (and perhaps car) is a given. Given that, your post touches on all the right things namely:
1. The lower the home cost (but in excellent condition) the better,
2. Keeping to a realistic frugal budget
3. Keeping portfolio withdrawals below 4%
4. Family willing to provide financial backstop if necessary

Regarding asset allocation - while it would be tough to lose portfolio value in a downturn, without equities her portfolio will not keep up with inflation or support a 4% withdrawal. Consider 40/60 - 60/40. Perhaps the family who will provide financial support should weigh in on the portfolio AA as ultimately they are the ones who will bear the risk if the portfolio is prematurely depleted.

Best of luck to your SIL.

TN_Boy
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Re: SIL retirement puzzle

Post by TN_Boy » Wed Nov 13, 2019 2:41 pm

gips wrote:
Wed Nov 13, 2019 1:25 pm
here's more info:
- I've asked her son to provide an xls download from her bank account so we can understand current spending.
- I believe she can cut at least $500/month from the conservative budget we put together. that would provide an extra $6k per year. It's been good to get feedback that the current budget is high, thank you all!
- she is not on cobra
- She refuses to rent and has the support of her BIL in this stance. It's a non-starter. The only option that I can see is that she purchases a place or moves in with us. So the only real option is she purchases a place and the only real question is how much can she spend. I'm gathering the answer is "as little as possible".
- As mentioned a couple of times, we and her BIL will take a note against the house if she gets into a cash crunch. If necessary, we can write a note for the entire equity - liquidation costs if she passes away.
- Her son has just started his career but is involved in this decision. He's very smart, does risk modeling for a living, so he understands all the risks we've identified. In the end, it's going to be their (SIL and nephew) decision and he's going to have to step up to support his mom if this goes south. He's been good at controlling her spend since she retired and is putting pressure on her to spend as little as possible on a home.
- her savings are in a high yield savings account but I've made the point she needs equities exposure to support a 4% withdrawal rate. Hence the asset allocation question in my original OP.
- She doesn't know if the pension has a cola.
- we're not really in a rush, we've been talking about this for over two years but now that she has to be out of the house by march, she's started actively looking for a place to live.
- I'm not really sure how she got certified as disabled. There isn't a physical disability and there aren't any real ongoing costs involved with the disability.

thanks,
I'm just going to say this again, since I'm still baffled by some of the responses: unless she is incapable of handling money (and I still haven't read anything that shows this in your posts, though maybe that is the case -- where did the 4k monthly budget estimate come from?) a monthly income of over 3k, plus a 400k nest egg is far far away from being a disaster.

She has adequate resources for someone retiring at 63 willing to live a reasonably modest lifestyle. She would be unwise to sink a lot of money into a house*, so perhaps that is one sign of financial irresponsibility you are picking up on.

She should find out if the pension is COLAed. Good chance it is not.

You asked about asset allocation. I'd say 30/70 or 40/60 stocks/bonds for now.

* Do remind her and BIL that under current tax law she will almost certainly get *zero* benefit from having a mortgage and paying property taxes; her itemized deductions are unlikely to be greater than her standard deduction. They may not realize this.

Topic Author
gips
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Re: SIL retirement puzzle

Post by gips » Wed Nov 13, 2019 2:51 pm

My MIL drilled into their heads that “renting is like throwing away money”. Over the years I’ve shared various online rent vs purchase calculators, they won’t even consider it. Not worth trying (but I have already mentioned it :happy ) she won’t be a able to obtain a mortgage, this will be an all cash purchase.

I’m guessing there is no cola for the pension.

She was a terribly irresponsible manager of money over the course of her life but her son is al over it now and seems to have changed her behavior. One of the reasons we like a home purchase is that the equity will be out of her line of sight.

Dottie57
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Re: SIL retirement puzzle

Post by Dottie57 » Wed Nov 13, 2019 4:20 pm

Look for senior condos. In my area there is a large tall building of condos for seniors. They sell for 80-120k. Very spare but functional units. I have used the various realty sites to look at them and people furnish them quite well.

deikel
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Re: SIL retirement puzzle

