Parents retiring with $500k saved - Things look OK?

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geerhardusvos
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Parents retiring with $500k saved - Things look OK?

Post by geerhardusvos »

Hi BH friends,

Happy Friday. My dad recently had a bad health scare and siblings asked me to started talk with them and ensuring they were going to be OK financially. Thankfully dad is back at work but will retire soon.

Quick overview:
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. Taxes and HOAs are like ~$20k a year on that, OUCH. House needs $50-60k maintenance to be ready for selling, but it's pretty nice. My sister wants to keep the house in the family, but she's sentimental like my mom about that place. They have ~$500k saved up (mostly in pretax 401k and IRA). He said he will be maxing out his 401k this year before he retires, so that's good. $10k EF cash or so. Their portfolio is mostly in his company stock, so working with him to sell that and get into a boglehead portfolio of sorts if they're open to it (they seem hesitant). They started taking my mom's SS a few years back. His income is ~$100k or so (hard to tell though). They should have ~$4500 coming in per month with SS once my dad retires at 70. Sounds like they have a will created. Just was wanting to make sure my mom was going to be OK, so started to nicely ask some questions. 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.

Net worth with the house included is ~$1.5M. Net worth seems solid considering their SS income and standard of living. All us siblings are relieved and I told them all about my conversation with the parents. Siblings want me to help bc they think things are off with dad and they trust me as the oldest and I am somewhat knowledgeable with econ major and my years reading BH forum and wiki. But I don't want to step on toes, just educate.

Questions:
-- Is a fee only financial advisor worth it? If so, Where's the best place to find a financial advisor in our area who will charge $500-1000 (annually?) to help them build a plan for taxes, retirement income, budget, SS, medicare, etc? Would be nice for me not to be the one managing all of it, but I could go to the appointments with them and call BS on anything
--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.
--How do their finances look? Anything we should be thinking about? RMDs are going to kick in here which isn't all bad
--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

Let me know if I left out any details and any input or thoughts are appreciated here, thank you.
Last edited by geerhardusvos on Fri Mar 06, 2020 9:34 pm, edited 9 times in total.
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bloom2708
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Re: Parents retiring with $500k saved - Things look OK?

Post by bloom2708 »

Will SS for both + $20k to $25k from the portfolio cover their spending?

A $1 million house with SS + $20k might be cutting it close.

Is the house paid for? No mortgage?

Be careful with the advisor search. They will likely want to get their funds under their advisement.

Garrett Planning Network is often recommended.
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Re: Parents retiring with $500k saved - Things look OK?

Post by geerhardusvos »

bloom2708 wrote: Fri Mar 06, 2020 10:58 am Will SS for both + $20k to $25k from the portfolio cover their spending?

A $1 million house with SS + $20k might be cutting it close.

Is the house paid for? No mortgage?

Be careful with the advisor search. They will likely want to get their funds under their advisement.

Garrett Planning Network is often recommended.
TY, I'll check out GPN. Will avoid AUM if at all possible. Thankfully they don't have any advisor right now.

I'm hoping they can cut living expenses to match SS income, and if they travel they can dip lightly into some of the portfolio each year.

Right, no more mortgage (they bought the house for $200k in 1993 lol). Just taxes and maintenance costs with the house. It's a big house and we keep telling them to get a rambler just outside of town.
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Re: Parents retiring with $500k saved - Things look OK?

Post by deltaneutral83 »

#s are skinny, requires a nice clip off the tax deferred accounts (4+%) to make up the shortfall from SS to desired annual expenses. Property taxes are 33% of annual expenses, am I reading that correctly? I'd downsize at minimum and contemplate moving from VHCOL.
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Re: Parents retiring with $500k saved - Things look OK?

Post by bloom2708 »

geerhardusvos wrote: Fri Mar 06, 2020 11:04 am TY, I'll check out GPN. Will avoid AUM if at all possible. Thankfully they don't have any advisor right now.

