Mom Has $2K Net Worth at 62 - Want to Help

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rincleo
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Mom Has $2K Net Worth at 62 - Want to Help

Post by rincleo »

I recently found out my mom's net worth at age 62 is ~$2,000 (minus a house with a mortgage) and was saddened, to say the least.

I gave her basic financial advice (stop paying so much for cable when you don't use it, stop buying certain things, etc.), showed her how to use Mint so she can start tracking finances, and suggested she start saving for an emergency fund and investing in either her 403b or 457b plans.

Background and expenses:
- She is 62 and plans to work for 3 more years as a school nurse to get her pension
- She has ~$285K left on the home mortgage and values the home at ~$400K
- Mortgage is ~$2,800/mo (but should decrease to ~$2,600) due to taking out a gov loan to pay for the house so we didn't have to move
- She has ~$100-300 a month after all her expenses are accounted for, which she doesn't invest (pays for a dinner, night out, haircut, etc.)

When it comes to "retirement", she is planning to live off of:
- Social Security (~$1,600/mo)
- Renting part of her home (~$1,100/mo, but she may move to pay less for housing so TBD)
- Pension (~$900/mo)
- Working in whatever capacity possible ($TBD)

403b/457b:
https://imgur.com/a/NLQMGby (first image is the 403b; second is the 457b)

Her expenses are ~$4,700/mo:
- Mortgage: $2800
- Homeowner's insurance: $165
- Car lease: $410
- Car insurance: $100
- Car gas: $120
- Gas/electric: $170
- Water: $70
- Life insurance: $40
- Food: $400-500
- Phone: $100
- Cable (incl. internet): $170

Income amounts to ~$5,200/mo.

Thanks for any help.
Last edited by rincleo on Thu Jul 16, 2020 6:10 pm, edited 5 times in total.
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JoeRetire
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by JoeRetire »

rincleo wrote: Thu Jul 16, 2020 1:53 pm - She is 62 and plans to work for 3 more years as a school nurse to get her pension
She should consider working as long as her health permits.
- She has ~$285K left on the home mortgage and values the home at ~$400-415K
- Mortgage is ~$2,800/mo (but should decrease to ~$2,400) due to taking out a gov loan to pay for the house so we didn't have to move
- She has ~$100 a month after all her expenses are accounted for, which she doesn't invest (pays for a dinner, night out, haircut, etc.)
She should consider selling her home and living in a less-expensive apartment.

You said "so we didn't have to move". Do you currently live with her?
Last edited by JoeRetire on Thu Jul 16, 2020 2:32 pm, edited 1 time in total.
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GmanJeff
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by GmanJeff »

Addressing investments at this point is futile. The funds available to invest and the time left within which to invest them are so small that they may as well be non-existent. A money market fund at her credit union would suffice for an emergency fund, if she can bring herself actually contribute anything to it from the $100/month she has in "excess" cash.

Instead of pondering investment strategies when there is essentially no capital to invest, it might be more useful to plan for a retirement which will be affordable under the circumstances. That might include developing a retirement budget which balances expected income against allowable expenses, and which might contemplate relocation to a lower cost environment if required to maintain a desired standard of living. Selling the current house upon retirement and purchasing a replacement which costs much less, elsewhere if necessary, would probably be the most effective way to reduce expenses and free up income for uses other than for housing.
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Stinky
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by Stinky »

Welcome to the Forum!

She absolutely needs to sell the house. She can’t afford it now, and really can’t afford it in retirement.

How much would a 1-bedroom apartment in her community cost? Or maybe a small condo with the net proceeds from the house sale?

She absolutely needs to track expenses and live on a budget. If she is frugal, she’ll make it in retirement.

