Parents retiring with $500k saved - Things look OK?
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Re: Parents retiring with $500k saved - Things look OK?
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Re: Parents retiring with $500k saved - Things look OK?
Where is the $26K coming from? The OP said $20K. The house doesn't need anything to sell, knock $60K off the selling price, in WA state believe me, the bargain hunters will be all over it to buy it for $950K, if it truly is a $1 million dollar house after repairs.Shallowpockets wrote: ↑Fri Mar 06, 2020 11:50 am The fact that your sister and mom are sentimental about the house can be a problem. A one million dollar house needing 50-60K to sell and 26K annual taxes is problematic.
Looking at it that way, the house is the problem overall for their retirement.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Re: Parents retiring with $500k saved - Things look OK?
Best response. Well said. People in this forum assume they will live 120 years.Keenobserver wrote: ↑Fri Mar 06, 2020 2:56 pm Im always perplexed when I see the reponses to these kind of questions. People saying they will not be ok. They dont have enough in case the sky turns to stone etc. I mean these folks are not getting any younger, if they dont have " enough" by now, do you think they will by grinding couple of more years? Should such folks die on the job? People tend to ignore the fact that such folks have limited years to live. What are the options if they dont have enough? Should they work to 95?
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Re: Parents retiring with $500k saved - Things look OK?
There is no WE. There is a YOU that wants to move and a THEY that doesn't:) They have plenty of assets to maintain a 70-80k lifestyle for the next 30 years. And it isn't even remotely close. There is zero financial reason for them to move unless their goal is to maximize your inheritance:). At some point they might decide that they will be happier moving but that should be lifestyle choice not a financial one.geerhardusvos wrote: ↑Fri Mar 06, 2020 8:30 pm
I agree, it just seems off and they are house rich but that asset is not paying them...the house is coming up on tens of thousands of maintenance with roofing paint job and other things that probably need to happen to make it sellable despite the hot market. We would all be so much happier if they just downsized, but might take them a few years to come to that conclusion. I like the other comment about how it gets harder to move as you get older, and they need to get rid of a ton of crap lol... One step at a time I guess. First things first is to get them out of the individual stock and then make sure they are in an appropriate aa... Here we go lol
This topic pops up on bogleheads constantly. There is a fine line that people walk between trying to be helpful and being paternalistic. They might not live the life. you. want them to, but at 69 they probably still have the mental acuity to make those choices. The thing you don't want to do is shut down communication so that when they are 89 and do need help, they aren't talking to you about this matter.
Re: Parents retiring with $500k saved - Things look OK?
You're welcome. That other poster was way out of line. I really don't understand where some of these guys are coming from. That was not at all in the helpful spirit of Bogleheads.org.geerhardusvos wrote: ↑Fri Mar 06, 2020 9:32 pmThank you
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
Re: Parents retiring with $500k saved - Things look OK?
If your parents were willing to work with a fee-only fiduciary financial adviser, they could get to the bottom of their actual expenses and assets, and assess their entire financial picture. It would remove the "hard to say" aspect and give you all a lot more confidence.geerhardusvos wrote: ↑Fri Mar 06, 2020 10:42 am - My dad is 69 and plans to stop working next year. My mom does not work and is 68.
- They seem to spend ~$70k-80k per year, but hard to say since they don't budget and didn't share.
- Live in HCOL area. Paid off house worth ~$1M. They want to stay in the house.
- They have ~$500k saved up (mostly in pretax 401k and IRA).
- They should have ~$4500 coming in per month with SS once my dad retires at 70.
The most frustrating part is that they don't seem willing to get educated on how things work, but they are hesitant about others helping, but I see signs of that changing with dads health.
Is a fee only financial advisor worth it?
If they find that their $500k doesn't meet their goals, the adviser could help make suggestions. Sometimes suggestions from a 3rd party are better received that from a family member.
You could start here: https://www.letsmakeaplan.org/
First work with them gently to not be embarrassed. Perhaps then they would open up to other possibilities.Is it too pushy to ask for power of attorney? My megacorp employer will pay for this for them, as well as a trust. What's a good way to talk with them about this? We have a good relationship, but they seem hesitant to share and they seem embarrassed that they worked 50 years and have only $500k.
For me, $500k would be too low. But it depends on their actual goals and expenses.How do their finances look? Anything we should be thinking about? RMDs are going to kick in here which isn't all bad
If they wanted to sell the house and live in a lower cost of living area, that might change. But you indicated that they don't want to sell the item that makes up 2/3 of their net worth.
Do they have long term care insurance?
Obviously, half the cost is better. But if they really want to stay, and can afford to do so, you may not want to try to convince them to move.Any thoughts on if they should stay in their house? My mom really really wants to stay, but they could move closer to us kids and it's half the cost where we live if they downsize
First, determine feasibility. Only then suggest necessary changes.