Post by deikel » Wed Nov 13, 2019 4:40 pm

gips wrote:
Wed Nov 13, 2019 1:25 pm
here's more info:
- I've asked her son to provide an xls download from her bank account so we can understand current spending.
- I believe she can cut at least $500/month from the conservative budget we put together. that would provide an extra $6k per year. It's been good to get feedback that the current budget is high, thank you all!
- she is not on cobra
- She refuses to rent and has the support of her BIL in this stance. It's a non-starter. The only option that I can see is that she purchases a place or moves in with us. So the only real option is she purchases a place and the only real question is how much can she spend. I'm gathering the answer is "as little as possible".
- As mentioned a couple of times, we and her BIL will take a note against the house if she gets into a cash crunch. If necessary, we can write a note for the entire equity - liquidation costs if she passes away.
- Her son has just started his career but is involved in this decision. He's very smart, does risk modeling for a living, so he understands all the risks we've identified. In the end, it's going to be their (SIL and nephew) decision and he's going to have to step up to support his mom if this goes south. He's been good at controlling her spend since she retired and is putting pressure on her to spend as little as possible on a home.
- her savings are in a high yield savings account but I've made the point she needs equities exposure to support a 4% withdrawal rate. Hence the asset allocation question in my original OP.
- She doesn't know if the pension has a cola.
- we're not really in a rush, we've been talking about this for over two years but now that she has to be out of the house by march, she's started actively looking for a place to live.
- I'm not really sure how she got certified as disabled. There isn't a physical disability and there aren't any real ongoing costs involved with the disability.

thanks,

I think you should go the route of a SPIA. A 200k SPIA will give her immediate ca 900 USD/month. That is 400 more then she needs at age 65 and that leaves her about 200 for a new house and transportation and a 400 USD/month extra spending for the new house (tax, cable, electricity that is presumably not in her current budget since she lives with family).

If you look at it the other way round, she needs an extra 500 a month from 65 age to death at say 95, plus more money to bridge from 62 to 65, leaving her around 150k for a house - but at almost no extra cost in the budget.

So I think she should shoot for 150-175k and I would suggest to make that an apartment rather then a house for so many reasons. Once that is done and you have a good and real budget for her set up, I would recommend a SPIA to cover her budget

This is not a question of how to invest the money that currently sits an a savings account, its a question of what is a true and realistic budget (4k/month when living at relatives sounds high to me too) and what can she reasonably do to become independent since the living with relatives seems to have come to an end...maybe.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

Morgan Dollar 1921
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Re: SIL retirement puzzle

Post by Morgan Dollar 1921 » Wed Nov 13, 2019 5:08 pm

"She should find out if the pension is COLAed. Good chance it is not."

(IF we knew who the pension was with, we could find out more than likely. Even if it is COLAed, the COLA could be pulled due to funding issues with pension fund return shortfall's. Just ask Ohio Teachers about the STRS cola changes, as Bob Dylan sang, "The times they are a changin")

You asked about asset allocation. I'd say 30/70 to start then move to 40/60 stocks/bonds for now.

(I strongly suggest IF she has had no previous exposure to investing she go with 30/60/10, equity, bonds & MMMF. Yes, some cash drag, but a good stabilizer for her long term commitment to staying with the allocation.)

I would think she would want to rent, a senior citizen theme, apartment, etc, if she has the ability to travel and wants to enjoy some travel, the demands of home ownership on a single person are demanding. There may be a point in the next 3-10 years where she is not able to take care of the home anyway, is the family gonna drop every thing and go mow grass or cut up a tree that blew across the driveway ? Fill the water softener, paint the house, seal the concrete, fix the garage door opener, etc.

Since she is on SSDI, I presume that she is eligible for medicare right away ?

What is the age of mortality for her age, and health situation, seems like without doing a ton of math, she is good for 25 - 30 years of life with the current assets and income numbers. IF she wants to leave some $ for someone then that changes that, just remember the last 10 years of our life are often our rocking chair years. Our travel and ability to spend are lower, I am not gonna worry about long term care nor living till 99 as much as I am wanting to enjoy the next 10 years while I have a better shot at good health, no joint replacements, etc, etc.

As I have said here before, and told 3 Annuity sales persons at a USPS Postmasters convention, the best time to start drawing your Social Security is while you are alive. Even thought they each had a good and different answer in the convention hall, I got no rebuttal as they stood in the hallway outside the meeting room. Hard to cash a pension check in a coffin.

She already has a good above average social security number for her employment, previous lifestyle which should have been based on that earnings record to create that SSDI and the bend point.

A lot of people go into retirement with less. Sometimes we have to tighten our belts. She needs to go economy and safe on a good late model used car, I suggest a Subaru maybe an Impreza, Crosstrek, Forester or Outback or a Toyota in the 12-16k range. Buy it pay cash and have no payments. I hope I have bought my last car.
Enjoy.

Morgan Dollar 1921
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Re: SIL retirement puzzle

Post by Morgan Dollar 1921 » Wed Nov 13, 2019 5:20 pm

Let me correct myself:
"Disabled people who are approved for Social Security disability insurance (SSDI) benefits will receive Medicare, and those who are approved for Supplemental Security Income (SSI) will receive Medicaid. However, SSDI recipients aren't eligible to receive Medicare benefits until two years after their date of entitlement."