I'm hoping they can cut living expenses to match SS income, and if they travel they can dip lightly into some of the portfolio each year.

Right, no more mortgage (they bought the house for $200k in 1993 lol). Just taxes and maintenance costs with the house. It's a big house and we keep telling them to get a rambler just outside of town.
Yes. It is two sides of a coin. Have slim margin/low expenses with big house equity or have plenty of cash/higher expenses with low house equity or renting.

With $500k, you really don't need an advisor.

30-40% stocks/70-60% bonds/money market. Use a Total US stock index and a short to intermediate bond index. TIPS might make sense in there for a mix.

Just a few funds, super low fees, not paying the advisor is more money for them.
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Re: Parents retiring with $500k saved - Things look OK?

Post by Uniballer »

What state do they reside in? Might matter for estate planning, etc.
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Re: Parents retiring with $500k saved - Things look OK?

Post by geerhardusvos »

Uniballer wrote: Fri Mar 06, 2020 11:20 am What state do they reside in? Might matter for estate planning, etc.
WA
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Re: Parents retiring with $500k saved - Things look OK?

Post by geerhardusvos »

bloom2708 wrote: Fri Mar 06, 2020 11:19 am
geerhardusvos wrote: Fri Mar 06, 2020 11:04 am TY, I'll check out GPN. Will avoid AUM if at all possible. Thankfully they don't have any advisor right now.

I'm hoping they can cut living expenses to match SS income, and if they travel they can dip lightly into some of the portfolio each year.

Right, no more mortgage (they bought the house for $200k in 1993 lol). Just taxes and maintenance costs with the house. It's a big house and we keep telling them to get a rambler just outside of town.
Yes. It is two sides of a coin. Have slim margin/low expenses with big house equity or have plenty of cash/higher expenses with low house equity or renting.

With $500k, you really don't need an advisor.

30-40% stocks/70-60% bonds/money market. Use a Total US stock index and a short to intermediate bond index. TIPS might make sense in there for a mix.

Just a few funds, super low fees, not paying the advisor is more money for them.
Yeah that’s good advice, and we’re on the DIY path if we can get the communication flowing
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Re: Parents retiring with $500k saved - Things look OK?

Post by Gnirk »

Many parents of a certain age don't like to confide in their kids about their finances because they were taught that you don't discuss money. My mom was one of those. Here is how I approached my widowed mom regarding DPOA, etc:

I told her that my husband and I were making sure we had all of our legal "stuff" in order, just in case. I explained we had gone to our attorney and drawn up Durable Powers of Attorney for financial and medical, updated Wills, and Health Care Directives (Living Wills). I said it was really important to me to know who would be making these critical decisions for me if I wasn't able to. We had a long talk, and I suggested that she might want to do the same thing, so that she had a choice in who would be making medical decisions and taking care of her finances if she wasn't able to because of an accident or medical crisis.

She actually "opened up" and let me know her financial situation, that she had long term care insurance, and where she kept her financial information.
Thank goodness she went to her attorney and had all the documents drawn up because five years later she was diagnosed with Alzheimer's and I was able to manage her health care and finances for the next 12 years.
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Re: Parents retiring with $500k saved - Things look OK?

Post by Shallowpockets »

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.
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Re: Parents retiring with $500k saved - Things look OK?

Post by oldfatguy »

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...
Nothing else matters. Stay out of it, IMO.

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.
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Re: Parents retiring with $500k saved - Things look OK?

Post by WarAdmiral »

The house seems to be an issue. It is occupying a large percentage of your parents net assets plus is a drain on yearly cash flows.

Their Annual income: $4500 * 12 = $54000. (i'm counting after tax)

Real Taxes = $26000

Left over: $28000 which is about $2333 per month for 2 ppl. It seems manageable but could be tight.
At this age, Health Care would be their number 1 concern. If there is an another health scare, will they have enough to tide through ?

They could consider selling their house and move to a cheaper/tax efficient house. That would increase monthly cash flow and lead to more comfortable living.

