Help with Retirement for Parents

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Topic Author
notsoeasymoney
Posts: 3
Joined: Fri Oct 16, 2020 12:17 pm

Help with Retirement for Parents

Post by notsoeasymoney »

<alt account here>

My parents are planning on retiring early next year. I’d like to give them some help with a path forward and am looking for some assistance. I could type about this forever but I’ll try not to. Over the past couple years, they’ve given me some visibility into their financials and although I’m fairly confident in handling of my family and follow Boglehead principles, I know I am ignorant of knowledge needed in the retirement timeframe. My goal here would be to share comments in this thread with them either by email or by slightly editing this OP just prior to sharing it with them as some of the following they wouldn’t be thrilled with me typing.

They’re both currently 65 and have owned a small business for many years. They’ve resisted listening to everything I’ve said about financial topics over the years, never attempted to learn anything themselves, and have blindly followed advice of others. They’ve run the gamut of various investment vehicles including annuities that I don’t know much about, one more recent equity indexed annuity that was likely horrific but they insist on saying was “minimum 7% interest per year”, and one was a recommended Edward Jones planner that they spent a bunch of time with and trusted against my warnings because he “was catholic and had 12 kids”. I think he cashed their annuities prematurely and had them in a bunch of class a and b loaded funds. I say that in jest, but it gets frustrating. I don’t know the details but the little I saw didn’t look good.

In the end, they’ve actually maybe seen a tiny bit of light and cut ties with all that and currently have the accounts below parked in various Vanguard tax advantaged accounts in VTINX (Vanguard Target Retirement Income Fund). I suggested that to them because I don’t have mental bandwidth with them to do anything else and it’s about as conservative as it gets. They went with it. Not optimal for sure but it’s not going anywhere. Yes, bonds are trash currently. They are extremely extremely conservative financially and always have been, but mostly they don’t really have much of an idea how anything works. Recently, my father told me that he’s thinking about “pulling it all out” because he’s worried about it dropping to $X and they can’t afford that. He won’t listen to me that something like VTINX isn’t dropping overnight by 40% and if it does there’s larger issues than money to be used many years in the future. I’ve printed out all sorts of graphs and yearly gains/losses for them to see. Their business accountant tells them how much money they can contribute to what retirement accounts. I helped my mother contribute to their Roth IRAs for 2019 before the deadline earlier this year. Dad wanted that money in Vanguard Wellesley because “it’s a good one, he heard on the radio”. I wasn’t going to argue. They won’t contribute month to month because I don’t know…but I digress.

So that’s me painting a picture. In the end, its difficult to talk to them much about it because it becomes unproductive.

Retirement Accounts
All retirement accounts are at Vanguard and currently in Vanguard Target Retirement Income Fund (VTINX - 0.12%) except $~7k now in Wellesley Income Fund (VWINX – 0.23%) in each of their Roth accounts.

Traditional IRA hers - $160k
Rollover IRA hers - $2500
Roth IRA hers - $50k
401k hers - $50k
Traditional IRA his - $230k
Roth IRA his - $35k
401k his - $135k
Savings Account at Cap One - $~150k

Total: $~815k

Additional Information:
- They live on a large property worth somewhere a bit north of $1mil and will be selling that soon to downsize. After downsizing to another house and capital gains, probably at least another $~500k investable in taxable account next year.
- They have a paid for rental house worth $~150k. Unsure what their plans are for it but they don't want to live there.
- I don't know how much cash the business bank accounts has on hand so haven't factored that in anywhere.
- They own a few other trucks, horse trailers, RV, boat, and other expensive things, most of which they use and will keep.
- They have probably $50-100k in business assets that would be sold and a small property with shop (where business was) that they plan on keeping for storage right now. They’ll work with their accountant on all that tax-wise next year I presume.
- Father is a busy body, works 7 days a week in physically demanding work to this day now and I don’t see him camping on the couch. He’ll always be doing something productive as long as he’s walking and I could even see him earning some side income just for kicks.
- She’s taking SS currently, he’s not.
- They aren’t big spenders, so while this may not be considered enough to retire on for many around here…it’s going to happen. They don't know what "enough" is though. I think maybe their accountant or a planner at some point told them they have enough now.