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Re: Parents retiring with $500k saved - Things look OK?
Open a HELOC before retirement so the home equity can be accessed if they stay. Or even better, sell that albatross and move to a reasonably priced flyover state. Even better, move to a reasonably priced country.
Re: Parents retiring with $500k saved - Things look OK?
The option is that people reduce expenses so they minimize the risk of outliving their savings.1789 wrote: ↑Fri Mar 06, 2020 10:07 pmBest response. Well said. People in this forum assume they will live 120 years.Keenobserver wrote: ↑Fri Mar 06, 2020 2:56 pm Im always perplexed when I see the reponses to these kind of questions. People saying they will not be ok. They dont have enough in case the sky turns to stone etc. I mean these folks are not getting any younger, if they dont have " enough" by now, do you think they will by grinding couple of more years? Should such folks die on the job? People tend to ignore the fact that such folks have limited years to live. What are the options if they dont have enough? Should they work to 95?
First, you analyze your income/assets —including what happens in the very likely situation that one spouse predeceases the other and the survivor’s Social Security/pension benefit is reduced. Second, you determine your desired expenses (both as a couple and as a potential single). Then you compare the 2 numbers and see if your desired expenses can be sustained for 25/30 years based on your income/assets.
The whole point is that it is going to be easier for retirees to adjust expenses down compared to bumping income up.
Working to 95 or living to 120 don’t come into it.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Re: Parents retiring with $500k saved - Things look OK?
I agree adjusting expenses down is the way to go and with your other comments on getting best out of SS. But if you do best you can there is no point working until 95 or until the day you die. Something along the way should be figured out with family members, i believe. Lets say your parents did best but eventually ran out of money or couldn't catch up with life expenses. What are you going to do? I would help them best i could, period. Problem solved.delamer wrote: ↑Sat Mar 07, 2020 1:00 pmThe option is that people reduce expenses so they minimize the risk of outliving their savings.1789 wrote: ↑Fri Mar 06, 2020 10:07 pmBest response. Well said. People in this forum assume they will live 120 years.Keenobserver wrote: ↑Fri Mar 06, 2020 2:56 pm Im always perplexed when I see the reponses to these kind of questions. People saying they will not be ok. They dont have enough in case the sky turns to stone etc. I mean these folks are not getting any younger, if they dont have " enough" by now, do you think they will by grinding couple of more years? Should such folks die on the job? People tend to ignore the fact that such folks have limited years to live. What are the options if they dont have enough? Should they work to 95?
First, you analyze your income/assets —including what happens in the very likely situation that one spouse predeceases the other and the survivor’s Social Security/pension benefit is reduced. Second, you determine your desired expenses (both as a couple and as a potential single). Then you compare the 2 numbers and see if your desired expenses can be sustained for 25/30 years based on your income/assets.
The whole point is that it is going to be easier for retirees to adjust expenses down compared to bumping income up.
Working to 95 or living to 120 don’t come into it.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)
Re: Parents retiring with $500k saved - Things look OK?
I don't know if your parents would be impressed with the observation that if they net $1M on the house and avoid $26k in property taxes plus whatever amount in maintenance that they end up with income of about $66k a year or $5,500/month to rent a place to live, inflation indexed for the rest of their expected lifetime -- give or take. This is the far end of the continuum of previous suggestions that it might work better to have a large portfolio and a less costly house, except that renting allows flexibility in location and avoids the burdens of home ownership though also giving up some of the advantages of owning one's own home. Lots of people do prefer to move to renting in later years and a well appreciated home enables that.
Re: Parents retiring with $500k saved - Things look OK?
I was pushing back on the idea that you and Keenobserver had that some posters were suggesting that the OP’s parents work until 95 or do their planning based on living until 120. I don’t see evidence of that in the comments.1789 wrote: ↑Sat Mar 07, 2020 1:08 pmI agree adjusting expenses down is the way to go and with your other comments on getting best out of SS. But if you do best you can there is no point working until 95 or until the day you die. Something along the way should be figured out with family members, i believe. Lets say your parents did best but eventually ran out of money or couldn't catch up with life expenses. What are you going to do? I would help them best i could, period. Problem solved.delamer wrote: ↑Sat Mar 07, 2020 1:00 pmThe option is that people reduce expenses so they minimize the risk of outliving their savings.1789 wrote: ↑Fri Mar 06, 2020 10:07 pmBest response. Well said. People in this forum assume they will live 120 years.Keenobserver wrote: ↑Fri Mar 06, 2020 2:56 pm Im always perplexed when I see the reponses to these kind of questions. People saying they will not be ok. They dont have enough in case the sky turns to stone etc. I mean these folks are not getting any younger, if they dont have " enough" by now, do you think they will by grinding couple of more years? Should such folks die on the job? People tend to ignore the fact that such folks have limited years to live. What are the options if they dont have enough? Should they work to 95?
