In-laws not saving for retirement -- help!

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financial.freedom
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In-laws not saving for retirement -- help!

Post by financial.freedom » Fri Jul 10, 2015 2:54 pm

I'm really concerned about my in-laws. They are in their 60s, not saving for retirement, accumulating a lot of debt, and I'm concerned that at some point in time it will have a major impact upon my spouse and I.

My father-in-law at one point had 400k in his work 401k, but he recently took out all of the money to put into his business. My in-laws have a few businesses, I think only one of which is positive cash-flow. Their real estate properties mostly are underwater due to double mortgages. They are underwater on their house due to two mortgages. They are underwater on their former home via two mortgages and are having trouble finding tenants, so losing money every month. It seems whenever they can take out a loan (whether it's a 401k loan or another mortgage), they use it to fund one or more of their businesses.

I am trying to stay out of it, but I'm concerned because at some point this could be a major problem, especially if the businesses and real estate properties remain underwater and they can't work anymore.

My wife advised her dad not to take out the 401k loan and he got upset with her. So if I say something, it might make our relations worse. But if I don't try to do something now, I'm afraid of much greater problems down the road.

What should I do? Is there anything I can do?

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Re: In-laws not saving for retirement -- help!

Post by livesoft » Fri Jul 10, 2015 2:59 pm

I don't see much of a problem myself since they are in their 60s. The reason is that they can always declare bankruptcy and live off of social security benefits. It's the one American Way. If they had been 20 years younger, then it could have been a problem.
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Re: In-laws not saving for retirement -- help!

Post by tyrion » Fri Jul 10, 2015 3:10 pm

The general advice here is usually to:

Be on the same page as your spouse - discuss theoretical limits of how you would help in the future.

Let your spouse be the bad cop. They should be the one giving hard advice to their parents.

Shore up your own financial situation.

Prior to giving financial assistance, get the details of the situation. It may not be as bad as you think (social security, downsizing, etc).

Letting the parents/in-laws come to you is a lot easier than trying to intervene without an invitation.

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Re: In-laws not saving for retirement -- help!

Post by Meg77 » Fri Jul 10, 2015 3:13 pm

The extent of your problem depends on your wife's temperament and your in laws' pride. Are they likely to come begging you for help if the house of cards falls? Is she a "tough love" kind of person, or is she the kind of person who wouldn't bear to see her parents have to downsize or go without?

When their finances start unraveling - and they will - the best thing you can do is not to start enabling them. If you never start, it'll be easier to deal with because you won't be throwing good money after bad and building resentments when you see them spend irresponsibly. They'll likely need to be forced to declare bankruptcy (they may already be insolvent if there are credit cards and car loans on top of all you describe), and probably the sooner the better. Too many people spend too long paying too much in interest and fees getting nowhere, and then they go bankrupt anyway.

One big issue I see is whether they even will get much in social security. It sounds as if they are self-employed which means they may not have been paying much into the system. In that case the worst case scenario may involve them living with you down the road when they can't work. Better prepare now - most children wouldn't want to see their parents put in a state run facility no matter how much they did to deserve it.

Not a fun situation - I don't envy you. There's a chance they can turn it around I guess, and if they have one profitable business that is something. Hopefully they are healthy and can work another decade or so!
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Re: In-laws not saving for retirement -- help!

Post by sunny_socal » Fri Jul 10, 2015 3:26 pm

Add another bedroom to your house :wink:

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Re: In-laws not saving for retirement -- help!

Post by alex_686 » Fri Jul 10, 2015 3:43 pm

sunny_socal wrote:Add another bedroom to your house :wink:
That is a horrible idea. You would always be tripping over them. Build a small apartment over your garage, a carriage house.

On a more serious note, why do you think this will be a major problem? You and your wife need to be on the same page and set clear boundaries.

Would they move in? I have had friends who have had good success in rotating in in-laws around their daughters every 6 months. Note, the husbands were white Americans, the wives Chinese immigrants, and grandparents spoke limited English, and the grandchildren needed child care, so it all worked out. Oddly, they all converted their downstairs into mini-apartments. Bedroom, 2nd kitchen, but no entrance. Your circumstances might be different.