Also, $500-1000 for a financial advisor is an issue too. Looks like their finances are fairly straightforward and can be managed by themselves/you.
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Re: Parents retiring with $500k saved - Things look OK?

Post by Living Free »

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.
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Re: Parents retiring with $500k saved - Things look OK?

Post by wilked »

I've heard good things about this for an FA

https://planvisionmn.com/

Haven't used it myself though
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Re: Parents retiring with $500k saved - Things look OK?

Post by Laker1 »

wilked wrote: Fri Mar 06, 2020 12:14 pm I've heard good things about this for an FA

https://planvisionmn.com/

Haven't used it myself though
I just did a session with Mark Zoril of Planvision...it was very helpful and made me feel much better about my boglehead ways and ideas on investing. The time to set up all the info needed was a little bit of work but very much worth it in the end. Saved me thousands over what other advisors have changed and was easy to understand. Do it!!
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Re: Parents retiring with $500k saved - Things look OK?

Post by Blue456 »

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.
$2,160 per month in taxes on a house is a huge problem when your monthly income is $4500 per month and maybe another $1600 from the retirement money. Maybe $2500 if these money get placed into annuity. So $2000 in taxes out of $7000 monthly income is a little bit better. But usually a house that big or in HCOL area means that it will be expensive to insure and to fix.
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Re: Parents retiring with $500k saved - Things look OK?

Post by ronno2018 »

Are you sure about the home taxes? I am in western WA urban area and mine are less than half that with a similar home value...
The Broz
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Re: Parents retiring with $500k saved - Things look OK?

Post by The Broz »

I agree - the house is problematic. I would suggest considering alternatives. As hard as that is, HCOL and retirements sometimes force tough decisions.
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Re: Parents retiring with $500k saved - Things look OK?

Post by Flashes1 »

Given how attached they are to the house, let them stay there a couple years after retirement and let them see with their own eyes how much a drag the property taxes are on their finances. That's probably the only way they're going to accept it.
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Re: Parents retiring with $500k saved - Things look OK?

Post by Mlm »

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...
Considering this I don't see how either you or a financial advisor can help. Maybe just encourage them to understand their current expenses.
Mary
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Re: Parents retiring with $500k saved - Things look OK?

Post by delamer »

oldfatguy wrote: Fri Mar 06, 2020 11:51 am
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...
Nothing else matters. Stay out of it, IMO.

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 agree that you should stay out of it unless/until they ask for help.

Not to mention that by your own admission you are making several assumptions about their assets, income, and expenses. You don’t really have the full picture.

One option is to gift them this book: The Bogleheads' Guide to Retirement Planning so they have the opportunity to educate themselves. But if they aren’t willing to put in the effort, you’ll have to live with that.

I am sympathetic to your concerns, but they are unimpaired adults who get to make their own choices.
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?

Post by The Broz »

delamer wrote: Fri Mar 06, 2020 1:10 pm
oldfatguy wrote: Fri Mar 06, 2020 11:51 am
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...
Nothing else matters. Stay out of it, IMO.

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 agree that you should stay out of it unless/until they ask for help.

Not to mention that by your own admission you are making several assumptions about their assets, income, and expenses. You don’t really have the full picture.

One option is to gift them this book: The Bogleheads' Guide to Retirement Planning so they have the opportunity to educate themselves. But if they aren’t willing to put in the effort, you’ll have to live with that.

I am sympathetic to your concerns, but they are unimpaired adults who get to make their own choices.
Good advice here
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Re: Parents retiring with $500k saved - Things look OK?

Post by Flashes1 »

My experience is some people just don't care to learn about personal investments and if they're 70 years old and still don't want to and they've said they don't want your help - then they're probably set in their ways.

Give them a couple high level ideas and move on.
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Re: Parents retiring with $500k saved - Things look OK?