First, you analyze your income/assets —including what happens in the very likely situation that one spouse predeceases the other and the survivor’s Social Security/pension benefit is reduced. Second, you determine your desired expenses (both as a couple and as a potential single). Then you compare the 2 numbers and see if your desired expenses can be sustained for 25/30 years based on your income/assets.
The whole point is that it is going to be easier for retirees to adjust expenses down compared to bumping income up.
Working to 95 or living to 120 don’t come into it.
Whether adult children will be able to assist their elderly parents financially varies widely by family. If you can be your parents’ backstop, that’s great. But that isn’t a solution for many families.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Re: Parents retiring with $500k saved - Things look OK?
By definition, if they don't have enough, they must get enough from some source.Keenobserver wrote: ↑Fri Mar 06, 2020 2:56 pmWhat are the options if they dont have enough? Should they work to 95?
They could continue to work, or get it from someone else (presumably family). Yes, sometimes that means working until 95.
Perhaps you mean something different by "enough"?
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Re: Parents retiring with $500k saved - Things look OK?
I wouldn't help anyone who didn't want my help. It's really hard to rescue or advise the unwilling. I might tell them that I'm available if they need me.oldfatguy wrote: ↑Fri Mar 06, 2020 11:51 amNothing else matters. Stay out of it, IMO.geerhardusvos wrote: ↑Fri Mar 06, 2020 10:42 am The most frustrating part is that they don't seem willing to get educated on how things work, but they don't want help...
My parents are the same way. They have a very modest house, but they should have moved out of it, or made some modifications, at least 10 years ago ... but they didn't, and they won't. The only way they will leave it is when they are carted out on a stretcher and no longer have a choice.
I was in a meeting with a closely related elderly couple in their late 80s. All of their children and their spouses were at the meeting. They clearly were at the point where both needed help physically. We did not know their financial situation. We offered to help; we asked about their financial situation. They did give the location of their final papers and the combination to their safe to one individual. Otherwise, they politely did not request help or give out any financial information.
After the meeting, we just shook our heads but we stayed close and provided all the help that they needed right through to the end. It turns out that they had enough resources to make it. Several of us had paid for projects figuring that they were only living on social security. We found out later that they could have handled the costs.
We were disappointed that they didn't do things our way, but it all worked out in the end.
It's hard to rescue the elderly when they are mentally ok. It's a different story when they become mentally dependent on others.
Re: Parents retiring with $500k saved - Things look OK?
Shrug. Family dynamics vary. There are plenty of septuagenarians not doing fine, and if things blow up, the kids wind up having to fix it. Here is what I personally think the parents owe the children.jacksonm wrote: ↑Fri Mar 06, 2020 2:50 pm I'm 70 years old and both your parents net worth and annual spending are about the same as ours and we're doing fine. Haven't even touched savings yet except for buying a new car and first RMD this year. The main difference between us and them is that our net worth is almost entirely in our investment portfolio. Our house is only worth about $300k and I even have a mortgage on it.
Maybe I shouldn't say this but I will any way..... if my kids asked the kinds of questions you are thinking about asking I would politely tell them to mind their own business. And my parents would have done the same to me, I'm sure. They were well into their 90's before we had to even think about paying close attention to their financial affairs - and they retired with about $300k. [OT comment removed by Moderator Misenplace] I can assure you that most of us septuagenarians are doing just fine. The fact that your Dad is still working at age 69 suggests to me he probably knows what he's doing.
1) A general idea of assets, income and liabilities. (Is house paid off, we have X in savings and investments, Y coming in from pension/SS).
2) What is the estate plan? I'll give all the kids an equal share. Or "I like Joe better, he gets all the money." Or "I want you to keep the family vacation house and use it for years."
3) Health care power of attorneys and Financial power of attorneys. Who takes care of us when we can't? Organized list of accounts, property, etc
4) How would LTC be handled? Do you want the kids to take you in? Or you have LTCi, or whatever?
I was very lucky, my parents offered the above information to me, so when I had to step in, it was less painful.
You and/or spouse could be gone or incapacitated tomorrow. Or you might get dementia and slowly lose your ability to handle your affairs, protesting you are absolutely okay to the bitter end.
Of course, if you don't like your kids or don't expect any help from them in later life, by all means avoid discussing finances with them. "I guess if dad and mom wanted me to help, they'd have gone over stuff with me. Good luck!"
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Re: Parents retiring with $500k saved - Things look OK?