Financial help? I shudder at that one. emotions will run high. Once again, clear rules help.

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Re: In-laws not saving for retirement -- help!

Post by NightFall » Fri Jul 10, 2015 4:24 pm

tyrion wrote: Let your spouse be the bad cop. They should be the one giving hard advice to their parents.
+1. Let your spouse do the talking to their parents. If they get upset at their kids for giving advice, I doubt it would have a better outcome coming from you.

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Re: In-laws not saving for retirement -- help!

Post by runner9 » Fri Jul 10, 2015 4:34 pm

I don't see how this will directly affect you more than emotionally unless you let it. You don't have to lend them money, don't have to let them move in with you, etc. They are in their 60s so a few decades of life is a long time, but not as long as if they are in their 30s.

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Re: In-laws not saving for retirement -- help!

Post by Louis Winthorpe III » Fri Jul 10, 2015 4:44 pm

Other than being supportive of your wife, you need to keep your mouth shut and stay out of it.

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Re: In-laws not saving for retirement -- help!

Post by sawhorse » Fri Jul 10, 2015 5:13 pm

Discuss with your spouse how to handle this, but let her be the messenger.

I agree that bankruptcy isn't a bad idea for someone that age. Too bad they pulled so much from their 401k because that has absolute creditor protection.

I'm shocked that they've continued to be allowed to take out new mortgages. No wonder 2008 happened. It almost makes me wish they go bankrupt because irresponsible banks like that kind of deserve it.

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Re: In-laws not saving for retirement -- help!

Post by dc81584 » Fri Jul 10, 2015 5:25 pm

[OT comments removed by admin LadyGeek]

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Re: In-laws not saving for retirement -- help!

Post by metacritic » Fri Jul 10, 2015 5:28 pm

Great advice on this thread.

I recall watching in horror as my father in law sold most of his positions in 2009, downgraded substantially and bought expensive annuities.

I inserted myself to be dismissed summarily. He didn't take it too personally, thankfully.

And truth is he's never been happier and he did a couple of canny things I also would have advised against: buying rental properties that creates (thus far) a constant revenue stream.

In any event sometimes we bogle heads get it wrong from another's perspective.

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Re: In-laws not saving for retirement -- help!

Post by financial.freedom » Fri Jul 10, 2015 5:29 pm

Thank you for the advice. Yes, I think they have not been paying much into the system for SS since they have mainly been self-employed over the years. They've had other businesses go bankrupt in the past and survived. But they seem to be slowing down as they get older (mid 60s), don't know how much longer they can keep things up and maintain their current lifestyle. So the consensus is for now, be on the same page as my wife and then keep my mouth shut. I think my wife would invite them to live with us if they asked, but that stresses me out... and might be too much strain on our budget unless we move to a LCOL area.

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Re: In-laws not saving for retirement -- help!

Post by sawhorse » Fri Jul 10, 2015 5:36 pm

By the way, how did you and your wife find out their financial information?

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Re: In-laws not saving for retirement -- help!

Post by livesoft » Fri Jul 10, 2015 5:37 pm

Self-employed people are supposed to pay FICA/medicare taxes just like everybody else -- at least if they have any profits.
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Re: In-laws not saving for retirement -- help!

Post by financial.freedom » Fri Jul 10, 2015 5:41 pm

livesoft wrote:Self-employed people are supposed to pay FICA/medicare taxes just like everybody else -- at least if they have any profits.
When I last inquired, my father-in-law told me his accountant shows losses every year.

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Re: In-laws not saving for retirement -- help!

Post by financial.freedom » Fri Jul 10, 2015 5:41 pm

sawhorse wrote:By the way, how did you and your wife find out their financial information?
They asked us to co-sign a loan, so we inquired.

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Re: In-laws not saving for retirement -- help!

Post by Clever_Username » Fri Jul 10, 2015 5:47 pm

financial.freedom wrote:
sawhorse wrote:By the way, how did you and your wife find out their financial information?
They asked us to co-sign a loan, so we inquired.
Did you co-sign? Are you and your spouse on the same page about co-signing?
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Re: In-laws not saving for retirement -- help!