Someone mentioned 22.7 years of life expectancy, that equates to a 4.4 % safe withdrawal rate. (100 divided by 22.7)

I would not hesitate to go 5% if my health was poorer.

bob60014
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Re: SIL retirement puzzle

Post by bob60014 » Wed Nov 13, 2019 5:36 pm

Im puzzled as to who is actually running the show here? You, the son, SIL or other family members? And has sil asked or want all this help?

TN_Boy
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Re: SIL retirement puzzle

Post by TN_Boy » Wed Nov 13, 2019 10:21 pm

deikel wrote:
Wed Nov 13, 2019 4:40 pm

stuff deleted

I think you should go the route of a SPIA. A 200k SPIA will give her immediate ca 900 USD/month. That is 400 more then she needs at age 65 and that leaves her about 200 for a new house and transportation and a 400 USD/month extra spending for the new house (tax, cable, electricity that is presumably not in her current budget since she lives with family).

If you look at it the other way round, she needs an extra 500 a month from 65 age to death at say 95, plus more money to bridge from 62 to 65, leaving her around 150k for a house - but at almost no extra cost in the budget.

So I think she should shoot for 150-175k and I would suggest to make that an apartment rather then a house for so many reasons. Once that is done and you have a good and real budget for her set up, I would recommend a SPIA to cover her budget

This is not a question of how to invest the money that currently sits an a savings account, its a question of what is a true and realistic budget (4k/month when living at relatives sounds high to me too) and what can she reasonably do to become independent since the living with relatives seems to have come to an end...maybe.
I still cannot understand the SPIA suggestion. In your example, if she uses an SPIA for 200k -- giving her a non-inflation adjusted $900 a month -- and then pays 200k for a house she has destroyed almost all her savings. She already has over 3k a month in reliable income.

The OP -- really the SIL of course -- needs to figure out how much she needs and then work to come up with a budget that fits her income, and perhaps a modest draw upon her savings. The SPIA only makes (to me) if she is a chronic overspender.... Not that an SPIA actually solves that problem ... you can still go into credit card debt and wind up in severe financial trouble.

Obviously, I am struggling to see the wisdom of wiping out the nest egg she has accumulated. But I also don't understand where the spending estimate comes from, and pretty much all of us think that number is too high.

Topic Author
gips
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Re: SIL retirement puzzle

Post by gips » Wed Nov 13, 2019 11:19 pm

- I'll update the spending model once her son provides a spreadsheet of her banking txns.
- today we saw a $150k condo that had A/B units: two separate living spaces within one condo with separate doors, one can be rented for $950/month while she lives in the other. seems ideal, she's considering it.

deikel
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Re: SIL retirement puzzle

Post by deikel » Thu Nov 14, 2019 10:42 am

TN_Boy wrote:
Wed Nov 13, 2019 10:21 pm
deikel wrote:
Wed Nov 13, 2019 4:40 pm

stuff deleted

I think you should go the route of a SPIA. A 200k SPIA will give her immediate ca 900 USD/month. That is 400 more then she needs at age 65 and that leaves her about 200 for a new house and transportation and a 400 USD/month extra spending for the new house (tax, cable, electricity that is presumably not in her current budget since she lives with family).

If you look at it the other way round, she needs an extra 500 a month from 65 age to death at say 95, plus more money to bridge from 62 to 65, leaving her around 150k for a house - but at almost no extra cost in the budget.

So I think she should shoot for 150-175k and I would suggest to make that an apartment rather then a house for so many reasons. Once that is done and you have a good and real budget for her set up, I would recommend a SPIA to cover her budget

This is not a question of how to invest the money that currently sits an a savings account, its a question of what is a true and realistic budget (4k/month when living at relatives sounds high to me too) and what can she reasonably do to become independent since the living with relatives seems to have come to an end...maybe.
I still cannot understand the SPIA suggestion. In your example, if she uses an SPIA for 200k -- giving her a non-inflation adjusted $900 a month -- and then pays 200k for a house she has destroyed almost all her savings. She already has over 3k a month in reliable income.

The OP -- really the SIL of course -- needs to figure out how much she needs and then work to come up with a budget that fits her income, and perhaps a modest draw upon her savings. The SPIA only makes (to me) if she is a chronic overspender.... Not that an SPIA actually solves that problem ... you can still go into credit card debt and wind up in severe financial trouble.