Post by geerhardusvos »

Gnirk wrote: Fri Mar 06, 2020 11:43 am Many parents of a certain age don't like to confide in their kids about their finances because they were taught that you don't discuss money. My mom was one of those. Here is how I approached my widowed mom regarding DPOA, etc:

I told her that my husband and I were making sure we had all of our legal "stuff" in order, just in case. I explained we had gone to our attorney and drawn up Durable Powers of Attorney for financial and medical, updated Wills, and Health Care Directives (Living Wills). I said it was really important to me to know who would be making these critical decisions for me if I wasn't able to. We had a long talk, and I suggested that she might want to do the same thing, so that she had a choice in who would be making medical decisions and taking care of her finances if she wasn't able to because of an accident or medical crisis.

She actually "opened up" and let me know her financial situation, that she had long term care insurance, and where she kept her financial information.
Thank goodness she went to her attorney and had all the documents drawn up because five years later she was diagnosed with Alzheimer's and I was able to manage her health care and finances for the next 12 years.
Wow thanks for sharing, I appreciate it
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Re: Parents retiring with $500k saved - Things look OK?

Post by geerhardusvos »

oldfatguy wrote: Fri Mar 06, 2020 11:51 am
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...
Nothing else matters. Stay out of it, IMO.

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 have revised my original post a little bit to be more accurate, thank you for your insight
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Re: Parents retiring with $500k saved - Things look OK?

Post by geerhardusvos »

ronno2018 wrote: Fri Mar 06, 2020 12:35 pm Are you sure about the home taxes? I am in western WA urban area and mine are less than half that with a similar home value...
You are right, I think taxes are less than 20 K but I am including HOAs in there accidentally
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Re: Parents retiring with $500k saved - Things look OK?

Post by geerhardusvos »

delamer wrote: Fri Mar 06, 2020 1:10 pm
oldfatguy wrote: Fri Mar 06, 2020 11:51 am
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...
Nothing else matters. Stay out of it, IMO.

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 agree that you should stay out of it unless/until they ask for help.

Not to mention that by your own admission you are making several assumptions about their assets, income, and expenses. You don’t really have the full picture.

One option is to gift them this book: The Bogleheads' Guide to Retirement Planning so they have the opportunity to educate themselves. But if they aren’t willing to put in the effort, you’ll have to live with that.

I am sympathetic to your concerns, but they are unimpaired adults who get to make their own choices.
Once my dad retires and has more time I bet he would read this book, so that’s a good idea
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Re: Parents retiring with $500k saved - Things look OK?

Post by retired@50 »

geerhardusvos wrote: Fri Mar 06, 2020 2:11 pm
ronno2018 wrote: Fri Mar 06, 2020 12:35 pm Are you sure about the home taxes? I am in western WA urban area and mine are less than half that with a similar home value...
You are right, I think taxes are less than 20 K but I am including HOAs in there accidentally
HOAs are still an unavoidable cost, and can rise, just like property taxes.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Re: Parents retiring with $500k saved - Things look OK?

Post by geerhardusvos »

Thank you all for your advice, this helps
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Re: Parents retiring with $500k saved - Things look OK?

Post by jacksonm »

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.
Last edited by jacksonm on Fri Mar 06, 2020 3:00 pm, edited 3 times in total.
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Re: Parents retiring with $500k saved - Things look OK?

Post by Keenobserver »

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?

Post by geerhardusvos »

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. It's worth what you paid for it .... if my kids asked the kinds of questions you are thinking about asking I would politely tell them to mind their own business. [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 knows what he's doing.
appreciate your insight and glad to hear you are doing well. Totally understand where you’re coming from. The fact that you have over 1 million saved shows you have more discipline and aptitude than my parents. The fact that my parents didn’t pay for our college or weddings and have been making strongish income for 20+ years and don’t have more than 500K saved up, especially given the past 10 years of returns, makes me wonder if they really know what they’re doing. they have not been maxing out their 401(k) as empty-nesters. But thankfully we are in good shape and can help them if needed. And they should be fine
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Re: Parents retiring with $500k saved - Things look OK?