She would also be well served to continue working for a few more years, as health permits. Either in her current job or something like retail. She can use the income.
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cheese_breath
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by cheese_breath »

rincleo wrote: Thu Jul 16, 2020 1:53 pm Background and expenses:
- She is 62 and plans to work for 3 more years as a school nurse to get her pension
- She has ~$285K left on the home mortgage and values the home at ~$400-415K
- Mortgage is ~$2,800/mo (but should decrease to ~$2,400) due to taking out a gov loan to pay for the house so we didn't have to move
I don't understand what you're saying. Did she just take out the loan? What are the monthly payments for it?
- She has ~$100 a month after all her expenses are accounted for, which she doesn't invest (pays for a dinner, night out, haircut, etc.)
What are her total expenses. Surely she has more than just the mortgage payment.
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VoiceOfReason
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by VoiceOfReason »

GmanJeff wrote: Thu Jul 16, 2020 2:31 pm Addressing investments at this point is futile. The funds available to invest and the time left within which to invest them are so small that they may as well be non-existent. A money market fund at her credit union would suffice for an emergency fund, if she can bring herself actually contribute anything to it from the $100/month she has in "excess" cash.

Instead of pondering investment strategies when there is essentially no capital to invest, it might be more useful to plan for a retirement which will be affordable under the circumstances. That might include developing a retirement budget which balances expected income against allowable expenses, and which might contemplate relocation to a lower cost environment if required to maintain a desired standard of living. Selling the current house upon retirement and purchasing a replacement which costs much less, elsewhere if necessary, would probably be the most effective way to reduce expenses and free up income for uses other than for housing.
+1

Start living today on the budget that she will have in retirement. Take whatever action to get into that sustainable situation by moving, cutting expenses, etc. Renting part of her home for income sounds challenging to say the least. In fact home ownership in and of itself for someone with no cash on hand sounds ill advised as well.

She would be better off selling the house, pocketing the proceeds and renting a small apartment for less than $1k per month.
snailderby
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by snailderby »

That mortgage payment seems pretty high. What's the current interest rate on that loan?
Last edited by snailderby on Thu Jul 16, 2020 2:43 pm, edited 1 time in total.
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by geerhardusvos »

rincleo wrote: Thu Jul 16, 2020 1:53 pm I recently found out my mom's net worth at age 62 is ~$2,000 (minus a house with a mortgage) and was saddened, to say the least.

I gave her basic financial advice (stop paying so much for cable when you don't use it, stop buying certain things, etc.), showed her how to use Mint so she can start tracking finances, and suggested she start saving for an emergency fund and investing in either her 403b or 457b plans.

I will list out all the information I have in the hope that someone might suggest other advice for saving and/or reducing costs, and which funds to select in her 403b or 457b plan.

Background and expenses:
- She is 62 and plans to work for 3 more years as a school nurse to get her pension
- She has ~$285K left on the home mortgage and values the home at ~$400-415K
- Mortgage is ~$2,800/mo (but should decrease to ~$2,400) due to taking out a gov loan to pay for the house so we didn't have to move
- She has ~$100 a month after all her expenses are accounted for, which she doesn't invest (pays for a dinner, night out, haircut, etc.)

When it comes to "retirement", she is planning to live off of:
- Social Security (~$1,600/mo)
- Renting part of her home (~$1,100/mo, but she may move to pay less for housing so TBD)
- Pension (~$900/mo)
- Working in whatever capacity possible ($TBD)

403b/457b:
- I was planning to allocate similar to Vanguard's Target Retirement while using the Vanguard funds that are available in the 403b/457b
- Link to funds: https://imgur.com/a/NLQMGby (first image is the 403b; second is the 457b)

Thanks for any help.
It’s time to get her house ready to sell and she should move into a cheap apartment or with family and friends. She should work as long as she can and try to save as much of her income as she can in a 50% stock 50% bond portfolio (or similar). It’s a tough place to be in, but if she gets out from under the house with some equity and is able to lower living expenses to $2500-3500 and works as long as she can she should be just about ok with no buffer for long term care so you may want to prepare to help her or have her move in. Unfortunately, it’s a Toughlove situation and I’m hoping she’s willing to listen and take action, but it’s not the absolute worst situation
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02nz
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by 02nz »

rincleo wrote: Thu Jul 16, 2020 1:53 pm - Social Security (~$1,600/mo)
Does she currently pay into Social Security? If not, her Social Security benefits will be reduced because of pension income from a job where she didn't pay in.
7eight9
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by 7eight9 »

She should be able to pocket around $100K+ if she sells her house. Buy a condo for $100K.

Monthly Social Security + pension = $2,500.