Thank you sir, that is a good listTN_Boy wrote: ↑Sun Mar 08, 2020 9:19 amShrug. Family dynamics vary. There are plenty of septuagenarians not doing fine, and if things blow up, the kids wind up having to fix it. Here is what I personally think the parents owe the children.jacksonm wrote: ↑Fri Mar 06, 2020 2:50 pm I'm 70 years old and both your parents net worth and annual spending are about the same as ours and we're doing fine. Haven't even touched savings yet except for buying a new car and first RMD this year. The main difference between us and them is that our net worth is almost entirely in our investment portfolio. Our house is only worth about $300k and I even have a mortgage on it.
Maybe I shouldn't say this but I will any way..... if my kids asked the kinds of questions you are thinking about asking I would politely tell them to mind their own business. And my parents would have done the same to me, I'm sure. They were well into their 90's before we had to even think about paying close attention to their financial affairs - and they retired with about $300k. [OT comment removed by Moderator Misenplace] I can assure you that most of us septuagenarians are doing just fine. The fact that your Dad is still working at age 69 suggests to me he probably knows what he's doing.
1) A general idea of assets, income and liabilities. (Is house paid off, we have X in savings and investments, Y coming in from pension/SS).
2) What is the estate plan? I'll give all the kids an equal share. Or "I like Joe better, he gets all the money." Or "I want you to keep the family vacation house and use it for years."
3) Health care power of attorneys and Financial power of attorneys. Who takes care of us when we can't? Organized list of accounts, property, etc
4) How would LTC be handled? Do you want the kids to take you in? Or you have LTCi, or whatever?
I was very lucky, my parents offered the above information to me, so when I had to step in, it was less painful.
You and/or spouse could be gone or incapacitated tomorrow. Or you might get dementia and slowly lose your ability to handle your affairs, protesting you are absolutely okay to the bitter end.
Of course, if you don't like your kids or don't expect any help from them in later life, by all means avoid discussing finances with them. "I guess if dad and mom wanted me to help, they'd have gone over stuff with me. Good luck!"
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Re: Parents retiring with $500k saved - Things look OK?
Fair point about moving away from family and friends. I'm not sure about the real estate market near OP's parents, but I would be surprised if there are not housing options that are considerably cheaper than a $1million house in their area which would not require a move of 50 miles. If a single family home is not an option then perhaps a condo? HOA fees (and possibly HOA politics) are a bummer but having someone else take care of landscaping and snow removal and etc would be pretty nice. Or they could rent as has been suggested elsewhere in the thread.randomguy wrote: ↑Fri Mar 06, 2020 5:00 pmIt sounds much worse to me. Moving 50 miles from friends and family to save a few bucks that you don't need doesn't sound like a great option unless you are worried about maxing out your kids inheritance.Living Free wrote: ↑Fri Mar 06, 2020 12:09 pm I agree with above recommendations re the house. How would having $1.1 million portfolio with a $400k paid off house sound? That sounds much better to me. Also consider lower ongoing expenses with the cheaper house.
The house is expensive and a higher percentage than people recommend in general. But they can afford it. There is no need to move unless they want to. AND this is a choice they can reconsider at anytime. Maybe in 10 years they will be more willing to downsize and live some place else.
The scary part of this post isn't the house or expenses. It is the single stock risk.
Re: Parents retiring with $500k saved - Things look OK?
My free financial advice is to sell the house as soon as your dad stops working and move someplace with a lower cost of living.
Last edited by oldfort on Sun Mar 08, 2020 9:12 pm, edited 1 time in total.
Re: Parents retiring with $500k saved - Things look OK?
You're welcome. There were a couple of things in your post that caught my eye.geerhardusvos wrote: ↑Sun Mar 08, 2020 2:07 pmThank you sir, that is a good listTN_Boy wrote: ↑Sun Mar 08, 2020 9:19 amShrug. Family dynamics vary. There are plenty of septuagenarians not doing fine, and if things blow up, the kids wind up having to fix it. Here is what I personally think the parents owe the children.jacksonm wrote: ↑Fri Mar 06, 2020 2:50 pm I'm 70 years old and both your parents net worth and annual spending are about the same as ours and we're doing fine. Haven't even touched savings yet except for buying a new car and first RMD this year. The main difference between us and them is that our net worth is almost entirely in our investment portfolio. Our house is only worth about $300k and I even have a mortgage on it.
Maybe I shouldn't say this but I will any way..... if my kids asked the kinds of questions you are thinking about asking I would politely tell them to mind their own business. And my parents would have done the same to me, I'm sure. They were well into their 90's before we had to even think about paying close attention to their financial affairs - and they retired with about $300k. [OT comment removed by Moderator Misenplace] I can assure you that most of us septuagenarians are doing just fine. The fact that your Dad is still working at age 69 suggests to me he probably knows what he's doing.
1) A general idea of assets, income and liabilities. (Is house paid off, we have X in savings and investments, Y coming in from pension/SS).
