Helping Mom with her finances in Arizona

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OnFire
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Helping Mom with her finances in Arizona

Post by OnFire » Wed Apr 29, 2020 2:50 pm

My mother retired early, at age 56. Her husband, my step-father, retired at the same age at the same time. They retired to Surprise Arizona in a senior community.

My step-dad retired from a bank and took a lump sum of around $550k. My mom sold her house in Chicago and bought a house in AZ. They had a small mortgage on their new house after buying it. It’s probably worth $250k and she has like $60k left on the mortgage.

My step-dad died of leukemia in October in 2019 and we discovered the scope of their financial mess. They had credit cards and they bought a small place an hour outside of Chicago despite everyone’s protests. It’s worth about $20k.

They didn’t work at all during retirement, even as their savings dwindled, although I recommended it.

She got a phone call from the bank holding their investments and they recommended selling the last of the IRA. It totals about $24k. She got the check last week.

Her Social Security is $2100 a month. She had a mortgage of about $780 a month, and a supplemental health care insurance payment of about $200 a month. She owns an 8 year old Kia Soul in AZ, and I have an extra if she comes in to Chicago.

Because investing is my forté, she is asking me what to do.

I said the best idea is probably put it in a money market account and take $200 a month for the next ten years.

I have the ability in the fall when my car loan is paid off to just pay her mortgage outright. My three siblings agreed we would split the current value if the house four ways (my mom’s will says this) and then I would take my equity back out or I could buy the house from my siblings when my Mom passes.

I know reverse mortgages exist and she would be happy to just live in her AZ house until she passes on. None of us needs my mom’s estate. We are all doing fine financially.

Is there anyone who can recommend a reverse mortgage company?

Should I slow down on my investments ($1,500 a month) to assist my mother? I’m ten years away from retiring from the fire department with a pension of about $65k. I have $250k in my Roth and 457 accounts. I have one rental house in Chicago with $100k in equity in it. I have my primary residence with $180k in equity in it. Any other ideas the collective wisdom of the board has?

Anyone deal with a similar situation?
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HomeStretch
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Re: Helping Mom with her finances in Arizona

Post by HomeStretch » Wed Apr 29, 2020 3:27 pm

Does your mom’s monthly income ($2100 SS + $200 from IRA proceeds) cover her expenses?

Is this correct? - your Mom’s assets are:
1. AZ house worth $250k and mortgage of $60k?
2. Chicago 2nd home worth $20k and no mortgage
3. $24k proceeds from IRA?

Does she have any outstanding debts besides the $60k mortgage?

People with low income/low assets may become eligible for financial assistance. Consider having your mom spend down all her assets and apply for financial assistance wherever possible before you and your siblings provide financial assistance.
Last edited by HomeStretch on Thu Apr 30, 2020 2:02 am, edited 1 time in total.

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CAsage
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Re: Helping Mom with her finances in Arizona

Post by CAsage » Wed Apr 29, 2020 3:30 pm

Sell Mom's small place outside Chicago, just to get rid of it. Can all 4 siblings chip in $15k each to pay off the mortgage (that would ensure that all of you are fairly contributing, and make it easy to split in many years when Mom passes). Reverse mortgages aren't usually a great deal, and if the mortgage is paid off, she should be able to manage on her SS income and use that 24K IRA money for carefully managed expenses. Hopefully no credit cards. Bit unclear how many years have elapsed and what happened to that $550K lump sum....
Last edited by CAsage on Wed Apr 29, 2020 4:18 pm, edited 1 time in total.
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billfromct
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Re: Helping Mom with her finances in Arizona

Post by billfromct » Wed Apr 29, 2020 3:53 pm

What is your mother's age?

Was her husband's SS higher then her SS? If so, she may be able to get a higher SS payment through SS survivor benefits.

Why did the bank "recommend selling the last of her IRA"?

With interest rates going down, I wouldn't be surprised if money market fund annual returns go down close to .1% or lower. The Vanguard Prime Reserve MM Fund annual return was between .01%-.06% from 2010-2015.

Expectations for MM fund returns aren't very good for the next few years.

bill

bloom2708
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Re: Helping Mom with her finances in Arizona

Post by bloom2708 » Wed Apr 29, 2020 3:58 pm

Sell the AZ house. She can likely rent a smaller place in AZ within her budget.

Plus the proceeds from the sale of the house would help her spending.

Does she want to stay in AZ? or move?
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead

delamer
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Re: Helping Mom with her finances in Arizona

Post by delamer » Wed Apr 29, 2020 4:21 pm

How much does she spend on food, utilities, auto expenses (gas,insurance) and other medical? If it’s $1,100 or less per month, then she has some cushion for small luxuries.