Obviously, I am struggling to see the wisdom of wiping out the nest egg she has accumulated. But I also don't understand where the spending estimate comes from, and pretty much all of us think that number is too high.
OP stated that her nest egg is in high yield savings account, so the person is clearly not an investor and although the OP asked for help with investments and allocations, it is my understanding that this is probably a bit far to reach for
someone else's money.

I also got the impression that the OP is pushing for a living outside of family and on their own, for non financial reasons.

In combination, trying to convince someone to invest, spent money on a home and transportation and making sure they are covered for their retirement seemed a fairly significant task to me.

A SPIA is a very valuable tool to use and, assuming the presented budget is accurate (who knows), a SPIA would provide the gap coverage, make money management easy and give an indication of how much money is left to invest into a different living arrangement.

SPIAs can be had inflation adjusted, my rough balling it was not - but its fairly irrelevant since spending over time in retirement is statistically dropping for retirees, so it actually scales nicely with reality if a SPIA is non inflation adjusted and in the last couple of years we enjoyed a 2% inflation rate.

I know bogleheads frown on SPIA, but it is a very useful tool allowing you to safely exceed the 4% draw rate equivalent (at the cost of the principle being gone and not being passed on to relatives).
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

deikel
Posts: 943
Joined: Sat Jan 25, 2014 7:13 pm

Re: SIL retirement puzzle

Post by deikel » Thu Nov 14, 2019 10:46 am

gips wrote:
Wed Nov 13, 2019 11:19 pm
- I'll update the spending model once her son provides a spreadsheet of her banking txns.
- today we saw a $150k condo that had A/B units: two separate living spaces within one condo with separate doors, one can be rented for $950/month while she lives in the other. seems ideal, she's considering it.
now you want to make her a landlord renting out half the new condo ? Does she have any experience in such ?

What does she actually want in all this? Trying to help is one thing, but are you not going a bit overboard here ?
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

TN_Boy
Posts: 1367
Joined: Sat Jan 17, 2009 12:51 pm

Re: SIL retirement puzzle

Post by TN_Boy » Thu Nov 14, 2019 11:01 am

deikel wrote:
Thu Nov 14, 2019 10:42 am
TN_Boy wrote:
Wed Nov 13, 2019 10:21 pm
deikel wrote:
Wed Nov 13, 2019 4:40 pm

stuff deleted

I think you should go the route of a SPIA. A 200k SPIA will give her immediate ca 900 USD/month. That is 400 more then she needs at age 65 and that leaves her about 200 for a new house and transportation and a 400 USD/month extra spending for the new house (tax, cable, electricity that is presumably not in her current budget since she lives with family).

If you look at it the other way round, she needs an extra 500 a month from 65 age to death at say 95, plus more money to bridge from 62 to 65, leaving her around 150k for a house - but at almost no extra cost in the budget.

So I think she should shoot for 150-175k and I would suggest to make that an apartment rather then a house for so many reasons. Once that is done and you have a good and real budget for her set up, I would recommend a SPIA to cover her budget

This is not a question of how to invest the money that currently sits an a savings account, its a question of what is a true and realistic budget (4k/month when living at relatives sounds high to me too) and what can she reasonably do to become independent since the living with relatives seems to have come to an end...maybe.
I still cannot understand the SPIA suggestion. In your example, if she uses an SPIA for 200k -- giving her a non-inflation adjusted $900 a month -- and then pays 200k for a house she has destroyed almost all her savings. She already has over 3k a month in reliable income.

The OP -- really the SIL of course -- needs to figure out how much she needs and then work to come up with a budget that fits her income, and perhaps a modest draw upon her savings. The SPIA only makes (to me) if she is a chronic overspender.... Not that an SPIA actually solves that problem ... you can still go into credit card debt and wind up in severe financial trouble.

Obviously, I am struggling to see the wisdom of wiping out the nest egg she has accumulated. But I also don't understand where the spending estimate comes from, and pretty much all of us think that number is too high.
OP stated that her nest egg is in high yield savings account, so the person is clearly not an investor and although the OP asked for help with investments and allocations, it is my understanding that this is probably a bit far to reach for
someone else's money.

I also got the impression that the OP is pushing for a living outside of family and on their own, for non financial reasons.

In combination, trying to convince someone to invest, spent money on a home and transportation and making sure they are covered for their retirement seemed a fairly significant task to me.

A SPIA is a very valuable tool to use and, assuming the presented budget is accurate (who knows), a SPIA would provide the gap coverage, make money management easy and give an indication of how much money is left to invest into a different living arrangement.

SPIAs can be had inflation adjusted, my rough balling it was not - but its fairly irrelevant since spending over time in retirement is statistically dropping for retirees, so it actually scales nicely with reality if a SPIA is non inflation adjusted and in the last couple of years we enjoyed a 2% inflation rate.

