Helping Father Plan for Retirement (messy)

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alaskantraveler
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Helping Father Plan for Retirement (messy)

Post by alaskantraveler » Mon Jul 10, 2017 12:46 pm

Details for my father

My father wants to retire. His health is in question. He is currently on medical leave.

Age: 63
Filing Status: 2017 Married Filing Jointly, Single after that (my mother passed in January from long term illness) 25% tax bracket
Mortgage: $250k loan on $325k house. 15 year, 2.5% (Parents sold and bought new house in November 16)
Retirement Assets, $180k cash, $700k tax deferred. $20k Roth. Total $900k
Salary. $120k
Current Pensions $1200/month
Eligible for another $2400/month pension at 65.
Has access to 3 different health insurance plans in retirement so health insurance is completely covered.
SS at FRA = $1850/month (ss is low because of State job that did not pay into SS).

At 65 he will receive total pensions of about $43k/year. SS at 66 will be about $22k. For a total of $65k.

Update: 7/19/17:
My father's retirement assets are now at $1m. He has decided to move forward with retirement. I got him to move the funds out of Merrill Lynch with 1% AUM to self managed accounts at Schwab. My father is fairly risk tolerant and is looking at a portfolio of stocks/bonds 70/30 or 65/35.



Concerns. My fathers $700k are in many different accounts, from a 401(a), 457B, Traditional IRA, roth IRA, inherited IRA, spouse 457b, spouse traditional IRA, a little in taxable. This is across 4 or 5 different financial institutions. He has some funds managed by Merrill Lynch with 1% AUM fee. I think about $150k. The asset manager is also managing his allocations in the employer accounts (not sure if he is being charged the 1% AUM for those values). I looked at the funds that he was in just once, fortunately many of the funds he is invested in are relatively low cost passive mutual funds (not exclusively) and the type of funds is all over the place, probably no less than 30 different funds. I don't even know his asset allocation at this point, but I think it is somewhere around 90% equities (some international) and 10% bonds. I know there are some REITS in there somewhere.

My father's fixed expenses are probably around $50k, but his discretionary spending is currently another $30k to $80k/year. He currently owns 5 timeshares that he has been scammed into buying. The first one he bought was from one of those free tour tickets for listening to a timeshare presentation. Then he bought others after going to timeshare update presentation while visiting the property for his week. He most recently bought 2 weeks at a Cancun Resort for around $25k. I have explained to him how terrible these are. And that many people give them away, and there is unlikely any resale value. He has around $4k - $5k per year in maintenance fees he pays.

My father is not tech savvy at all. He doesn't even know many of his account values, because he does not manage his accounts online. He usually calls credit card companies to pay the balance. He has one employer/ union sponsored account at Vanguard currently. He has an IRA and checking account set up with Schwab. (takes advantage of the fee free ATM card for international use). Because he is so not tech savvy I am leaning towards him consolidating all of his funds to Schwab. He can invest much of his assets in Vanguard ETFs there. I am leaning towards Schwab as he has an account set up already and there is a Schwab bank nearby so he can go in and get face to face assistance. Vanguard's customer service may not be sufficient enough for him. He also likes to travel, and will keep the debit card.

Questions.

Schwab or Vanguard? Was thinking about a simple 3 fund portfolio, but perhaps just a single life strategy fund. He will need to allocate the funds between several different accounts(5-8 accounts) so a 3 fund portfolio would probably be better. Schwab mutual funds or Vanguard ETFs/Mutual funds if he is based at Schwab? (I've heard bad things about Schwab's total bnd market index fund)

His health is not great. His father lived to be 82, his mother 87. Should he claim SS at 66 or 70? I know that it is generally advised that married couples have the higher earner delay till 70. My father is widowed and life expectancy is likely below average. He is leaning towards 66.