Your mother's problem is not where to invest her money. Her problem is a mortgage. Eliminate that and it doesn't matter where she puts her money. A HY savings account would be fine. No need for her to gamble the little she has in the stock market.
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by Broken Man 1999 »

If she can find a couple of roommates, maybe she could afford to keep her house. Hey, it worked for The Golden Girls, right?

If not, certainly get her into a one bedroom apartment that is safe.

Currently she is one step away to needing $$$$ to replace an appliance, repair a car, a large medical bill, etc. She doesn't seem to have the option to invest, without some real
changes.

An earlier post asked about the mortgage info. I am also puzzled:

- Mortgage is ~$2,800/mo (but should decrease to ~$2,400) due to taking out a gov loan to pay for the house so we didn't have to move

Can you provide more info?

Is it possible to get SS based on someone else, a husband?

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econprof
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by econprof »

Genuinely, consider yourself lucky that your mom is doing so well. She has positive net worth, a pension coming, social security coming, and some assets in the form of a house.

Obviously that's a bad portfolio compared to the median Boglehead, but it's well above how many Americans retire. I am currently helping a family member adjust to a $906 monthly social security check in a HCOL area. Her net assets are negative, at about 50k or so in credit card debt and a repoed car loan. She was homeless within the last year and just turned 62. The only reason she's not on the street is I've been paying her rent for 6 months.

This is not uncommon -- I know many people my age (~30) helping family members who shot themselves in the foot by not saving for retirement.

That all said: get your mom public assistance immediately. Get her on SNAP (food stamps) if she qualifies, Medicaid, meals on wheels, senior home services like laundry, anything you can do to keep costs down.
Topic Author
rincleo
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by rincleo »

ABCDE
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sailaway
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by sailaway »

If she is willing to have a roommate/boarder in retirement, why not get one out now to help with budgeting?

Also, look into any community support programs she may be eligible for.
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by Sandtrap »

Investments at this point do not move the overall financial needle by much.
The things that can really make a difference:

1. Sell home. Thereby reducing all debt and eliminating mortgage debt.
2. Rent an affordable place.
3. Continue working, even part time, as she can.

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rincleo
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by rincleo »

ABCDE
Last edited by rincleo on Mon Jul 20, 2020 5:19 pm, edited 1 time in total.
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Watty
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by Watty »

One huge problem with keeping the home is that she cannot afford to maintain it since she does not have the funds to pay for things like a new furnace or roof or some other large expense.

Most housing markets are still real strong and she may not have a hard time selling it for decent price. if she waits until she absolutely has to sell it then she could find herself trying to sell it in the middle of a recession or housing slump.

I would suggest selling it then renting a modest apartment until she ends up retiring.

As other have said with the $100K in home equity, still being able to work, pension, and Social Security she is not in nearly as bad a position as some people.
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by tashnewbie »

GmanJeff wrote: Thu Jul 16, 2020 2:31 pm Addressing investments at this point is futile. The funds available to invest and the time left within which to invest them are so small that they may as well be non-existent. A money market fund at her credit union would suffice for an emergency fund, if she can bring herself actually contribute anything to it from the $100/month she has in "excess" cash.

Instead of pondering investment strategies when there is essentially no capital to invest, it might be more useful to plan for a retirement which will be affordable under the circumstances. That might include developing a retirement budget which balances expected income against allowable expenses, and which might contemplate relocation to a lower cost environment if required to maintain a desired standard of living. Selling the current house upon retirement and purchasing a replacement which costs much less, elsewhere if necessary, would probably be the most effective way to reduce expenses and free up income for uses other than for housing.
+2. As others have mentioned, I think the key for her is going to be selling the house, reducing monthly expenses, and sticking to a reasonable budget. You didn't mention her total monthly expenses, but I assume the mortgage is the majority of her monthly expenditure. Selling her house and renting something would go a long way toward reducing financial stress. Renting has the benefit of capping her housing expense because she doesn't have to budget for maintenance.

As others have stated, her situation could be a lot worse. Good luck!
Scooter57
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by Scooter57 »

Did your mom ask you to take over her finances?

Unless she did, you are way out of line telling her what to do with her house or her money.