I know bogleheads frown on SPIA, but it is a very useful tool allowing you to safely exceed the 4% draw rate equivalent (at the cost of the principle being gone and not being passed on to relatives).
Not all bogleheads frown on SPIAs. But 3/4ths or more of her monthly income is already covered by reliable income streams (SSDI and a pension).

Buying an annuity in that situation is, I think, a bad financial move. You are blowing up reserves.

I completely agree with the position taken in this article: https://www.onefpa.org/journal/Pages/DE ... Tower.aspx. See Observation 3. Milevsky is far from an SPIA doubter.

Topic Author
gips
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Joined: Mon May 13, 2013 5:42 pm

Re: SIL retirement puzzle

Post by gips » Thu Nov 14, 2019 11:51 am

deikel wrote:
Thu Nov 14, 2019 10:46 am
gips wrote:
Wed Nov 13, 2019 11:19 pm
- I'll update the spending model once her son provides a spreadsheet of her banking txns.
- today we saw a $150k condo that had A/B units: two separate living spaces within one condo with separate doors, one can be rented for $950/month while she lives in the other. seems ideal, she's considering it.
now you want to make her a landlord renting out half the new condo ? Does she have any experience in such ?

What does she actually want in all this? Trying to help is one thing, but are you not going a bit overboard here ?
I don't "want to make her a landlord", she saw the place and thought it a good idea. I also think it's a great idea to have the option given the way the unit is configured without any shared space. However, we didn't provide any feedback to her positive or negative, it's up to her and her son to make that decision.

Our role in this is not to dictate, not to suggest but simply to provide options for her and her son. The reason we're so involved is a) she doesn't drive b) her son doesn't drive c) she can't put together a financial model or use a computer d) she's interested in looking for a place in florida and we have a condo there e) left to her own devices, she'll call us at the 24th hour to let us know she's moving into our house and e) to a large extent, we're part of her financial safety net. Believe me, we would LOVE not to be involved.

TN_Boy
Posts: 1367
Joined: Sat Jan 17, 2009 12:51 pm

Re: SIL retirement puzzle

Post by TN_Boy » Thu Nov 14, 2019 12:57 pm

gips wrote:
Thu Nov 14, 2019 11:51 am
deikel wrote:
Thu Nov 14, 2019 10:46 am
gips wrote:
Wed Nov 13, 2019 11:19 pm
- I'll update the spending model once her son provides a spreadsheet of her banking txns.
- today we saw a $150k condo that had A/B units: two separate living spaces within one condo with separate doors, one can be rented for $950/month while she lives in the other. seems ideal, she's considering it.
now you want to make her a landlord renting out half the new condo ? Does she have any experience in such ?

What does she actually want in all this? Trying to help is one thing, but are you not going a bit overboard here ?
I don't "want to make her a landlord", she saw the place and thought it a good idea. I also think it's a great idea to have the option given the way the unit is configured without any shared space. However, we didn't provide any feedback to her positive or negative, it's up to her and her son to make that decision.

Our role in this is not to dictate, not to suggest but simply to provide options for her and her son. The reason we're so involved is a) she doesn't drive b) her son doesn't drive c) she can't put together a financial model or use a computer d) she's interested in looking for a place in florida and we have a condo there e) left to her own devices, she'll call us at the 24th hour to let us know she's moving into our house and e) to a large extent, we're part of her financial safety net. Believe me, we would LOVE not to be involved.
It is a little confusing trying to figure out who in the family is helping her and in what way, we've got you, the son, and apparently the BIL on the sidelines. I imagine you are finding it confusing as well .... And it's not clear if she has cognitive issues, or is maybe financially illiterate and perhaps a bit -- for want of a better word -- "spacey."

She has enough money to be okay if reasonable choices are made. If she is not going to make reasonable choices then she is not going to be okay and you should consider sending the message now loud and clear "we are not bailing you out of your financial mistakes, and you are not moving in with us." She is NOT in a bad situation now, unless she makes some avoidable dumb mistakes, or chronically overspends. There is almost nothing you can do about the latter.

That said, it seems like you and the son need to closely coordinate the help, which you may already be doing. It's puzzling that nobody can drive in the family, apparently. But anyway, who lives near her? The son? If she needs help with stuff like Dr appts, who does that?

If she does try and rent out space in the condo she probably shouldn't buy, somebody does need to play landlord (vetting prospective renters, collecting rent, coordinating cleaning and repainting after a renter moves out, evicting someone if necessary, etc). Who would get to play landlord?

Good luck and I hope the situation goes well.

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