I am concerned about his allocation and advised that for someone on the edge of retirement and withdrawals from retirement accounts he needs to be focused on wealth preservation rather than aggressive growth. His risk tolerance appears to be very high but most of his accumulation was post 2008. I am recommending somewhere from 40/60 to 60/40? With 30% of equities in international? I am recommending he set a safe withdrawal rate of 4% and make a withdrawal of once per year into his checking account. He can spend that amount as his discretionary spending. By 65 his pensions and ss should cover most of his fixed living expenses. If he delays SS till 70, he will likely need a greater than 4% withdrawal rate until then.

What about taxes? He has some cash, and very little in a Roth. 2017 is his last year filing married. What about roth conversions if there is any 15% space left?

What about the mortgage? $250k ,15 yr @ 2.5%. The interest rate is very low. He will receive modest benefit from the mortgage interest deduction because of the single filing status. He has consider paying it down, but not completely paying it off.

As for retiring, I advised him that he has enough to retire to cover his basic living expenses and modest discretionary spending. His discretionary spending is still a wild card. I have advised him get his assets simplified, and moved to a less risky allocation before retiring.

Any advice appreciated.
Last edited by alaskantraveler on Wed Jul 19, 2017 6:56 pm, edited 3 times in total.

goblue100
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Re: Helping Father Plan for Retirement (messy)

Post by goblue100 » Mon Jul 10, 2017 1:40 pm

Does he want your help? It sounds to me like you have capacity to help him, if he will listen to you. What does he say when you ask him why he keeps buying time shares he can't afford?
Some people are immune to good advice. - Saul Goodman

alaskantraveler
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Re: Helping Father Plan for Retirement (messy)

Post by alaskantraveler » Mon Jul 10, 2017 1:50 pm

goblue100 wrote:Does he want your help? It sounds to me like you have capacity to help him, if he will listen to you. What does he say when you ask him why he keeps buying time shares he can't afford?
He values my advice. As for buying the timeshares, he is pre-disposed to making emotionally charged financial decisions. He put himself in the position to listening to the sales pitch, and was convinced over and over again. Timeshares is another topic in itself.

psteinx
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Re: Helping Father Plan for Retirement (messy)

Post by psteinx » Mon Jul 10, 2017 2:02 pm

The timeshares thing is maybe the biggest red flag here.

And it's not just about the fact that he has 5 of them, it's that he's kept buying them, and that, in the future, he may make comparably questionable purchases. Perhaps not more timeshares (though of course that's a possibility), but maybe it's a $60K sports car, or some crazy annuity or life insurance policy or whatever. Parts of the financial services industry are rather adept at targeting unsophisticated seniors with little financial savvy, and perhaps declining physical, mental, and emotional health.

Even though he's only 63, and was, at least up until the recent health issue, capable of holding down a $120K job, I think it's worth at least considering whether it would be appropriate to try to get a financial guardian (not sure what the exact legal term is) appointed here (presumably yourself). Maybe that's overkill and maybe it wouldn't go over well, but I would at least think about it.

Also, your mother passed in January. He's in not so great health himself. He apparently makes impulsive decisions. He's got a fair amount of money. Be aware that older females might express interest in him, and he might be open to that. That's not an awful thing of course. If he were to live another 15-20 years, having a wife to share his life might be quite good. But not all possible outcomes of that path are positive. Be aware of it as a possibility, at least.

alaskantraveler
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Re: Helping Father Plan for Retirement (messy)

Post by alaskantraveler » Mon Jul 10, 2017 2:15 pm

psteinx wrote:The timeshares thing is maybe the biggest red flag here.

And it's not just about the fact that he has 5 of them, it's that he's kept buying them, and that, in the future, he may make comparably questionable purchases. Perhaps not more timeshares (though of course that's a possibility), but maybe it's a $60K sports car, or some crazy annuity or life insurance policy or whatever. Parts of the financial services industry are rather adept at targeting unsophisticated seniors with little financial savvy, and perhaps declining physical, mental, and emotional health.

Even though he's only 63, and was, at least up until the recent health issue, capable of holding down a $120K job, I think it's worth at least considering whether it would be appropriate to try to get a financial guardian (not sure what the exact legal term is) appointed here (presumably yourself). Maybe that's overkill and maybe it wouldn't go over well, but I would at least think about it.