If so, it might be better to keep the $24,000 as a reserve fund rather than withdrawing anything monthly. And she might not need any assistance from her kids.

How old is she and how many years left on the mortgage?

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CULater
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Re: Helping Mom with her finances in Arizona

Post by CULater » Wed Apr 29, 2020 4:32 pm

One thing to recommend is that your mother prepare a Transfer-On-Death deed to her home, naming you and siblings as the recipients. Not all states allow them but this can be done very easily and inexpensively in Arizona and will avoid probate.
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bob60014
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Re: Helping Mom with her finances in Arizona

Post by bob60014 » Wed Apr 29, 2020 4:47 pm

" they bought a small place an hour outside of Chicago despite everyone’s protests. It’s worth about $20k."

What exactly did they buy for 20k outside Chicago? A lot, a trailer....?

123
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Re: Helping Mom with her finances in Arizona

Post by 123 » Wed Apr 29, 2020 4:53 pm

OnFire wrote:
Wed Apr 29, 2020 2:50 pm
...She got a phone call from the bank holding their investments and they recommended selling the last of the IRA. It totals about $24k. She got the check last week...
This sounds very odd. Banks and brokerages rarely suggest closing accounts because it removes assets from their books and the opportunity to earn revenue/fees from those assets. Unless there is something about the relationship with the customer that has "headed south".
The closest helping hand is at the end of your own arm.

phxjcc
Posts: 356
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Re: Helping Mom with her finances in Arizona

Post by phxjcc » Thu Apr 30, 2020 1:42 am

OnFire wrote:
Wed Apr 29, 2020 2:50 pm
My mother retired early, at age 56. Her husband, my step-father, retired at the same age at the same time. They retired to Surprise Arizona in a senior community.

My step-dad retired from a bank and took a lump sum of around $550k. My mom sold her house in Chicago and bought a house in AZ. They had a small mortgage on their new house after buying it. It’s probably worth $250k and she has like $60k left on the mortgage.

My step-dad died of leukemia in October in 2019 and we discovered the scope of their financial mess. They had credit cards and they bought a small place an hour outside of Chicago despite everyone’s protests. It’s worth about $20k.

They didn’t work at all during retirement, even as their savings dwindled, although I recommended it.

She got a phone call from the bank holding their investments and they recommended selling the last of the IRA. It totals about $24k. She got the check last week.

Her Social Security is $2100 a month. She had a mortgage of about $780 a month, and a supplemental health care insurance payment of about $200 a month. She owns an 8 year old Kia Soul in AZ, and I have an extra if she comes in to Chicago.

Because investing is my forté, she is asking me what to do.

I said the best idea is probably put it in a money market account and take $200 a month for the next ten years.

I have the ability in the fall when my car loan is paid off to just pay her mortgage outright. My three siblings agreed we would split the current value if the house four ways (my mom’s will says this) and then I would take my equity back out or I could buy the house from my siblings when my Mom passes.

I know reverse mortgages exist and she would be happy to just live in her AZ house until she passes on. None of us needs my mom’s estate. We are all doing fine financially.

Is there anyone who can recommend a reverse mortgage company?

Should I slow down on my investments ($1,500 a month) to assist my mother? I’m ten years away from retiring from the fire department with a pension of about $65k. I have $250k in my Roth and 457 accounts. I have one rental house in Chicago with $100k in equity in it. I have my primary residence with $180k in equity in it. Any other ideas the collective wisdom of the board has?

Anyone deal with a similar situation?
Yes.
They spent their $550k, is that what you are saying?
Yes, my Aunt did the same thing.
So, she has $2100 income, period correct?
Her fixed expenses are:
Mortgage payment $780---is this PITI or just P+I?
Health ins $200
I will guess the rest
Utilities $400, includes cable and cell and because A/C in AZ summers
Car insurance $75
Groceries $200
Gas $100
Entertainment $100
Grooming $100
HOA $300 (?)
-------------
$2275.

We finally had to take the cHeckbook away, and once a month would "help" my Aunt pay her bills.
We tried everything, but she'd blow her whole disposable income from her SS check week one.
The ONLY thing that worked for us was going to the bank when the SS check came in and getting her the cash for her hairdresser, going out to eat, going to the movies, etc. and putting it in an envelope; written on it was "my money for the moNth".

When saw that she had to decide whether to get her haircut/colored (again, for the 3x time this month) or eat and put gas in the car, she finally got it.

In the above, if she does not have an HOA, she should be cash flow positive.

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