Post by geerhardusvos »

Laker1 wrote: Fri Mar 06, 2020 12:24 pm
wilked wrote: Fri Mar 06, 2020 12:14 pm I've heard good things about this for an FA

https://planvisionmn.com/

Haven't used it myself though
I just did a session with Mark Zoril of Planvision...it was very helpful and made me feel much better about my boglehead ways and ideas on investing. The time to set up all the info needed was a little bit of work but very much worth it in the end. Saved me thousands over what other advisors have changed and was easy to understand. Do it!!
Will check it out, thank you
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Re: Parents retiring with $500k saved - Things look OK?

Post by Jayhawker »

If they are determined to stay in the house, you might want to look into reverse mortgages. Due diligence is required but I have heard that there have been reforms in this area that make them a much better deal. I recommend the work of Wade Pfau in this area. Best of luck.
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Re: Parents retiring with $500k saved - Things look OK?

Post by zengolf2011 »

Since mental competence is not an issue, all the decisions are theirs to make. If you believe this and express it to them, they may be more open to a POA, which is usually a good idea. Re. assets and financial planning, they should be OK at least for a few years. They may decide to downsize after settling into retirement, but there's nothing wrong with staying put as long as they can afford it. IMHO, a financial advisor is usually not the answer. If they are disinterested in financial planning themselves, they could easily be taken advantage of. A better solution could be a low-cost Vanguard life strategy or target date fund. Perhaps you could gently educate them if they're not familiar with these. But, as long as they are mentally competent, all assets are theirs to manage and spend as they wish.
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Re: Parents retiring with $500k saved - Things look OK?

Post by pointyhairedboss »

The Finance Buff (https://thefinancebuff.com/blog), reputable poster on Bogleheads, provides a service for finding "Advice Only" advisers in your area.

https://adviceonlyfinancial.com/

"Advice Only" is defined as: Advice-Only means you pay a financial advisor for advice, and only the advice. The advisor does not sell you products or manage your money
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Re: Parents retiring with $500k saved - Things look OK?

Post by ExitStageLeft »

If their annual spend is accurate at $70k to $80k they should be fine. Running the numbers on FIRECalc.com shows an annual spend $78,118.
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Re: Parents retiring with $500k saved - Things look OK?

Post by TheDDC »

geerhardusvos wrote: Fri Mar 06, 2020 3:00 pm appreciate your insight and glad to hear you are doing well. Totally understand where you’re coming from. The fact that you have over 1 million saved shows you have more discipline and aptitude than my parents. The fact that my parents didn’t pay for our college or weddings and have been making strongish income for 20+ years and don’t have more than 500K saved up, especially given the past 10 years of returns, makes me wonder if they really know what they’re doing. they have not been maxing out their 401(k) as empty-nesters. But thankfully we are in good shape and can help them if needed. And they should be fine
You shouldn't need to "help them" by handing them any money - that's not really baked into the equation here, and something that is sort of irresponsible if that's what you are referring to by "help".

It seems as though they possess the mental facilities to process these questions they are facing. From your description they are probably overspending and have too much house and should probably downsize/live in a lower COL area. Will they? It's up to them. Either they can choose a path of insolvency or live in the real world. The extent of "help" it sounds like they need is help from you to process this whole endeavor.

My mom finally got to the point with her health issues that she/we needed to focus on helping her, but that did not involve anyone handing over anyone money. In my mom's case, she handed over financial management of her assets to me and is in stable mental health. I am not charging an AUM fee for my services. :) :D

If your parents get to the point where they need a financial planner I would strongly urge a DIY approach unless there are complex tax issues at play. Only then would I consider a good CPA. There is really no monetary threshold where anyone here on the forum would tell you to get an adviser. It really comes down to how much is on your plate to handle. For me, I am doing the whole nine yards for my mom financially - balancing the books, paying bills, making sure the hirelings of the medical-industrial complex doesn't rape and pillage too badly, etc. I don't mind it, but "help" comes at several levels.