Also, your mother passed in January. He's in not so great health himself. He apparently makes impulsive decisions. He's got a fair amount of money. Be aware that older females might express interest in him, and he might be open to that. That's not an awful thing of course. If he were to live another 15-20 years, having a partner to share his life might be quite good. But not all possible outcomes of that path are positive. Be aware of it as a possibility, at least.
All valid points... You are right, I brought up the timeshares as way to show his tendency to make erratic decisions that have a large financial impact. As I said before, I believe he has sufficient retirement savings to cover his fixed expenses and for modest discretionary spending. He is someone who has expressed interest in a $60k sports car. My father is just very susceptible to a good salesman. He is certainly not at the point of needing a financial guardian, but I hope that he will put any large financial decisions by me. I had a serious talk with him after he bought 2 timeshares in 4 months dropping over $40k plus taking on the maintenance fees. I told him that all of the financial advice that I offer cannot overtake the loss by these kinds of decisions.

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Re: Helping Father Plan for Retirement (messy)

Post by Meg77 » Mon Jul 10, 2017 2:31 pm

alaskantraveler wrote:My father's fixed expenses are probably around $50k, but his discretionary spending is currently another $30k to $80k/year. He currently owns 5 timeshares that he has been scammed into buying.
Are his basic expenses really only $50K? With a $325k home that seems unlikely, especially if you factor in the cost of health insurance premiums on the open market and any ongoing medical expenses due to his current condition(s). Step one is to get a good handle on his projected basic expenses and creating a "retirement budget." Don't forget things like ongoing home maintenance which may be close to zero some years but then $10K or so in others. I think it might be a good idea to set him up on Mint.com or something just so you can both track his actual spending for a few months.
alaskantraveler wrote: Questions.

Schwab or Vanguard? Was thinking about a simple 3 fund portfolio, but perhaps just a single life strategy fund. He will need to allocate the funds between several different accounts(5-8 accounts) so a 3 fund portfolio would probably be better. Schwab mutual funds or Vanguard ETFs/Mutual funds if he is based at Schwab? (I've heard bad things about Schwab's total bnd market index fund)
Schwab sounds like a good option for the reasons you listed. It'll be better than some of the firms he's at now I'm sure. But you need to be totally willing and able (i.e. he lets you) to have full access to the accounts and help him manage a distribution strategy. Otherwise it might be best for him to stick with a financial advisor in this scenario - these situations are what they are there for. If he gets dementia or defrauded or cuts you off and drains his own account or moves things around, he has the potential to cause severe financial damage to himself. Luckily his pensions will provide a perfectly livable income in just a few years, so it's not like he'll starve. But still, if he's erratic mentally, emotionally or even physically - or if you are busy or overwhelmed at any point - there's no harm in having a professional involved. [/quote]
alaskantraveler wrote: His health is not great. His father lived to be 82, his mother 87. Should he claim SS at 66 or 70? I know that it is generally advised that married couples have the higher earner delay till 70. My father is widowed and life expectancy is likely below average. He is leaning towards 66.
Claim at 66. He's statistically unlikely to live till the breakeven age with health given that his dad didn't and that he already has health issues presenting. Even if he does he may need the money sooner than later to prevent depleting his portfolio.[/quote]
alaskantraveler wrote: I am concerned about his allocation and advised that for someone on the edge of retirement and withdrawals from retirement accounts he needs to be focused on wealth preservation rather than aggressive growth. His risk tolerance appears to be very high but most of his accumulation was post 2008. I am recommending somewhere from 40/60 to 60/40? With 30% of equities in international? I am recommending he set a safe withdrawal rate of 4% and make a withdrawal of once per year into his checking account. He can spend that amount as his discretionary spending. By 65 his pensions and ss should cover most of his fixed living expenses. If he delays SS till 70, he will likely need a greater than 4% withdrawal rate until then.
He might be fine honestly, especially since his basic expenses will be covered by pensions - and because he has several years worth of expenses in cash he can tap when markets trend down, instead of selling equities. If you consider the present value of his future pension income as a bond, he's actually heavily weighted in fixed income. And he could live 20-30 more years too. So personally I'd be comfortable with a stock heavy portfolio - up to 75% in equities. His withdrawal rate can be (and probably needs to be) larger than 4% in the early years as long as he drops it down when his pensions kick in. But he's only a couple of years away from that anyway.
alaskantraveler wrote: What about taxes? He has some cash, and very little in a Roth. 2017 is his last year filing married. What about roth conversions if there is any 15% space left?
Taxes will largely be what they are with income from pensions and SSI. There isn't too much planning to do. Unless you are super hands on and actively managing his accounts, I am not sure I'd worry about optimizing to the point of roth conversions. But of course you can if you like. It won't make a difference to him in all likelihood as far as lifestyle, but it would affect your inheritance.
alaskantraveler wrote: What about the mortgage? $250k ,15 yr @ 2.5%. The interest rate is very low. He will receive modest benefit from the mortgage interest deduction because of the single filing status. He has consider paying it down, but not completely paying it off.
This is tricky. That is a crazy low rate that basically is free money since inflation averages around 2.5% a year - not even including any tax breaks. I would probably keep it in place and invest the difference. Even bonds are likely to return more than that over the life of the loan.
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Meg77
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Re: Helping Father Plan for Retirement (messy)