Sharing her home with a paying roomate would be a very reasonable solution. She would have close to median family income for many Americans if she did. From what you say, she has been prudent with debt. She lives comfortably. There is a great deal of contract work available to nurses should she decide to work longer. Or she could do some babysitting, shopping for neighbors, or any one of many other kinds of gig work for some extras.

Attempting to come up with significant money at this point would make her prey to the many investment-oriented get rich schemers out there.

Bogleheads is dominated by very high earning professionals who believe they need huge amounts of money to retire comfortably. But most retirees I know have about what your mom has and do just fine.
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FIREchief
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by FIREchief »

rincleo wrote: Thu Jul 16, 2020 3:12 pm
snailderby wrote: Thu Jul 16, 2020 2:41 pm That mortgage payment seems pretty high. What's the current interest rate on that loan?
2.62%
She must be paying a LOT in property taxes.
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by SB1234 »

rincleo wrote: Thu Jul 16, 2020 1:53 pm I recently found out my mom's net worth at age 62 is ~$2,000 (minus a house with a mortgage) and was saddened, to say the least.

I gave her basic financial advice (stop paying so much for cable when you don't use it, stop buying certain things, etc.), showed her how to use Mint so she can start tracking finances, and suggested she start saving for an emergency fund and investing in either her 403b or 457b plans.

I will list out all the information I have in the hope that someone might suggest other advice for saving and/or reducing costs, and which funds to select in her 403b or 457b plan.

Background and expenses:
- She is 62 and plans to work for 3 more years as a school nurse to get her pension
- She has ~$285K left on the home mortgage and values the home at ~$400-415K
- Mortgage is ~$2,800/mo (but should decrease to ~$2,400) due to taking out a gov loan to pay for the house so we didn't have to move
- She has ~$100 a month after all her expenses are accounted for, which she doesn't invest (pays for a dinner, night out, haircut, etc.)

When it comes to "retirement", she is planning to live off of:
- Social Security (~$1,600/mo)
- Renting part of her home (~$1,100/mo, but she may move to pay less for housing so TBD)
- Pension (~$900/mo)
- Working in whatever capacity possible ($TBD)

403b/457b:
- I was planning to allocate similar to Vanguard's Target Retirement while using the Vanguard funds that are available in the 403b/457b
- Link to funds: https://imgur.com/a/NLQMGby (first image is the 403b; second is the 457b)

Thanks for any help.
What is her current income? Sorry if I missed it. Trying to understand what part of income will be replaced with pension and SS. If the difference is too much the even renting out for roommates may not help. But if it is close then roommates may be a decent option to increase income in the short term while figuring out the over all strategy.
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rincleo
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by rincleo »

ABCDE
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rincleo
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by rincleo »

ABCDE
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rincleo
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by rincleo »

ABCDE
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rincleo
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by rincleo »

ABCDE
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rincleo
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by rincleo »

ABCDE
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thewizzer
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by thewizzer »

rincleo wrote: Thu Jul 16, 2020 3:41 pm
cheese_breath wrote: Thu Jul 16, 2020 2:36 pm
rincleo wrote: Thu Jul 16, 2020 1:53 pm Background and expenses:
- She is 62 and plans to work for 3 more years as a school nurse to get her pension
- She has ~$285K left on the home mortgage and values the home at ~$400-415K
- Mortgage is ~$2,800/mo (but should decrease to ~$2,400) due to taking out a gov loan to pay for the house so we didn't have to move
I don't understand what you're saying. Did she just take out the loan? What are the monthly payments for it?
- She has ~$100 a month after all her expenses are accounted for, which she doesn't invest (pays for a dinner, night out, haircut, etc.)
What are her total expenses. Surely she has more than just the mortgage payment.
She took the loan out years ago and the mortgage payment now accounts for it (~$2,800/mo).