2) What is the estate plan? I'll give all the kids an equal share. Or "I like Joe better, he gets all the money." Or "I want you to keep the family vacation house and use it for years."
3) Health care power of attorneys and Financial power of attorneys. Who takes care of us when we can't? Organized list of accounts, property, etc
4) How would LTC be handled? Do you want the kids to take you in? Or you have LTCi, or whatever?
I was very lucky, my parents offered the above information to me, so when I had to step in, it was less painful.
You and/or spouse could be gone or incapacitated tomorrow. Or you might get dementia and slowly lose your ability to handle your affairs, protesting you are absolutely okay to the bitter end.
Of course, if you don't like your kids or don't expect any help from them in later life, by all means avoid discussing finances with them. "I guess if dad and mom wanted me to help, they'd have gone over stuff with me. Good luck!"
One was the remark about your dad's health. Is he showing signs of an overall decline? Or was it a "one-time" health scare (if there is such a thing). Who manages the finances now, your dad or your mom?
Another was "My sister wants to keep the house in the family" which means your mom and your dad REALLY need to think about estate planning. For example, do they plan on giving the house to your sister? Or all kids but somehow the house doesn't get sold?? This could be a fine mess which they could avoid by deciding what they really want to do (note .... they might not decide to pass down assets equally to the children ... but if they do, they need to realize the big expensive house needs to be managed in the estate plan.
If the parents decline, how do they expect to get help? Kids dropping in all the time? Move to assisted living? Etc.
It's hard to tell if they are in trouble with spending given your post. A 500k portfolio is not tiny. It is true that having so much of their net worth tied up in the house limits their financial flexibility.
With respect to POAs and such, I think you should just them (or maybe mom if she is concerned about dad) who they want to handle things if needed.
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Re: Parents retiring with $500k saved - Things look OK?
I'm betting the house wasn't valued at nearly $1 million when they bought it.willthrill81 wrote: ↑Fri Mar 06, 2020 7:41 pm I agree with others that their situation looks doable, but a retired couple living in a $1 million home and only $500k in their portfolio seems 'off'.
Re: Parents retiring with $500k saved - Things look OK?
Right. Owners in my neighborhood who were original buyers in the mid-80’s paid around $135K-$150K. Their houses are now worth about $700K, give or take 5%. Even those of us who bought 20 years ago have made $400K or so.StormShadow wrote: ↑Sun Mar 08, 2020 7:30 pmI'm betting the house wasn't valued at nearly $1 million when they bought it.willthrill81 wrote: ↑Fri Mar 06, 2020 7:41 pm I agree with others that their situation looks doable, but a retired couple living in a $1 million home and only $500k in their portfolio seems 'off'.
(I am not arguing that a house is a good investment. Just that it is possible to accumulate a lot of equity by staying put and paying off your mortgage, if you get lucky and buy in the right neighborhood.)
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Parents retiring with $500k saved - Things look OK?
Certainly it wasn't. But it's still not a good idea from a financial perspective to have 2/3 of one's net worth unnecessarily tied up in a property in a HCOL area. As I noted, they could stay in the same state but move to a far lower COL area and pocket a bare minimum of $500k, maybe closer to $700k. But considering that they've been living in their current area for at least 27 years, leaving it may be difficult.StormShadow wrote: ↑Sun Mar 08, 2020 7:30 pmI'm betting the house wasn't valued at nearly $1 million when they bought it.willthrill81 wrote: ↑Fri Mar 06, 2020 7:41 pm I agree with others that their situation looks doable, but a retired couple living in a $1 million home and only $500k in their portfolio seems 'off'.
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Re: Parents retiring with $500k saved - Things look OK?
I confirmed with him that they are doing this so that’s great. Communications have been a lot smoother as an update here for everyone. Interestingly, coronavirus has kind of got us all talking as a family so some positive there lol
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Re: Parents retiring with $500k saved - Things look OK?
From a financial perspective it doesn't matter. 54k of income and 500k of assets is going to cover a 25 year retirement. The house equity just serves as a back up.willthrill81 wrote: ↑Sun Mar 08, 2020 8:36 pmCertainly it wasn't. But it's still not a good idea from a financial perspective to have 2/3 of one's net worth unnecessarily tied up in a property in a HCOL area. As I noted, they could stay in the same state but move to a far lower COL area and pocket a bare minimum of $500k, maybe closer to $700k. But considering that they've been living in their current area for at least 27 years, leaving it may be difficult.StormShadow wrote: ↑Sun Mar 08, 2020 7:30 pmI'm betting the house wasn't valued at nearly $1 million when they bought it.willthrill81 wrote: ↑Fri Mar 06, 2020 7:41 pm I agree with others that their situation looks doable, but a retired couple living in a $1 million home and only $500k in their portfolio seems 'off'.