Post by Meg77 » Mon Jul 10, 2017 2:33 pm

alaskantraveler wrote:
psteinx wrote:The timeshares thing is maybe the biggest red flag here.

And it's not just about the fact that he has 5 of them, it's that he's kept buying them, and that, in the future, he may make comparably questionable purchases. Perhaps not more timeshares (though of course that's a possibility), but maybe it's a $60K sports car, or some crazy annuity or life insurance policy or whatever. Parts of the financial services industry are rather adept at targeting unsophisticated seniors with little financial savvy, and perhaps declining physical, mental, and emotional health.

Even though he's only 63, and was, at least up until the recent health issue, capable of holding down a $120K job, I think it's worth at least considering whether it would be appropriate to try to get a financial guardian (not sure what the exact legal term is) appointed here (presumably yourself). Maybe that's overkill and maybe it wouldn't go over well, but I would at least think about it.

Also, your mother passed in January. He's in not so great health himself. He apparently makes impulsive decisions. He's got a fair amount of money. Be aware that older females might express interest in him, and he might be open to that. That's not an awful thing of course. If he were to live another 15-20 years, having a partner to share his life might be quite good. But not all possible outcomes of that path are positive. Be aware of it as a possibility, at least.
All valid points... You are right, I brought up the timeshares as way to show his tendency to make erratic decisions that have a large financial impact. As I said before, I believe he has sufficient retirement savings to cover his fixed expenses and for modest discretionary spending. He is someone who has expressed interest in a $60k sports car. My father is just very susceptible to a good salesman. He is certainly not at the point of needing a financial guardian, but I hope that he will put any large financial decisions by me. I had a serious talk with him after he bought 2 timeshares in 4 months dropping over $40k plus taking on the maintenance fees. I told him that all of the financial advice that I offer cannot overtake the loss by these kinds of decisions.
By the way there are companies that can help him get out of these timeshares - for a fee. Timeshare Exit Team is one I've heard endorsed by Dave Ramsey. They are apparently not cheap but they guarantee they'll get you out of the deal, or you don't pay anything. With $5k a year in fees on timeshares it doesn't sound like he can use much, that might be worth investigating.
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Re: Helping Father Plan for Retirement (messy)

Post by Jack FFR1846 » Mon Jul 10, 2017 2:38 pm

Is he at least using the timeshares? My parents had 12 weeks at one point but used them all or rented then directly. If he is not using them, then what use are they? I don't see how anyone is going to ignore this issue
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Re: Helping Father Plan for Retirement (messy)

Post by Pajamas » Mon Jul 10, 2017 2:41 pm

Are the fees on all those timeshares really only $4-5k a year? Sounds low. If you are going to help your father. the first thing to do (after he agrees to you helping him, of course) is a full, thorough assessment of his financial situation. That is necessary before any planning. The spending behaviors also need to be addressed or it will all be for naught.