Questions:
1. They need a financial planner as I don’t know enough about the withdrawal side to even know what I don't know. There’s little chance they will pay a yearly AUM fee they can see with their own eyes to a fee-based planner so I feel the ideal solution would be to have someone lay out an initial plan to be executed by my mother with my assistance. Then maybe checkups every year or every couple years. What options exist for something along those lines?
2. Given the previous question, what topics other than the obvious investment selections/asset allocation, can I discuss to persuade my parents that it’s worth it to pay for professional guidance? I can’t seem to find many articles online discussing this for retirees. Withdrawal amounts, tax implications, where to withdrawal from, how to do it, Tax strategies roth vs pre-tax, conversions…there’s got to be a million things.
3. What simple changes can I make to their retirement accounts given everything I have said? Probably not worth doing anything until they figure out the financial planner thing. I was torn between LifeStrategy and the Target Date funds but just went as conservative as possible in a one fund solution that would be easy for them to read about.
4. Any other suggestions of what you might do if you were in the entire above scenario? I don’t really know where to go, and obviously they don’t either.

Thank you for your help.
User avatar
FiveK
Posts: 10311
Joined: Sun Mar 16, 2014 2:43 pm

Re: Help with Retirement for Parents

Post by FiveK »

notsoeasymoney wrote: Fri Oct 16, 2020 12:53 pm They’re both currently 65....

Traditional IRA hers - $160k
Rollover IRA hers - $2500
Roth IRA hers - $50k
401k hers - $50k
Traditional IRA his - $230k
Roth IRA his - $35k
401k his - $135k
Savings Account at Cap One - $~150k

Total: $~815k

Additional Information:
- They live on a large property worth somewhere a bit north of $1mil and will be selling that soon to downsize. After downsizing to another house and capital gains, probably at least another $~500k investable in taxable account next year.
- They have a paid for rental house worth $~150k. Unsure what their plans are for it but they don't want to live there.
...
- She’s taking SS currently, he’s not.
- They aren’t big spenders, so while this may not be considered enough to retire on for many around here…it’s going to happen. They don't know what "enough" is though. I think maybe their accountant or a planner at some point told them they have enough now.

Questions:
1. They need a financial planner as I don’t know enough about the withdrawal side to even know what I don't know. There’s little chance they will pay a yearly AUM fee they can see with their own eyes to a fee-based planner so I feel the ideal solution would be to have someone lay out an initial plan to be executed by my mother with my assistance. Then maybe checkups every year or every couple years. What options exist for something along those lines?
2. Given the previous question, what topics other than the obvious investment selections/asset allocation, can I discuss to persuade my parents that it’s worth it to pay for professional guidance? I can’t seem to find many articles online discussing this for retirees. Withdrawal amounts, tax implications, where to withdrawal from, how to do it, Tax strategies roth vs pre-tax, conversions…there’s got to be a million things.
3. What simple changes can I make to their retirement accounts given everything I have said? Probably not worth doing anything until they figure out the financial planner thing. I was torn between LifeStrategy and the Target Date funds but just went as conservative as possible in a one fund solution that would be easy for them to read about.
4. Any other suggestions of what you might do if you were in the entire above scenario? I don’t really know where to go, and obviously they don’t either.

Thank you for your help.
1. Vanguard's Personal Advisor Service (PAS) or a local fee-only advisor come to mind. I don't know the minimum length of a PAS commitment, but 6 months at 0.3% on a $1 million asset base would be $1500, which might be comparable to what a fee-only advisor would charge for a plan.

2. Naming beneficiaries for all accounts, and a simple will for anything that doesn't allow naming a beneficiary.

3. Agree with "not worth doing anything until...."

4. Reading between the lines, they most likely do have "enough" now, even with a very simple strategy such as
- keep anywhere from 3 months to 2 years in cash
- father delays SS until age 70
- withdraw first from taxable investments if needed for spending
- convert some amount of the traditional accounts to Roth until RMDs start.

It might be worth doing some "what if...?"s for Roth conversion strategy using the personal finance toolbox if you or they have even a little Excel knowledge. You could also use other tax software, but the picture of marginal rates (not just nominal bracket percentages) that tool shows seems more helpful.
Jack FFR1846
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Re: Help with Retirement for Parents

Post by Jack FFR1846 »

I'm sorry, but the answer to your unasked question is extremely easy to answer. Let me start with pertinent facts.

1) They have enough between money, investments, toys, house, rental, social security to retire.

2) They don't want your help.

3) If you offer your help, the most action they are likely to take is to do the opposite of what you say.