The reasons to downsize/move
1) you want to. You want a smaller house, different location,...
2) you have to. You can't afford it. You can't maintain it. You can't live in it.
3) you would prefer to spend the money else where. Sell. this house and you can spend 50k/year taking trips and driving porsches.
1 doesn't apply. 2 doesn't apply at the moment. Maybe in 5 years health issues will drive it. So the only question is 3. Nobody but them can answer this.
Financially the answer is always live as cheap as possible. That is a useless answer for anyone whose goal isn't to accumulate the most possible cash when they die. For the rest of us we have to figure out where spending will let us live the life we want.
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Re: Parents retiring with $500k saved - Things look OK?
I'm not convinced that #2 doesn't apply. If they're spending $80k and only have $54k coming in, that's a difference of $26k, which works out to more than a 5% withdrawal rate from their portfolio.randomguy wrote: ↑Sun Mar 08, 2020 9:23 pmFrom a financial perspective it doesn't matter. 54k of income and 500k of assets is going to cover a 25 year retirement. The house equity just serves as a back up.willthrill81 wrote: ↑Sun Mar 08, 2020 8:36 pmCertainly it wasn't. But it's still not a good idea from a financial perspective to have 2/3 of one's net worth unnecessarily tied up in a property in a HCOL area. As I noted, they could stay in the same state but move to a far lower COL area and pocket a bare minimum of $500k, maybe closer to $700k. But considering that they've been living in their current area for at least 27 years, leaving it may be difficult.StormShadow wrote: ↑Sun Mar 08, 2020 7:30 pmI'm betting the house wasn't valued at nearly $1 million when they bought it.willthrill81 wrote: ↑Fri Mar 06, 2020 7:41 pm I agree with others that their situation looks doable, but a retired couple living in a $1 million home and only $500k in their portfolio seems 'off'.
The reasons to downsize/move
1) you want to. You want a smaller house, different location,...
2) you have to. You can't afford it. You can't maintain it. You can't live in it.
3) you would prefer to spend the money else where. Sell. this house and you can spend 50k/year taking trips and driving porsches.
1 doesn't apply. 2 doesn't apply at the moment. Maybe in 5 years health issues will drive it. So the only question is 3. Nobody but them can answer this.
Financially the answer is always live as cheap as possible. That is a useless answer for anyone whose goal isn't to accumulate the most possible cash when they die. For the rest of us we have to figure out where spending will let us live the life we want.
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Re: Parents retiring with $500k saved - Things look OK?
Which would be expected to last a little over 19 years assuming they make no change in their spending. After that point, OP's father would be 89 and still have a paid off house as a backup. Median life expectancy in the USA is 78.7.willthrill81 wrote: ↑Sun Mar 08, 2020 9:25 pm I'm not convinced that #2 doesn't apply. If they're spending $80k and only have $54k coming in, that's a difference of $26k, which works out to more than a 5% withdrawal rate from their portfolio.
I think they'll be fine.
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Re: Parents retiring with $500k saved - Things look OK?
Yes, they probably will be, which is what I said in my first post in this thread.StormShadow wrote: ↑Sun Mar 08, 2020 9:41 pmWhich would be expected to last a little over 19 years assuming they make no change in their spending. After that point, OP's father would be 89 and still have a paid off house as a backup. Median life expectancy in the USA is 78.7.willthrill81 wrote: ↑Sun Mar 08, 2020 9:25 pm I'm not convinced that #2 doesn't apply. If they're spending $80k and only have $54k coming in, that's a difference of $26k, which works out to more than a 5% withdrawal rate from their portfolio.
I think they'll be fine.
The Sensible Steward
Re: Parents retiring with $500k saved - Things look OK?
And what happens when the portfolio goes to 0 (which only happens about 20% of the time. And normally it takes 25 years which. is pushing the combined life expectancy of a 70 year old)? They aren't broke. They have a 1 million dollar house. Do you really think they are going to have problems paying the bills?willthrill81 wrote: ↑Sun Mar 08, 2020 9:25 pmI'm not convinced that #2 doesn't apply. If they're spending $80k and only have $54k coming in, that's a difference of $26k, which works out to more than a 5% withdrawal rate from their portfolio.randomguy wrote: ↑Sun Mar 08, 2020 9:23 pmFrom a financial perspective it doesn't matter. 54k of income and 500k of assets is going to cover a 25 year retirement. The house equity just serves as a back up.willthrill81 wrote: ↑Sun Mar 08, 2020 8:36 pmCertainly it wasn't. But it's still not a good idea from a financial perspective to have 2/3 of one's net worth unnecessarily tied up in a property in a HCOL area. As I noted, they could stay in the same state but move to a far lower COL area and pocket a bare minimum of $500k, maybe closer to $700k. But considering that they've been living in their current area for at least 27 years, leaving it may be difficult.StormShadow wrote: ↑Sun Mar 08, 2020 7:30 pmI'm betting the house wasn't valued at nearly $1 million when they bought it.willthrill81 wrote: ↑Fri Mar 06, 2020 7:41 pm I agree with others that their situation looks doable, but a retired couple living in a $1 million home and only $500k in their portfolio seems 'off'.