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Hub
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Re: Helping Father Plan for Retirement (messy)

Post by Hub » Mon Jul 10, 2017 2:44 pm

The good news is that he has pensions and SS coming that will keep him living well enough even if he loses his nest-egg. He's done a pretty good job of saving from my perspective. The timeshare thing is tragic though.

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Re: Helping Father Plan for Retirement (messy)

Post by radiowave » Mon Jul 10, 2017 2:55 pm

Meg77 wrote: . . .
By the way there are companies that can help him get out of these timeshares - for a fee. Timeshare Exit Team is one I've heard endorsed by Dave Ramsey. They are apparently not cheap but they guarantee they'll get you out of the deal, or you don't pay anything. With $5k a year in fees on timeshares it doesn't sound like he can use much, that might be worth investigating.
Be very careful, my FIL got caught up in several "guaranteed" schemes to sell his time share, wound up being bogus companies that listed timeshare for sale in dubious magazines. He wound up on some list and got constant calls from companies which he engaged over time. Bottom line, family was able to transfer the deed back to the TS title company after his death. A real painful experience all the way around.
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Re: Helping Father Plan for Retirement (messy)

Post by Carefreeap » Mon Jul 10, 2017 3:04 pm

Jack FFR1846 wrote:Is he at least using the timeshares? My parents had 12 weeks at one point but used them all or rented then directly. If he is not using them, then what use are they? I don't see how anyone is going to ignore this issue
Yeah, I'm not a timeshare fan either but I do know a couple of people who used them regularly. One of them just passed and between the 5 remaining kids, someone is always taking one of the weeks to Hawaii. And much to my surprise, one of the daughters has been quite successful with listing the second week on Craig's list via VRBO and takes in enough to cover the annual fees (for both weeks) and then some. That may be more management than you want but you should at least explore that option.

I agree with Meg about your father's asset allocation. It's o.k. to be aggressive with the healthy pensions and SS.

And I'm sure you know it but you can consolidate his 457s and other governmental savings plan into an IRA (but your mother's will need to remain separate from his). The big difference was that the governmental plans would allow access without penalty once one separated from service. Since he's older than 59 1/2 there may no longer be any value in keeping those plans once separated from service. And if they are like my 457 they are actually more expensive; in addition to the normal mutual fund expense ratio there's also a 1% asset fee charged. I would talk to a CPA to understand the varies rules with the goal to simplify his life and reduce the number of accounts.

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Re: Helping Father Plan for Retirement (messy)

Post by NotWhoYouThink » Mon Jul 10, 2017 3:23 pm

What's wrong with a $60K sports car? I'm serious. Maybe he has always wanted one, and if he doesn't get it soon maybe he never will. I hope my kids don't think they have a say in my vehicle selection.

I understand the multiple accounts are complicated, and the time shares are an issue if he doesn't use them. If he uses them, what's the problem?

You can give him advice and I hope he listens to the investment advice. But tread softly about the spending.

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Re: Helping Father Plan for Retirement (messy)

Post by bayview » Mon Jul 10, 2017 3:35 pm

NotWhoYouThink wrote:What's wrong with a $60K sports car? I'm serious. Maybe he has always wanted one, and if he doesn't get it soon maybe he never will. I hope my kids don't think they have a say in my vehicle selection.

I understand the multiple accounts are complicated, and the time shares are an issue if he doesn't use them. If he uses them, what's the problem?

You can give him advice and I hope he listens to the investment advice. But tread softly about the spending.
Well, it IS 6.7% of his savings, a bit over a year and a half's worth of 4% withdrawals...