Her total expenses are ~$5,000/mo:
- Mortgage: $2800
- Homeowner's insurance: $165
- Car lease: $410
- Car insurance: $100
- Car gas: $120
- Gas/electric: $170
- Water: $70
- Life insurance: $40
- Food: $800-1,000
- Phone: $100
- Cable: $170

Income amounts to a little over $5,000/mo.
You're going to get a lot of negative responses to her budget. I know it's not your doing, but there is room for a lot of improvement. That's her decision to make, but I don't see anything on that list that can't be trimmed significantly.
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Stinky
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by Stinky »

rincleo wrote: Thu Jul 16, 2020 3:34 pm
Stinky wrote: Thu Jul 16, 2020 2:36 pm Welcome to the Forum!

She absolutely needs to sell the house. She can’t afford it now, and really can’t afford it in retirement.

How much would a 1-bedroom apartment in her community cost? Or maybe a small condo with the net proceeds from the house sale?

She absolutely needs to track expenses and live on a budget. If she is frugal, she’ll make it in retirement.

She would also be well served to continue working for a few more years, as health permits. Either in her current job or something like retail. She can use the income.
A 1-bedroom is around $1,800/mo. I looked at a few near where she works but she 1) said the area is not great and 2) does not want to move now only to move again in 3 years (wants to leave the state we reside in).
I would advise her to sell and move to the apartment now.

Two reasons. First, she can’t afford a major repair to her house if something breaks. Second, she couldn’t save about $1k per month in housing costs, and she can use that the build up an emergency fund.

If she doesn’t like the area, maybe she pays a little more and moves to a better area.
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by tashnewbie »

thewizzer wrote: Thu Jul 16, 2020 4:03 pm
rincleo wrote: Thu Jul 16, 2020 3:41 pm
cheese_breath wrote: Thu Jul 16, 2020 2:36 pm
rincleo wrote: Thu Jul 16, 2020 1:53 pm Background and expenses:
- She is 62 and plans to work for 3 more years as a school nurse to get her pension
- She has ~$285K left on the home mortgage and values the home at ~$400-415K
- Mortgage is ~$2,800/mo (but should decrease to ~$2,400) due to taking out a gov loan to pay for the house so we didn't have to move
I don't understand what you're saying. Did she just take out the loan? What are the monthly payments for it?
- She has ~$100 a month after all her expenses are accounted for, which she doesn't invest (pays for a dinner, night out, haircut, etc.)
What are her total expenses. Surely she has more than just the mortgage payment.
She took the loan out years ago and the mortgage payment now accounts for it (~$2,800/mo).

Her total expenses are ~$5,000/mo:
- Mortgage: $2800
- Homeowner's insurance: $165
- Car lease: $410
- Car insurance: $100
- Car gas: $120
- Gas/electric: $170
- Water: $70
- Life insurance: $40
- Food: $800-1,000
- Phone: $100
- Cable: $170

Income amounts to a little over $5,000/mo.
You're going to get a lot of negative responses to her budget. I know it's not your doing, but there is room for a lot of improvement. That's her decision to make, but I don't see anything on that list that can't be trimmed significantly.
+1. There's a lot that could be trimmed, but she's gotta want to do it. Ultimately, she has to make her own decisions. I think someone else asked this too, but did she specifically ask you to help her with her finances?
pmr2017
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by pmr2017 »

Have you thought about an elderly apartment for her? I have a few private complexes where tenants pay a set percentage of their adjusted gross income, which can make it very affordable for most people.

Certain building have income requirements, so she may not qualify, but it's something to look into. There also will be income based market rate buildings to look at too. They have income requirements, but the monthly rent will be hundreds below the market rates.
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Nate79
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by Nate79 »

Lots of good advice so far though I doubt it will be followed. Regardless I would suggest she sell the car and buy a $2-3k car. A $400 lease is absurd for someone with no money and living paycheck to paycheck.
Also why does she have life insurance? Dump it unless someone is living off her income.
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JoeRetire
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by JoeRetire »

rincleo wrote: Thu Jul 16, 2020 3:41 pm
She took the loan out years ago and the mortgage payment now accounts for it (~$2,800/mo).

Her total expenses are ~$5,000/mo:
- Mortgage: $2800
- Homeowner's insurance: $165
- Car lease: $410
A $410 car lease? Yikes.
- Life insurance: $40
Why does she have life insurance?
- Food: $800-1,000
Why is she spending so much for food?
- Phone: $100
- Cable: $170
Both too expensive!