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Re: Parents retiring with $500k saved - Things look OK?

Post by randomguy »

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.
It 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.

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.
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Re: Parents retiring with $500k saved - Things look OK?

Post by FIREchief »

Gnirk wrote: Fri Mar 06, 2020 11:43 am Many parents of a certain age don't like to confide in their kids about their finances because they were taught that you don't discuss money. My mom was one of those. Here is how I approached my widowed mom regarding DPOA, etc:

I told her that my husband and I were making sure we had all of our legal "stuff" in order, just in case. I explained we had gone to our attorney and drawn up Durable Powers of Attorney for financial and medical, updated Wills, and Health Care Directives (Living Wills). I said it was really important to me to know who would be making these critical decisions for me if I wasn't able to. We had a long talk, and I suggested that she might want to do the same thing, so that she had a choice in who would be making medical decisions and taking care of her finances if she wasn't able to because of an accident or medical crisis.

She actually "opened up" and let me know her financial situation, that she had long term care insurance, and where she kept her financial information.
Thank goodness she went to her attorney and had all the documents drawn up because five years later she was diagnosed with Alzheimer's and I was able to manage her health care and finances for the next 12 years.
Wow, does this really sound familiar!! Widowed mother, refuses to discuss anything regarding estate planning. It's nice to hear that your mother was accepting of your sharing about responsible estate planning and it led to her opening up (loosening up might be more accurate). I know of other situations where it has had the opposite effect (i.e. "Mom" thinks she is being manipulated by a DS/DD trying to "steal" her money and simply refuses to even talk about anything). Not pretty..... :annoyed
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Re: Parents retiring with $500k saved - Things look OK?

Post by DesertDiva »

Do they live in a 1- or 2-story house? Will the house be appropriate for their needs as they age? It may be easier for them to adjust to a move now versus 10 years down the road.
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Re: Parents retiring with $500k saved - Things look OK?

Post by FIREchief »

jacksonm wrote: Fri Mar 06, 2020 2:50 pm 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.

I can assure you that most of us septuagenarians are doing just fine.
This is "interesting." So you are aware of the financial situations of 70 year olds everywhere and can give folks "assurances" that they should mind their own business rather than sincerely trying to help their parents? Yikes!!!
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Re: Parents retiring with $500k saved - Things look OK?

Post by dbr »

I don't think issues such as budgets, taxes, Social Security, or Medicare (health insurance in general) are going to be addressed by most so-called financial advisors. At this point SS seems a done-deal, but you could ask here with details or consult one of the online planners. Medicare can be complex and confusing but there are good reference materials for that and unbiased consultants can be found. Tax questions could go to a CPA, but if they have done their own up to now they may not need it. Some reading may be in order. They will have to become familiar with RMDs and with estimated taxes. I would not think it would be unwelcome to ask them what kind of decisions they are making about SS, taxes, and health care.

$500k in a 401k only needs the one fix of diversifying the company stock and replacing it with any variety of low-moderate risk diversified stock and bond funds at a middle of the road asset allocation.

I can sympathize with wanting to stay in the house. Unless it becomes evident this is simply impossible being able to retire in the home you are in may be a very good outcome.

I think spending needs more analysis and then the feasibility of supporting that spending can be tested in models like FireCalc and all the others. Healthcare spending will need special attention. Keep in mind that insurance companies selling Medicare Advantage plans abound and want their business. That doesn't mean there is anything wrong with advantage plans but that one should be aware whom one is talking to. Sellers of Medigap plans might be equally aggressive.

I think other posters who are on the cautious side about trying to help where help is not wanted have a point. If pressure to do this is coming from your siblings, then maybe they should be part of the approach as well. Do you really think there is a problem here? The only red flag I see is most of the assets in company stock. Budget and health insurance could be yellow flags.
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Re: Parents retiring with $500k saved - Things look OK?