I would probably agree, if it weren't for his disturbing pattern of wild-hair purchases in multiple areas.
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Re: Helping Father Plan for Retirement (messy)

Post by alaskantraveler » Mon Jul 10, 2017 3:50 pm

Carefreeap wrote: And I'm sure you know it but you can consolidate his 457s and other governmental savings plan into an IRA (but your mother's will need to remain separate from his). The big difference was that the governmental plans would allow access without penalty once one separated from service. Since he's older than 59 1/2 there may no longer be any value in keeping those plans once separated from service. And if they are like my 457 they are actually more expensive; in addition to the normal mutual fund expense ratio there's also a 1% asset fee charged. I would talk to a CPA to understand the varies rules with the goal to simplify his life and reduce the number of accounts.
I wasn't clear on that yet. So because he is over 59 1/2 he can combine his 457b and 401a into a traditional IRA?

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Re: Helping Father Plan for Retirement (messy)

Post by alaskantraveler » Mon Jul 10, 2017 3:52 pm

NotWhoYouThink wrote:What's wrong with a $60K sports car? I'm serious. Maybe he has always wanted one, and if he doesn't get it soon maybe he never will. I hope my kids don't think they have a say in my vehicle selection.

I understand the multiple accounts are complicated, and the time shares are an issue if he doesn't use them. If he uses them, what's the problem?

You can give him advice and I hope he listens to the investment advice. But tread softly about the spending.
I'm not one to judge, if he wants a $60k sports car. He owns 3 motorcycles including a Harley. The issue is whether or not he has sufficient assets to afford a $60k luxury good, when he has the desire to retire early.

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Re: Helping Father Plan for Retirement (messy)

Post by alaskantraveler » Mon Jul 10, 2017 3:57 pm

Pajamas wrote:Are the fees on all those timeshares really only $4-5k a year? Sounds low. If you are going to help your father. the first thing to do (after he agrees to you helping him, of course) is a full, thorough assessment of his financial situation. That is necessary before any planning. The spending behaviors also need to be addressed or it will all be for naught.
He has 2 timeshares that are Every Year that have $1100/yr maintenance fee. He has 2 timeshares that are every other year so $550 per year in maintenance fees, then he bought the 2 weeks in mexico. I don't know what the maintenance fees are, but I bet they are high. So the total fees are between $4-$5k.

He and my mother used them in the past. He has used it once since my mother's passing. He went for 2 weeks alone. I don't think he has much interest in doing that anymore. I was going to look at getting him to see if we can rent them out to cover the maintenance fees.

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Re: Helping Father Plan for Retirement (messy)

Post by Pajamas » Mon Jul 10, 2017 4:06 pm

alaskantraveler wrote:[ So the total fees are between $4-$5k.
Okay, that makes sense. I guess the timeshares that I have read about are usually for more than a week or two and have much higher fees paid on a monthly or quarterly basis.

If he doesn't want to use them, getting rid of them completely might be a better option than keeping them and renting them out, especially if they have much market value or if the rent doesn't cover the annual expenses plus provide an acceptable return on the market value. Certainly what he paid for them is irrelevant now, only the market value is important.

After you make the assessment, you could consolidate funds and accounts and look at any capital gains or losses in taxable.

The idea to move to Schwab so he can go to the office is a good idea as long as he doesn't fall prey to investment advisors or expensive funds there. I have even been tempted by the offer of dinner at a good restaurant from my broker when they began an investment advisory program.

The key to him not running out of money is going to be to manage his spending, both reducing fixed costs as much as possible and getting a handle on the discretionary spending.

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Re: Helping Father Plan for Retirement (messy)

Post by Carefreeap » Mon Jul 10, 2017 4:48 pm

alaskantraveler wrote:
Carefreeap wrote: And I'm sure you know it but you can consolidate his 457s and other governmental savings plan into an IRA (but your mother's will need to remain separate from his). The big difference was that the governmental plans would allow access without penalty once one separated from service. Since he's older than 59 1/2 there may no longer be any value in keeping those plans once separated from service. And if they are like my 457 they are actually more expensive; in addition to the normal mutual fund expense ratio there's also a 1% asset fee charged. I would talk to a CPA to understand the varies rules with the goal to simplify his life and reduce the number of accounts.
I wasn't clear on that yet. So because he is over 59 1/2 he can combine his 457b and 401a into a traditional IRA?
If he's separated from service from those employers he can roll his accounts into an IRA.