The reasons to downsize/move
1) you want to. You want a smaller house, different location,...
2) you have to. You can't afford it. You can't maintain it. You can't live in it.
3) you would prefer to spend the money else where. Sell. this house and you can spend 50k/year taking trips and driving porsches.
1 doesn't apply. 2 doesn't apply at the moment. Maybe in 5 years health issues will drive it. So the only question is 3. Nobody but them can answer this.
Financially the answer is always live as cheap as possible. That is a useless answer for anyone whose goal isn't to accumulate the most possible cash when they die. For the rest of us we have to figure out where spending will let us live the life we want.
Realistically most people should plan on downsizing at some point when we start talking about living past 85 or so. But if they want to live in their current home for the next 10-15 years before downsizing, seems sane to me.
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Re: Parents retiring with $500k saved - Things look OK?
Again, I've said that they would likely be fine. But I would rather move to a smaller, easier to maintain, less costly home (which will help them with maintenance expenses and property taxes) when I'm 65 than when I'm 75 or 85. That's just me though.randomguy wrote: ↑Mon Mar 09, 2020 12:08 amAnd what happens when the portfolio goes to 0 (which only happens about 20% of the time. And normally it takes 25 years which. is pushing the combined life expectancy of a 70 year old)? They aren't broke. They have a 1 million dollar house. Do you really think they are going to have problems paying the bills?willthrill81 wrote: ↑Sun Mar 08, 2020 9:25 pmI'm not convinced that #2 doesn't apply. If they're spending $80k and only have $54k coming in, that's a difference of $26k, which works out to more than a 5% withdrawal rate from their portfolio.randomguy wrote: ↑Sun Mar 08, 2020 9:23 pmFrom a financial perspective it doesn't matter. 54k of income and 500k of assets is going to cover a 25 year retirement. The house equity just serves as a back up.willthrill81 wrote: ↑Sun Mar 08, 2020 8:36 pmCertainly it wasn't. But it's still not a good idea from a financial perspective to have 2/3 of one's net worth unnecessarily tied up in a property in a HCOL area. As I noted, they could stay in the same state but move to a far lower COL area and pocket a bare minimum of $500k, maybe closer to $700k. But considering that they've been living in their current area for at least 27 years, leaving it may be difficult.StormShadow wrote: ↑Sun Mar 08, 2020 7:30 pm
I'm betting the house wasn't valued at nearly $1 million when they bought it.
The reasons to downsize/move
1) you want to. You want a smaller house, different location,...
2) you have to. You can't afford it. You can't maintain it. You can't live in it.
3) you would prefer to spend the money else where. Sell. this house and you can spend 50k/year taking trips and driving porsches.
1 doesn't apply. 2 doesn't apply at the moment. Maybe in 5 years health issues will drive it. So the only question is 3. Nobody but them can answer this.
Financially the answer is always live as cheap as possible. That is a useless answer for anyone whose goal isn't to accumulate the most possible cash when they die. For the rest of us we have to figure out where spending will let us live the life we want.
Realistically most people should plan on downsizing at some point when we start talking about living past 85 or so. But if they want to live in their current home for the next 10-15 years before downsizing, seems sane to me.
The Sensible Steward
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Re: Parents retiring with $500k saved - Things look OK?
Yeah me too. Then again, I’d do that so I could go skiing more often, buy more video games, and spend the rest of the time drinking margaritas with little umbrellas in them on the beach in Hawaii. Other people might want to spend less and stay put in their dream home.willthrill81 wrote: ↑Mon Mar 09, 2020 12:12 amAgain, I've said that they would likely be fine. But I would rather move to a smaller, easier to maintain, less costly home (which will help them with maintenance expenses and property taxes) when I'm 65 than when I'm 75 or 85. That's just me though.randomguy wrote: ↑Mon Mar 09, 2020 12:08 amAnd what happens when the portfolio goes to 0 (which only happens about 20% of the time. And normally it takes 25 years which. is pushing the combined life expectancy of a 70 year old)? They aren't broke. They have a 1 million dollar house. Do you really think they are going to have problems paying the bills?willthrill81 wrote: ↑Sun Mar 08, 2020 9:25 pmI'm not convinced that #2 doesn't apply. If they're spending $80k and only have $54k coming in, that's a difference of $26k, which works out to more than a 5% withdrawal rate from their portfolio.randomguy wrote: ↑Sun Mar 08, 2020 9:23 pmFrom a financial perspective it doesn't matter. 54k of income and 500k of assets is going to cover a 25 year retirement. The house equity just serves as a back up.willthrill81 wrote: ↑Sun Mar 08, 2020 8:36 pm
Certainly it wasn't. But it's still not a good idea from a financial perspective to have 2/3 of one's net worth unnecessarily tied up in a property in a HCOL area. As I noted, they could stay in the same state but move to a far lower COL area and pocket a bare minimum of $500k, maybe closer to $700k. But considering that they've been living in their current area for at least 27 years, leaving it may be difficult.