Post by Skiffy » Fri Jul 10, 2015 5:51 pm

You didn't co-sign the loan?

I would second the suggestion NOT to start enabling, it will just delay the their making hard choices.

Our family is not the sort to get into each other's business, maybe your family is?

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Re: In-laws not saving for retirement -- help!

Post by financial.freedom » Fri Jul 10, 2015 6:02 pm

Skiffy wrote:You didn't co-sign the loan?

I would second the suggestion NOT to start enabling, it will just delay the their making hard choices.

Our family is not the sort to get into each other's business, maybe your family is?
Correct, we did not co-sign the loan (it was for 2M yikes). We know their business is because we asked why they needed us to co-sign. They know some of our finances through my wife, but I usually try to avoid talking finances with family unless they ask.

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Re: In-laws not saving for retirement -- help!

Post by sawhorse » Fri Jul 10, 2015 6:06 pm

financial.freedom wrote:
sawhorse wrote:By the way, how did you and your wife find out their financial information?
They asked us to co-sign a loan, so we inquired.
Yowza. When it's getting to things like requesting co-signed loans, you really need to have all communications go through your wife. Don't sign the loan. Instead, see if your wife can convince them to look at bankruptcy. What state? Some states allow a lot of debts to be discharged in bankruptcy.

They also seem like they may be candidates for short sales.

When she advised him not to take out the 401k loan, did she point out that creditors cannot touch a 401k? You don't have to mention the word bankruptcy to tell them that.

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Re: In-laws not saving for retirement -- help!

Post by Jerry55 » Fri Jul 10, 2015 6:10 pm

All excellent advice above.

Like one poster said, let your wife deal with these issues. Don't be an enabler I'll repeat.
I've seen instances where people TOOK advice, only to have it come crashing down, and they got the blame.
I've also seen people NOT take advice, and wound up with huge losses.

We can't protect people from themselves, and since they're in their 60's, they've been doing ok so far.

I try to get my children to invest for their future, and I've been told in a kind manner, that they don't think like me.

Time for me to start spending their inheritance. :beer
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Re: In-laws not saving for retirement -- help!

Post by zebrafish » Fri Jul 10, 2015 7:26 pm

financial.freedom wrote:Correct, we did not co-sign the loan (it was for 2M yikes). We know their business is because we asked why they needed us to co-sign. They know some of our finances through my wife, but I usually try to avoid talking finances with family unless they ask.
I think this was a wise decision, because the bank can come after your assets for any debt for which you cosign.

I would make sure you and the spouse are on the same page moving forward about what "help" means and how much "help" you are willing to provide. Some people feel the need to prop up family members financially. Some don't. To me, this doesn't sound like a promising situation for you to become involved with on a financial level. Sounds like a very high risk for enabling.

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Re: In-laws not saving for retirement -- help!

Post by sawhorse » Fri Jul 10, 2015 7:38 pm

zebrafish wrote:Sounds like a very high risk for enabling.
I'm uncomfortable in general with the negative connotations of "enabling" in terms of interpersonal relations. I know cases in which parents and siblings tried the "tough love" approach because they thought they'd be doing the person a favor in the end by not "enabling" them. They ended badly, in two cases fatally. If the parents and siblings had offered productive support and a middle ground, it would have turned out better. These cases involved clinical mental illnesses and not irresponsible borrowing and spending however.

Rather than giving them money outright, and cosigning a loan is basically equivalent to that, is there any way your wife can make them realize that they have a problem? That's the first step. Maybe sit down with them and ask them how they're going to pay all their debts and then poke holes in their arguments. Doesn't work for everyone and can backfire. Your wife would be in a better position to know how her parents might react.

Although I firmly think your wife should be the messenger, I'm not sure she should be the bad cop as some have suggested. Maybe if she blames the decision on you, it would preserve the relationship with her parents. Depends on what your relationship with them is like. My grandmother thought the wife of her favorite son is evil incarnate and nothing would change that opinion. If get son had blamed it on the wife, it wouldn't have had any negative effect on the relationship.

I'm also astonished they would ask you to sign a loan for that amount. How do they think you're going to be able to afford it with an interest rate that is surely pretty high given their history?