I mentioned the 59 1/2 age because under the government plans you can access your retirements penalty-free once you separate service but not tax-free. A 401k or IRA would have a 10% penalty.

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Re: Helping Father Plan for Retirement (messy)

Post by Carl53 » Mon Jul 10, 2017 5:19 pm

What was your mother's earning history? Did she pay into SS? If so, your father might be able to collect survivors benefits while waiting for his own benefits to increase. If one of the pensions is the result of government employment he may be subject to Government Pension Offset, GPO, and lose up to the equivalent of two thirds of the SS survivor benefit depending on how big it is. http://financialducksinarow.com/2505/go ... -security/

Also, regarding his ultimate SS benefits, he likely will be subject to the Windfall Elimination Provision, WEP, unless he had 30 years of qualifying substantial earnings under SS. http://financialducksinarow.com/2512/wi ... -security/

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Re: Helping Father Plan for Retirement (messy)

Post by denovo » Mon Jul 10, 2017 5:30 pm

Honestly, I think the most important thing is to start with a little bit of sympathy since he's having his health problems and his wife (your mom) jut passed away. He could be making bad decisions because of stress and retiring may help relieve that.
alaskantraveler wrote:
My father wants to retire. His health is in question. He is currently on medial leave.
I would seriously encourage him to retire if he can afford it.



Eligible for another $2400/month pension at 65.
What happens if he retires now? Less than $2,400 or nada?
Has access to 3 different health insurance plans in retirement so health insurance is completely covered.
Is he eligible for retiree health benefits if he retires now?

I am leaning towards Schwab as he has an account set up already and there is a Schwab bank nearby so he can go in and get face to face assistance.
Consolidate the accounts at Schwab.
Questions.

He is leaning towards 66.
Good idea.
I am concerned about his allocation and advised that for someone on the edge of retirement and withdrawals from retirement accounts he needs to be focused on wealth preservation rather than aggressive growth.
Keep it simple. Retirement Income Fund for everything if Schwab has an equivalent since he's not tech savvy or into this stuff.

What about the mortgage? $250k ,15 yr @ 2.5%. The interest rate is very low. He will receive modest benefit from the mortgage interest deduction because of the single filing status. He has consider paying it down, but not completely paying it off.
He's not liquid enough to pay it off.
Any advice appreciated.
I think your biggest barrier is to get him to listen to, and no one on this board will be able to help you with that. But presuming he listens to you the first 3 things I would immediately take care of is 1. Kicking that advisor to the curb. 2. Getting rid of the timeshares 3. Consolidating the accounts.

Depending on your answers to the above, he may be able to retire now....
"Don't trust everything you read on the Internet"- Abraham Lincoln

sawhorse
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Re: Helping Father Plan for Retirement (messy)

Post by sawhorse » Mon Jul 10, 2017 6:03 pm

Normally I'd say Schwab vs Vanguard doesn't matter as both offer low cost index funds, and I might lean toward Schwab because of their superior customer service.

But in this case, I can see an unethical Schwab salesman successfully selling him on a complex high expense portfolio whereas Vanguard won't do that. So my vote goes to Vanguard for the investment accounts.

Based on your description, your father sounds like he could be easily talked into a bad annuity or life insurance policy. Those things are very difficult to get out of once you sign the paperwork. You really need to educate him about these things.

TravelforFun
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Re: Helping Father Plan for Retirement (messy)

Post by TravelforFun » Mon Jul 10, 2017 7:04 pm

OP, your father can't retire now and expect his investments to support his annual expenses of $80K. Here are the numbers:

Between ages of 63 to 66, he would need $66K a year ($80K- $14K pension) from his investments or $198K total leaving him $702K, assuming investments gain just keeps up with inflation.

At and after age 66, his need from investments would decrease to $44K ($66K- $22K SS) and that would represent a withdrawal rate of 6.3% ($44 ÷ $702) which is not a safe rate at all.

He should try to work a little longer unless his health is really poor, or reduce his spending.