Post by Watty »

geerhardusvos wrote: Fri Mar 06, 2020 10:42 am Where's the best place to find a financial advisor in our area who will charge $500-1000 (annually?) to help them build a plan for taxes, retirement income, budget, SS, medicare, etc? Would be nice for me not to be the one managing all of it, but I could go to the appointments with them and call BS on anything
Vanguard will manage their account for a 0.3% fee. I have not used them but there have been prior threads on about using them which you can look up. They could use that for a year or two to get things in order then take over managing their accounts themself.

It sounds like you do not have a lot of firm details about their finances. It is possible that their finances could be a lot better than they are letting on and they just want to keep the details private. This is not uncommon.
geerhardusvos wrote: Fri Mar 06, 2020 10:42 am Just was wanting to make sure my mom was going to be OK, so started to nicely ask some questions. 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.
It might seem simple but one of the first things that you might talk with them about is making sure that they both know what the monthly bills are and how to pay them. There have been posts where people found out that one of their parents did not even know how to write a check since their spouse had always done it.

It is not unusual for most of a couples money to be in one spouse's retirement account since it accumulated there over the years. Instead of first working on a POA in case they are both incapacitated it would be good to make sure that they have a POA to deal with each others accounts if something happens to one of them. Some financial institutions, like Vanguard, are picky about having the POA done on their forms.

It is critical that the beneficiaries on their retirement accounts are correct since that will usually override what is on their wills.

geerhardusvos wrote: Fri Mar 06, 2020 10:42 am --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
A big question is if the house has a lot of stairs and how it will work as they age. I know of a situation where someone was not able to handle the stairs so they converted dining room into a bedroom and that was far from ideal. If they do not have a full bathroom on the main level that will also be a huge problem.

My mom outlived my dad and she insisted on staying in the large suburban family home where I was raised. It was her choice which I can understand we tried to get her to move for years. It was a ranch house so the layout was OK but it as she got older it was very socially isolating and she ended up driving longer than she should have just because she had few alternatives. As she aged most of her friends died, moved away, or were also not able to drive so she really did not have many social contacts. That was what she wanted but in some ways it was not a good situation.

geerhardusvos wrote: Fri Mar 06, 2020 10:42 am My sister wants to keep the house in the family, but she's sentimental like my mom about that place.
There was a post a while back by someone that had kept their family home when they inherited it. As I recall they did Ok financially but has some of the usual but not terrible issues that you have to deal with when you have a rental property.

In their post they mentioned that they regretted having kept the house as a rental since the bad memories of dealing with it as a rental property had replaced their good memories of having grown up in the home.

Unless your sister wants to buy the property and can afford it she should let your parents figure out what to do with the house.
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Re: Parents retiring with $500k saved - Things look OK?

Post by JAZZISCOOL »

ronno2018 wrote: Fri Mar 06, 2020 12:35 pm Are you sure about the home taxes? I am in western WA urban area and mine are less than half that with a similar home value...
Property taxes can be available online (by address) in many states so that should be confirmed easily.
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Re: Parents retiring with $500k saved - Things look OK?

Post by Lalamimi »

Not sure it this has been mentioned but your dad can draw spousal SS off your mother's SS until he turns 70, then draw his own. Probably won't be much but its just sitting there.
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Re: Parents retiring with $500k saved - Things look OK?

Post by willthrill81 »

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'.

Do you think that they have home maintenance factored in? Using the '1% rule of thumb', which applies to the value of the structure and not the entire property, they probably have $5-$8k of expected home maintenance each year, though any homeowner will tell you that this is really lumpy. They might spend $2k for ten years and then spend $40k in one year, which could be a real burden for them.

They could stay in WA state but move to a far less costly area and free up a minimum of $500k in cash, which would double their portfolio size. Financially, I have a hard time seeing that not being better than staying where they are. But they might not be willing to make such a change.
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Re: Parents retiring with $500k saved - Things look OK?