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Re: In-laws not saving for retirement -- help!

Post by zebrafish » Fri Jul 10, 2015 11:10 pm

sawhorse wrote:... is there any way your wife can make them realize that they have a problem? That's the first step...

...

I'm also astonished they would ask you to sign a loan for that amount. How do they think you're going to be able to afford it with an interest rate that is surely pretty high given their history?
Well, there is a pretty big disconnect if someone comes and asks you to cosign a 2 million dollar loan (unless you're a billionaire!) To me, getting someone to realize this is a problem sounds like a multistep process. :beer

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Re: In-laws not saving for retirement -- help!

Post by dolphinsaremammals » Sat Jul 11, 2015 12:25 am

Never, ever cosign a loan with these people. Sounds like you know that, though.

I'd think in terms of bankruptcy and if possible in those circumstances, trying to keep the one profitable business going. Then eventually an apartment over the garage. Your wife will want to keep them from starving and living in the street. You have no obligation to support any better lifestyle than that.

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Re: In-laws not saving for retirement -- help!

Post by basspond » Sat Jul 11, 2015 4:58 am

Everything should go through your wife and the minute her parents asked you to co-sign is the minute their reckless financial decisions became yours. I would be very worried too. I would suggest that your wife approach this by showing her concern about all the complicated businesses they are in and if they know how they want their estate to be handled when they are gone. Hope it works out but it doesn't look good. What kind of parent in their sixties asks their child to co-sign a note?

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Re: In-laws not saving for retirement -- help!

Post by joebh » Sat Jul 11, 2015 6:28 am

financial.freedom wrote:My wife advised her dad not to take out the 401k loan and he got upset with her. So if I say something, it might make our relations worse. But if I don't try to do something now, I'm afraid of much greater problems down the road.

What should I do? Is there anything I can do?
Since your wife already made an attempt to advise and failed, it's very unlikely that you could succeed.

Your best bet is to have a long discussion with your wife. Be specific. Decide between yourselves what you will do if your in-laws are in need.

How will you respond if they ask for a loan?
How will you respond if they ask for money (a gift)?
How will you respond if they ask to live with you?
How will you respond if they change their mind and start asking for advice.

Right now there is little you can say to the in-laws. So just get on the same page with your wife and hope for the best down the road. Remember that this is their problem, and not yours - unless you decide to make it yours.

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Re: In-laws not saving for retirement -- help!

Post by Johno » Sat Jul 11, 2015 12:04 pm

zebrafish wrote:
sawhorse wrote:... is there any way your wife can make them realize that they have a problem? That's the first step...

...

I'm also astonished they would ask you to sign a loan for that amount. How do they think you're going to be able to afford it with an interest rate that is surely pretty high given their history?
Well, there is a pretty big disconnect if someone comes and asks you to cosign a 2 million dollar loan (unless you're a billionaire!)
That one also threw me for a loop. OP didn't say own financial situation, and I'm not 'prying' (anonymously on the internet :D ) but it's hard for me to imagine co-signing a loan, for free, for anybody, if it was more than a small fraction of my NW. And if $2mil is a small fraction of OP's NW, I don't see a reason really to panic if he and wife might end up partly supporting the parents in law. If they go bust, any loans and mortgages are the creditors' problem, and all that IMO can reasonably be asked of family at that point is to moderately supplement a modest existence on Social Security, which plenty of people live even without anyone else there to help out making ends meet here and there. That doesn't seem such a frightening financial burden for anyone in a position to consider even for a nano-second co-signing a $2mil loan.

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Re: In-laws not saving for retirement -- help!

Post by BolderBoy » Sat Jul 11, 2015 12:33 pm

financial.freedom wrote:What should I do? Is there anything I can do?
Save yourself (selves, if your wife is on the same page with you). Do the in-laws live in a different state? If not, do you know what the filial support laws are like in your state?

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Re: In-laws not saving for retirement -- help!