So now the easy answer. Stay out of their business.
Bogle: Smart Beta is stupid
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geerhardusvos
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Location: heavenlies

Re: Help with Retirement for Parents

Post by geerhardusvos »

Making it clear that you are there to help them if they need is a good idea, and obviously open communication between both sides is healthy. It seems like you know enough about their accounts that they have shared something with you. However, if they don’t want your help, and if they don’t want to take action on your recommendations, you can’t do much. Ideally they would be in low-cost index funds and stay within their means, but sounds like are going to be just fine. I don’t see any emergency here and I don’t really see any reason to pry if they are resistant, but it’s fine for you to bring it up every so often that you are there to help and that there are ways to simplify and maximize their long-term financial success if they are interested. Sounds like the kind of people who can probably just live off their SS, and they have plenty of other assets, so no worries here.
VTSAX and chill
Topic Author
notsoeasymoney
Posts: 3
Joined: Fri Oct 16, 2020 12:17 pm

Re: Help with Retirement for Parents

Post by notsoeasymoney »

Appreciate the reply
FiveK wrote: Fri Oct 16, 2020 2:32 pm 1. Vanguard's Personal Advisor Service (PAS) or a local fee-only advisor come to mind. I don't know the minimum length of a PAS commitment, but 6 months at 0.3% on a $1 million asset base would be $1500, which might be comparable to what a fee-only advisor would charge for a plan.
I've thought about VG PAS, and they've actually asked about it as well. They are very pro-Vanguard so it's probably a win. I'm ignorant as to the robo-ness of it vs how they would guide them on, for example, when best do Roth conversions. If that's something that they do as well, I could see that as a good possibility. Referencing later comment...I wonder if VG would make a suggestion such a 'it would be advisable to delay SS until age 70'? Obviously a local advisor would. I just don't see a local advisor doing much for $1500.
FiveK wrote: Fri Oct 16, 2020 2:32 pm 2. Naming beneficiaries for all accounts, and a simple will for anything that doesn't allow naming a beneficiary.
Great suggestion. They have a will, but I have not confirmed for myself that they have beneficiaries set up for all their accounts. I'll get that on the todo list.
FiveK wrote: Fri Oct 16, 2020 2:32 pm 4. Reading between the lines, they most likely do have "enough" now, even with a very simple strategy such as
- keep anywhere from 3 months to 2 years in cash
- father delays SS until age 70
- withdraw first from taxable investments if needed for spending
- convert some amount of the traditional accounts to Roth until RMDs start.

It might be worth doing some "what if...?"s for Roth conversion strategy using the personal finance toolbox if you or they have even a little Excel knowledge. You could also use other tax software, but the picture of marginal rates (not just nominal bracket percentages) that tool shows seems more helpful.
Good stuff. I can handle Excel (software dev) and I'll check it out and hopefully put it to use for/with them, thanks again.
Topic Author
notsoeasymoney
Posts: 3
Joined: Fri Oct 16, 2020 12:17 pm

Re: Help with Retirement for Parents

Post by notsoeasymoney »

Jack FFR1846 wrote: Fri Oct 16, 2020 3:06 pm I'm sorry, but the answer to your unasked question is extremely easy to answer. Let me start with pertinent facts.
1) They have enough between money, investments, toys, house, rental, social security to retire.
2) They don't want your help.
3) If you offer your help, the most action they are likely to take is to do the opposite of what you say.
So now the easy answer. Stay out of their business.
I've tried this, and discussed this with my wife, but it's really difficult for me to keep seeing them do ignorant things with finances they wouldn't do if they just had a small push in the right direction. I do actually stay out of their business with all of the other things I wouldn't agree with. That and they keep asking me random things that keep me thinking they do actually want something. But yes point taken, understood, and I will keep this as a distinct possibility going forward.
User avatar
Watty
Posts: 20694
Joined: Wed Oct 10, 2007 3:55 pm

Re: Help with Retirement for Parents

Post by Watty »

You might buy them one of the Boglehead books and suggest that they post here themself.

https://www.amazon.com/s?k=Bogleheads&t ... ads.org-20

You might also suggest that they check out this web site to help figure out a Social Security claiming strategy.

https://opensocialsecurity.com/

They will also be needing to figure out Medicare and I found the book "Medicare for Dummies" to be very good despite the title. There is also a new updated edition coming out by the end of the month.

https://www.amazon.com/Medicare-Dummies ... 173&sr=8-3
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Eagle33
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Re: Help with Retirement for Parents

Post by Eagle33 »

Be careful not to force your advice where it may not be welcomed. Find a common goal of your parents that they are willing to accept your help.

A place to start may be you buying 2 copies of How to Make Your Money Last - The Indispensable Retirement Guide by Jane Bryant Quinn. One copy for your parents & 1 copy for you to read. It looks like Amazon is offering 3 for price of 2, so each parent will have their own copy.

Here is a link of a recent interview of Jane Bryant Quinn.
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.
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