Post by geerhardusvos »

Watty wrote: Fri Mar 06, 2020 6:00 pm
geerhardusvos wrote: Fri Mar 06, 2020 10:42 am Where's the best place to find a financial advisor in our area who will charge $500-1000 (annually?) to help them build a plan for taxes, retirement income, budget, SS, medicare, etc? Would be nice for me not to be the one managing all of it, but I could go to the appointments with them and call BS on anything
Vanguard will manage their account for a 0.3% fee. I have not used them but there have been prior threads on about using them which you can look up. They could use that for a year or two to get things in order then take over managing their accounts themself.

It sounds like you do not have a lot of firm details about their finances. It is possible that their finances could be a lot better than they are letting on and they just want to keep the details private. This is not uncommon.
geerhardusvos wrote: Fri Mar 06, 2020 10:42 am Just was wanting to make sure my mom was going to be OK, so started to nicely ask some questions. 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.
It might seem simple but one of the first things that you might talk with them about is making sure that they both know what the monthly bills are and how to pay them. There have been posts where people found out that one of their parents did not even know how to write a check since their spouse had always done it.

It is not unusual for most of a couples money to be in one spouse's retirement account since it accumulated there over the years. Instead of first working on a POA in case they are both incapacitated it would be good to make sure that they have a POA to deal with each others accounts if something happens to one of them. Some financial institutions, like Vanguard, are picky about having the POA done on their forms.

It is critical that the beneficiaries on their retirement accounts are correct since that will usually override what is on their wills.

geerhardusvos wrote: Fri Mar 06, 2020 10:42 am --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
A big question is if the house has a lot of stairs and how it will work as they age. I know of a situation where someone was not able to handle the stairs so they converted dining room into a bedroom and that was far from ideal. If they do not have a full bathroom on the main level that will also be a huge problem.

My mom outlived my dad and she insisted on staying in the large suburban family home where I was raised. It was her choice which I can understand we tried to get her to move for years. It was a ranch house so the layout was OK but it as she got older it was very socially isolating and she ended up driving longer than she should have just because she had few alternatives. As she aged most of her friends died, moved away, or were also not able to drive so she really did not have many social contacts. That was what she wanted but in some ways it was not a good situation.

geerhardusvos wrote: Fri Mar 06, 2020 10:42 am My sister wants to keep the house in the family, but she's sentimental like my mom about that place.
There was a post a while back by someone that had kept their family home when they inherited it. As I recall they did Ok financially but has some of the usual but not terrible issues that you have to deal with when you have a rental property.

In their post they mentioned that they regretted having kept the house as a rental since the bad memories of dealing with it as a rental property had replaced their good memories of having grown up in the home.

Unless your sister wants to buy the property and can afford it she should let your parents figure out what to do with the house.
Thank you. That Vanguard idea is interesting. Oh yeah the house has stairs...
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Re: Parents retiring with $500k saved - Things look OK?

Post by geerhardusvos »

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'.

Do you think that they have home maintenance factored in? Using the '1% rule of thumb', which applies to the value of the structure and not the entire property, they probably have $5-$8k of expected home maintenance each year, though any homeowner will tell you that this is really lumpy. They might spend $2k for ten years and then spend $40k in one year, which could be a real burden for them.

They could stay in WA state but move to a far less costly area and free up a minimum of $500k in cash, which would double their portfolio size. Financially, I have a hard time seeing that not being better than staying where they are. But they might not be willing to make such a change.
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
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Re: Parents retiring with $500k saved - Things look OK?

Post by geerhardusvos »

FIREchief wrote: Fri Mar 06, 2020 5:18 pm
jacksonm wrote: Fri Mar 06, 2020 2:50 pm 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.

I can assure you that most of us septuagenarians are doing just fine.
This is "interesting." So you are aware of the financial situations of 70 year olds everywhere and can give folks "assurances" that they should mind their own business rather than sincerely trying to help their parents? Yikes!!!
Thank you
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