Post by barefootjan » Sat Jul 11, 2015 12:46 pm

BolderBoy wrote:
financial.freedom wrote:What should I do? Is there anything I can do?
Save yourself (selves, if your wife is on the same page with you). Do the in-laws live in a different state? If not, do you know what the filial support laws are like in your state?
BolderBoy, I was just going to ask the same thing (although with all that property, it seems like a stretch that the in-laws will be completely impoverished.) The point, though, is that it's not always a good idea to just 'butt out."

One question: do you know which state law applies: 1) the one where the debtor currently lives, 2) the one where the debtor lived at the time the debt was incurred, or 3) the one where the family member lives? - Based on court ruling in the Commonwealth of PA ( http://www.post-gazette.com/business/20 ... 1410260034 ) I'm guessing #2?

To financial.freedom: Best of luck to you and your family!

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Re: In-laws not saving for retirement -- help!

Post by Johno » Sat Jul 11, 2015 1:56 pm

BolderBoy wrote:
financial.freedom wrote:What should I do? Is there anything I can do?
Save yourself (selves, if your wife is on the same page with you). Do the in-laws live in a different state? If not, do you know what the filial support laws are like in your state?
Even people in the middle to well off/responsible end of the financial spectrum can eventually end up owing money for long term care that they don't have. So millions of their adult children should be at least a bit frightened by recent court decisions about filial support laws, particularly in PA. It's worth reading up on. But those cases involve basic support of life, albeit potentially expensive ones like medical or long term care. There's never been a suggestion AFAIK that a filial responsibility law could be used to make an adult child responsible for say a mortgage or business loan a parent couldn't pay.

And in this case the question seems to be whether it could be worth proactively getting involved in the parents' *non medical debt* problems to head them off, or just stand back and let their debt house of cards perhaps collapse and later perhaps help them get by at a reduced lifestyle. I think the former approach is wholly too risky, and it would be a huge mistake to be scared into doing it by the potential, only indirectly related risk of filial support laws. The more prudent general approach IMO is to let the parents in law deal with their own current debt problem, and if they can't and lose their assets OP and spouse should be able to agree between themselves IMO to limit support to supplementing a modest lifestyle for the parents based mainly on Social Security. Yes that lifestyle also carries some future risk of big medical or long term care bills it's *possible* (still not necessarily likely*) an adult child could he held responsible for, again millions are potentially in that situation. But does that make it a good idea to start eg. cosigning big loans to keep a parents-in-law's business on its feet? An approach where that would even be seriously raised as a possibility seems misguided to me.

*it also seems the nightmare cases have in common that public entities like Medicaid didn't pay for some reason other than just filial responsibility. In the PA case 'Pittas' the elderly person left the US before Medicaid processed their application; in an NJ case a nursing home accidentally let the patient's SS deposits they were authorized to take instead pile up in his account and went over the Medicaid asset limit, then a *nephew* settled with the home actually paying a large bill. Also many states have generally similar laws but some are narrower.

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Re: In-laws not saving for retirement -- help!

Post by financial.freedom » Sat Jul 11, 2015 9:16 pm

Johno wrote:
zebrafish wrote:
sawhorse wrote:... is there any way your wife can make them realize that they have a problem? That's the first step...

...

I'm also astonished they would ask you to sign a loan for that amount. How do they think you're going to be able to afford it with an interest rate that is surely pretty high given their history?
Well, there is a pretty big disconnect if someone comes and asks you to cosign a 2 million dollar loan (unless you're a billionaire!)
That one also threw me for a loop. OP didn't say own financial situation, and I'm not 'prying' (anonymously on the internet :D ) but it's hard for me to imagine co-signing a loan, for free, for anybody, if it was more than a small fraction of my NW. And if $2mil is a small fraction of OP's NW, I don't see a reason really to panic if he and wife might end up partly supporting the parents in law. If they go bust, any loans and mortgages are the creditors' problem, and all that IMO can reasonably be asked of family at that point is to moderately supplement a modest existence on Social Security, which plenty of people live even without anyone else there to help out making ends meet here and there. That doesn't seem such a frightening financial burden for anyone in a position to consider even for a nano-second co-signing a $2mil loan.
Our financial situation: good income but low NW (not anywhere near 2M NW) due to recently finishing school and starting our careers.