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BL
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Re: Helping Father Plan for Retirement (messy)

Post by BL » Tue Jul 11, 2017 1:14 am

One thing to keep in mind is that his spouse just recently died, and that is a whole lot of stress and makes it difficult to think straight and make good decisions. Decision making is also stressful, so try to keep that for doing only what is necessary later this year. This can affect his health and well-being, so is not trivial. Working can either be a help toward normalcy, or a stressful time which may not be good. Doing nothing is probably not so healthy, either.

I would try to gather together all possible financial information first before deciding what things need to be done before December 31 for tax purposes, etc. For example, consolidating may not be urgent if it causes extra stress. Possibly heirs on investment accounts and bank accounts may need to be changed and a new will may need to be considered in the near future. Time shares may or may not fall into that category. Working out a budget might be necessary.

Try to do a tax return or at least a tax estimate with something like taxcaster. There may be Capital Gains or Roth conversions, that might make sense for the lower tax bracket this year.

I agree that he is vulnerable to suggestions by financial "advisors". Perhaps Vanguard PAS would be worthwhile for safe advice, someone to help consolidate and manage accounts, good bond funds, and no one trying to sell insurance or management products. Spending 0.3% for an advisor could be a bargain in this case. Along with 0.1 or so % ER mutual funds, it would be cheaper than almost any other adviser would come up with. Give them a call when you have information gathered and in front of you/him. You would probably both want to be on the line with them. He might luck out at Schwab but he might not.

He could probably consolidate all traditional IRAs, 4xx work accounts,etc.into one account. I believe her accounts could be made his account if preferred, rather than an inherited account. A Vanguard PAS could probably handle this.

He could draw survivor's SS now and his later if his will be bigger. I don't think there is any magic in his starting at FRA; perhaps starting in time for Medicare payments to be handled by SS at age 65 would have some merit, both for simplicity and possibly affecting amount of Part B payments, I am not sure if that is still the case. If there is a good reason to delay, such as doing Roth conversions, that might change things. (Keep doing "what-if's on that tax program.)

Perhaps next year would be time enough to decide if the home is suitable both financially and physically for him to grow old in.

alaskantraveler
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Re: Helping Father Plan for Retirement (messy)

Post by alaskantraveler » Wed Jul 19, 2017 7:01 pm

Op here. I added an update to the original post. My father has decided to move forward with retirement. Retirement assets now at $1 million. He has some excess cash available.

I recommended that he keep one years cash in his checking account and make one withdrawal per year from his retirement accounts into is regular checking. As for the excess cash, he has put some of it in a taxable account at Schwab. This is around $50k-$100k. He wants this cash to be very low risk. He does not want to deal with the effort of doing CD ladders.

I recommended possibly putting the excess cash in a tax exempt muni bond fund? Any suggestions? He lives in a state that does not have an income tax.

galectin
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Re: Helping Father Plan for Retirement (messy)

Post by galectin » Thu Jul 20, 2017 8:09 am

alaskantraveler wrote: I recommended that he keep one years cash in his checking account and make one withdrawal per year from his retirement accounts into is regular checking. As for the excess cash, he has put some of it in a taxable account at Schwab. This is around $50k-$100k. He wants this cash to be very low risk. He does not want to deal with the effort of doing CD ladders.

I recommended possibly putting the excess cash in a tax exempt muni bond fund? Any suggestions? He lives in a state that does not have an income tax.
Schwab has no commission low ER short term and intermediate term government bond funds available. I would consider splitting the excess cash between them. It sounds like he will be in the 15% marginal tax bracket, so I am not sure a tax exempt muni bond fund is the best.

alaskantraveler
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Re: Helping Father Plan for Retirement (messy)

Post by alaskantraveler » Thu Jul 20, 2017 10:13 am

galectin wrote:
Schwab has no commission low ER short term and intermediate term government bond funds available. I would consider splitting the excess cash between them. It sounds like he will be in the 15% marginal tax bracket, so I am not sure a tax exempt muni bond fund is the best.
After 2017 he will be in a 25% tax bracket because of the single filing status. Government bond funds aren't tax exempt, right?

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