The reasons to downsize/move
1) you want to. You want a smaller house, different location,...
2) you have to. You can't afford it. You can't maintain it. You can't live in it.
3) you would prefer to spend the money else where. Sell. this house and you can spend 50k/year taking trips and driving porsches.
1 doesn't apply. 2 doesn't apply at the moment. Maybe in 5 years health issues will drive it. So the only question is 3. Nobody but them can answer this.
Financially the answer is always live as cheap as possible. That is a useless answer for anyone whose goal isn't to accumulate the most possible cash when they die. For the rest of us we have to figure out where spending will let us live the life we want.
Realistically most people should plan on downsizing at some point when we start talking about living past 85 or so. But if they want to live in their current home for the next 10-15 years before downsizing, seems sane to me.
I would set AA to 50/50 or 60/40 and then see how things go. Worst case scenario you sell the house and move in with the kids (or rent nearby )
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh
Re: Parents retiring with $500k saved - Things look OK?
Personally I am selling the house and retiring 5 years ago:) But I am not them. They have made choices and will have to continue to make choices. They have stated they want to stay in the house. They can afford to stay in the house. It might not be the choice I make but it isn't a wrong one. There are zero financial reasons to move. They aren't running out of money no matter what.finite_difference wrote: ↑Mon Mar 09, 2020 12:32 am
Yeah me too. Then again, I’d do that so I could go skiing more often, buy more video games, and spend the rest of the time drinking margaritas with little umbrellas in them on the beach in Hawaii. Other people might want to spend less and stay put in their dream home.
I would set AA to 50/50 or 60/40 and then see how things go. Worst case scenario you sell the house and move in with the kids (or rent nearby )
Now there is a decent chance they haven't thought about the advantages of moving. It is reasonable to point that the pluses and minuses to them but this isn't a subject to waste capital on. Save that for things like taking the keys away from them in ~10-15 years, when they need someone to help with their financial accounts, and the rest of the stuff that really matters.
Re: Parents retiring with $500k saved - Things look OK?
My free financial advice is to let your parents stay in their house for as long as they can, or want to. If need be they could consider a reverse mortgage, or moving. But with $500k saved, and SS coming, they might not have to. Perhaps revisit the situation as needed. But for at least 5-10 more years they will be fine. And they have the house to fall back on if needed.
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
Re: Parents retiring with $500k saved - Things look OK?
randomguy wrote: ↑Fri Mar 06, 2020 5:00 pm Moving 50 miles from friends and family to save a few bucks that you don't need doesn't sound like a great option unless you are worried about maxing out your kids inheritance.
The scary part of this post isn't the house or expenses. It is the single stock risk.
Yeh, there are considerations other than financial when moving. The number of times I've been advised that I could afford to retire if I left New York where everything is so expensive - and wouldn't my landlord even pay me to move? - and .... They mean well, I suppose, but don't consider community, preferred activity, individual requirements - and the lack of public transportation in many LCOL areas. What do you do in a place where you hardly know anyone and then can't drive any more? Where your favored physical activity isn't available? Where any specialized reading you need isn't available unless it's online? Contrary to popular opinion, not everything is ... Relocating can make sense in many circumstances, but it's not a panacea for all financial ills.
That big single-stock investment though - any chance you can explain "taking some money off the table" by transferring just some of it into one of the indexes? Diversification might be an easier sell than moving or POAs since it is planning for the long term which is probably less troubling.
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Re: Parents retiring with $500k saved - Things look OK?
Really? I think having to labor at 95 is a bigger nightmare than being 95 and broke. You would rather have your 95 years old parents grinding at a job so they can feel financially stable? Even an old mule gets to retire at some point, but not these folks I guess.JoeRetire wrote: ↑Sat Mar 07, 2020 1:24 pmBy definition, if they don't have enough, they must get enough from some source.Keenobserver wrote: ↑Fri Mar 06, 2020 2:56 pmWhat are the options if they dont have enough? Should they work to 95?
They could continue to work, or get it from someone else (presumably family). Yes, sometimes that means working until 95.
Perhaps you mean something different by "enough"?