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Re: In-laws not saving for retirement -- help!

Post by financial.freedom » Sat Jul 11, 2015 9:17 pm

BolderBoy wrote:
financial.freedom wrote:What should I do? Is there anything I can do?
Save yourself (selves, if your wife is on the same page with you). Do the in-laws live in a different state? If not, do you know what the filial support laws are like in your state?
They live in a different state.

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Re: In-laws not saving for retirement -- help!

Post by financial.freedom » Sat Jul 11, 2015 9:27 pm

Johno wrote:
BolderBoy wrote:
financial.freedom wrote:What should I do? Is there anything I can do?
Save yourself (selves, if your wife is on the same page with you). Do the in-laws live in a different state? If not, do you know what the filial support laws are like in your state?
Even people in the middle to well off/responsible end of the financial spectrum can eventually end up owing money for long term care that they don't have. So millions of their adult children should be at least a bit frightened by recent court decisions about filial support laws, particularly in PA. It's worth reading up on. But those cases involve basic support of life, albeit potentially expensive ones like medical or long term care. There's never been a suggestion AFAIK that a filial responsibility law could be used to make an adult child responsible for say a mortgage or business loan a parent couldn't pay.

And in this case the question seems to be whether it could be worth proactively getting involved in the parents' *non medical debt* problems to head them off, or just stand back and let their debt house of cards perhaps collapse and later perhaps help them get by at a reduced lifestyle. I think the former approach is wholly too risky, and it would be a huge mistake to be scared into doing it by the potential, only indirectly related risk of filial support laws. The more prudent general approach IMO is to let the parents in law deal with their own current debt problem, and if they can't and lose their assets OP and spouse should be able to agree between themselves IMO to limit support to supplementing a modest lifestyle for the parents based mainly on Social Security. Yes that lifestyle also carries some future risk of big medical or long term care bills it's *possible* (still not necessarily likely*) an adult child could he held responsible for, again millions are potentially in that situation. But does that make it a good idea to start eg. cosigning big loans to keep a parents-in-law's business on its feet? An approach where that would even be seriously raised as a possibility seems misguided to me.

*it also seems the nightmare cases have in common that public entities like Medicaid didn't pay for some reason other than just filial responsibility. In the PA case 'Pittas' the elderly person left the US before Medicaid processed their application; in an NJ case a nursing home accidentally let the patient's SS deposits they were authorized to take instead pile up in his account and went over the Medicaid asset limit, then a *nephew* settled with the home actually paying a large bill. Also many states have generally similar laws but some are narrower.
There is a possibility that their one business which is cash-flow positive will thrive and they can have a stream of income. But the other businesses have so much debt and losses every year, I just don't know what will happen. In the meantime they are not living below their means ($5k watches, flying first class, etc). But there's no way I can criticize their lifestyle without it affecting our relationship. After reading through the replies and thinking about it, I've decided to not prophylactically get involved. We won't co-sign loans, but if 10 years from now they need basic things such as food and a roof over their heads we can help provide that.

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Re: In-laws not saving for retirement -- help!

Post by sawhorse » Sat Jul 11, 2015 11:40 pm

financial.freedom wrote:Our financial situation: good income but low NW (not anywhere near 2M NW) due to recently finishing school and starting our careers.
It seems that your in laws, for whatever reason, believe your net worth to be much higher than it is. (Perhaps they are confusing income with net worth and not accounting for student loans, cost of living, etc?) The sooner you disabuse them of that notion, the better. Understate your net worth so they get the message that not only are you unwilling, but you can't even if you were willing. Maybe your wife can directly ask them what they think your net worth is and how much you have left after expenses, and then tell them a plausible but underestimated number.

I really hope there is some way to get them to consider bankruptcy. It might even be good if they tell your wife, if you don't sign the loan we'll go bankrupt. That would be an opportunity to have your wife educate them on the benefits of filing bankruptcy. As well as short sales. It's not like they have good credit to protect, and at their age the repercussions of bankruptcy aren't big.

I get the feeling that people think bankruptcy is worse than it actually is. Many people have been saved by filling bankruptcy.

springnr
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Re: In-laws not saving for retirement -- help!

Post by springnr » Sun Jul 12, 2015 12:21 am

The In-laws finding a way to repay their 401K loan should be high on the list of priorities.

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obgyn65
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Re: In-laws not saving for retirement -- help!

Post by obgyn65 » Sun Jul 12, 2015 4:48 pm

This would be my choice also.
Louis Winthorpe III wrote:Other than being supportive of your wife, you need to keep your mouth shut and stay out of it.
"The two most important days in someone's life are the day that they are born and the day they discover why." -John Maxwell

sawhorse
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Re: In-laws not saving for retirement -- help!

Post by sawhorse » Sun Jul 12, 2015 10:35 pm

springnr wrote:The In-laws finding a way to repay their 401K loan should be high on the list of priorities.
I would say it's perhaps the HIGHEST priority. 401ks have ironclad protection in bankruptcy. They can take your kitchen sink and the clothes off your back but they can't touch your 401k. Get as much back into it as you can.

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BolderBoy
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Re: In-laws not saving for retirement -- help!

Post by BolderBoy » Sun Jul 12, 2015 10:41 pm

financial.freedom wrote:
BolderBoy wrote:
financial.freedom wrote:What should I do? Is there anything I can do?
Save yourself (selves, if your wife is on the same page with you). Do the in-laws live in a different state? If not, do you know what the filial support laws are like in your state?
They live in a different state.
Then you are probably safe. In a PA case where the judge assigned parental financial liability to a child who lived in Ohio, the Ohio judge told PA to go pound sand. Other states would hopefully do the same.

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Re: In-laws not saving for retirement -- help!

Post by Carefreeap » Mon Jul 13, 2015 8:52 am

sawhorse wrote:
financial.freedom wrote:Our financial situation: good income but low NW (not anywhere near 2M NW) due to recently finishing school and starting our careers.
It seems that your in laws, for whatever reason, believe your net worth to be much higher than it is. (Perhaps they are confusing income with net worth and not accounting for student loans, cost of living, etc?) The sooner you disabuse them of that notion, the better. Understate your net worth so they get the message that not only are you unwilling, but you can't even if you were willing. Maybe your wife can directly ask them what they think your net worth is and how much you have left after expenses, and then tell them a plausible but underestimated number.

I really hope there is some way to get them to consider bankruptcy. It might even be good if they tell your wife, if you don't sign the loan we'll go bankrupt. That would be an opportunity to have your wife educate them on the benefits of filing bankruptcy. As well as short sales. It's not like they have good credit to protect, and at their age the repercussions of bankruptcy aren't big.

I get the feeling that people think bankruptcy is worse than it actually is. Many people have been saved by filling bankruptcy.
Until they run up debt again and are effectively BK in another 10 years. That's how my parents operated. And there's nothing you can do about because they are so smart and you just don't understand.

I have plenty of empathy for the OP but agree with the others to stay off of the in-law's sinking ship.

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Re: In-laws not saving for retirement -- help!

Post by Texanbybirth » Mon Jul 13, 2015 9:26 am

joebh wrote:
financial.freedom wrote:My wife advised her dad not to take out the 401k loan and he got upset with her. So if I say something, it might make our relations worse. But if I don't try to do something now, I'm afraid of much greater problems down the road.

What should I do? Is there anything I can do?
Since your wife already made an attempt to advise and failed, it's very unlikely that you could succeed.

Your best bet is to have a long discussion with your wife. Be specific. Decide between yourselves what you will do if your in-laws are in need.

How will you respond if they ask for a loan?
How will you respond if they ask for money (a gift)?
How will you respond if they ask to live with you?
How will you respond if they change their mind and start asking for advice.

Right now there is little you can say to the in-laws. So just get on the same page with your wife and hope for the best down the road. Remember that this is their problem, and not yours - unless you decide to make it yours.
+1
Old Tom Bombadil is a merry fellow, | Bright blue his jacket is, and his boots are yellow. | None has ever caught him yet, for Tom, he is the master: | His songs are stronger songs, and his feet are faster.

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greg24
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Re: In-laws not saving for retirement -- help!

Post by greg24 » Mon Jul 13, 2015 10:45 am

sawhorse wrote:It seems that your in laws, for whatever reason, believe your net worth to be much higher than it is.
Or maybe the in-laws think that people with negative net worths, such as themselves, should be co-signing $2M loans. Their view of financial solvency is much different than yours.

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Re: In-laws not saving for retirement -- help!

Post by heyyou » Mon Jul 13, 2015 11:42 am

@financial.freedom
Discuss with your spouse and set boundaries now, so there will be less drama when the in-laws are over the boundary. Start keeping a running total of any money given or spent on them, minus whatever they pay back, and keep records of both. Measure that as a percentage of your annual savings, same as if you were spending it on yourselves for a vacation. DW will later be able to say "no" because you two will see how it is hurting your combined savings. DW says to her parents "We have already given you $X0,000 in the last five years from our savings, so we can't help now with the two mortgages on your residence."

Consider trying to avoid giving them cash, write checks to help track the spending. Buying experiences instead of things has been shown to be a good path. DW taking her mom to lunch is good.

Keep your standard of living lower than the spendthrifts. Don't tell them about promotions or raises at work.

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Re: In-laws not saving for retirement -- help!

Post by daggerboard » Mon Jul 13, 2015 2:07 pm

Sorry to hear about the stress.

I have and am continuing to deal with similar circumstances with my own in-laws.

Lessons learned the hard way:

1) Beware of feeding the habit - enabling family in dire straits by fending off foreclosures and such with small or significant loans, co-signing etc just enables them to continue with the behaviors that have brought on the situation they are in. My wife and I have agreed to never again to step in such a way, but rather are expecting to support them once their house of cards is fully collapsed - e.g. give them a small living stipend etc.

2) Beware of too big to fail - I observed yet other family members fund a sibling's massive overspending and financial mismanagement by giving ever larger loans to fend off bankruptcy - trying to protect their past loans by loaning even more. Until their collective resources were exhausted and the bankruptcy happened regardless. In a family of 3 siblings, 1 bad apple managed to drain the 2 other siblings life savings in this manner. Now all three are approaching retirement age with nothing to fund it.

3) If you do loan money, make sure you do it in a way that you get paid back - e.g. we made a loan and had it secured with a mortgage on property the family member owned (no debt senior to ours). So one day if the family member or the estate wants to sell the property, we actually get paid. This cost a couple hundred bucks and a slice of humble pie for the family member to chew on.

sawhorse
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Re: In-laws not saving for retirement -- help!

Post by sawhorse » Mon Jul 13, 2015 2:20 pm

Have you thought about asking them to take a personal finance class along with you? Perhaps gift it to them. This could send a message that you can't afford to give them what they want, and it isn't condescending if you do it along with them. And you will probably learn something yourself.

profnot
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Re: In-laws not saving for retirement -- help!

Post by profnot » Mon Jul 13, 2015 4:18 pm

As many have said, I would "get on the same page" with your wife about what you would do re a series of "what if's."

Then I would work with wife to get parents to a fee-based financial planner and let him be the bearer of bad news plus come up with written solutions. I would pay for the FP sessions and ask for an hourly rate, not a per cent of money handled.

I think you are quite right - this will impact your finances (current and future) and could cause huge stress in your marriage due to pressure and guilt from parents.

Good luck!

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Re: In-laws not saving for retirement -- help!

Post by sawhorse » Mon Jul 13, 2015 4:29 pm

profnot wrote: Then I would work with wife to get parents to a fee-based financial planner and let him be the bearer of bad news plus come up with written solutions. I would pay for the FP sessions and ask for an hourly rate, not a per cent of money handled.
The risk is that the financial planner will do something counterproductive. Encourage them to buy ethically questionable products. Support their pursuit of financial aid from the children. They have an incentive not to be too critical because they could lose a client that way.

In addition, the parents may not be totally forthright with the planner.

This is a really frustrating situation.

Do her parents live in your area? That would make it easier for you to vet financial planners and you could accompany them to the meetings.

Since a lot of their debt is with underwater mortgages, have they looked into short sales?

No matter what, stuff as much back into the 401k as possible to get the legal protection.

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