It's not hard to see why her net worth is where it is. Without some drastic changes, she cannot afford to retire.
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02nz
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by 02nz »

Yeah those expenses are kinda crazy. She can easily find $10K in savings a year without any painful sacrifices, but she's got to want to do it.
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by willthrill81 »

Scooter57 wrote: Thu Jul 16, 2020 3:29 pm Did your mom ask you to take over her finances?

Unless she did, you are way out of line telling her what to do with her house or her money.
I've heard this before and understand the sentiment, but the OP is likely to be on the hook financially if the mother's finances go off the rails. So saying that it's 'not the OP's business' is not realistic.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
egrets
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by egrets »

rincleo wrote: Thu Jul 16, 2020 3:34 pm
Stinky wrote: Thu Jul 16, 2020 2:36 pm Welcome to the Forum!

She absolutely needs to sell the house. She can’t afford it now, and really can’t afford it in retirement.

How much would a 1-bedroom apartment in her community cost? Or maybe a small condo with the net proceeds from the house sale?

She absolutely needs to track expenses and live on a budget. If she is frugal, she’ll make it in retirement.

She would also be well served to continue working for a few more years, as health permits. Either in her current job or something like retail. She can use the income.
A 1-bedroom is around $1,800/mo. I looked at a few near where she works but she 1) said the area is not great and 2) does not want to move now only to move again in 3 years (wants to leave the state we reside in).
I'm in a medium cost of living area, and someone's suggestion of a $1000 a month apartment is laughable. Here $1400 to $1500 would be rock bottom.

What state does she want to move to and why?
tashnewbie
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by tashnewbie »

02nz wrote: Thu Jul 16, 2020 4:41 pm Yeah those expenses are kinda crazy. She can easily find $10K in savings a year without any painful sacrifices, but she's got to want to do it.
She could easily save $12k a year just by moving to the $1800/month apartment. Plus, she'd save on renters insurance versus homeowners insurance and utilities. It can be done, for sure, but she has to decide it's what she wants. OP, I truly wish you and your mother the best. She's in a much better position for retirement than a lot of people in the US. She will be fine, but I think she's got to get a handle on her budget/expenses.
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willthrill81
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by willthrill81 »

egrets wrote: Thu Jul 16, 2020 4:44 pm
rincleo wrote: Thu Jul 16, 2020 3:34 pm
Stinky wrote: Thu Jul 16, 2020 2:36 pm Welcome to the Forum!

She absolutely needs to sell the house. She can’t afford it now, and really can’t afford it in retirement.

How much would a 1-bedroom apartment in her community cost? Or maybe a small condo with the net proceeds from the house sale?

She absolutely needs to track expenses and live on a budget. If she is frugal, she’ll make it in retirement.

She would also be well served to continue working for a few more years, as health permits. Either in her current job or something like retail. She can use the income.
A 1-bedroom is around $1,800/mo. I looked at a few near where she works but she 1) said the area is not great and 2) does not want to move now only to move again in 3 years (wants to leave the state we reside in).
I'm in a medium cost of living area, and someone's suggestion of a $1000 a month apartment is laughable.
Not all MCOL areas are created equal. In ours, a studio apartment in a good area can be gotten for under $1k/month.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
Reamus294
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by Reamus294 »

If it was my mother and she was willing to listen...
I'd remind her she is living paycheck to paycheck and she won't be able to afford her current lifestyle. The sooner she gets used to her future lifestyle the better. If she can increase her pension and social security by staying at the current job longer, that would be ideal.

Like others said she is one home repair away from also having substantial credit card debt. If you show her how much she is also paying in interest/taxes/home insurance in the mortgage each month, that is money she is never going to get back unless the value of the house significantly increases. Moving to an apartment now will make that next move in 3 years much easier.

She can do well on $2,500 a month but only with significant changes. After selling the house, I would set aside a little for emergencies and then consider an annuity (SPIA) for the remainder because it seems like she has a history of not saving and spending what she has. $150K could provide another $700 a month.

All of this depends on how much she will want you involved. It's a good thing that you get to have these discussions with her now and not after she decided to retire. Best of luck to you!
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by Jack FFR1846 »

Cricket is $35 a month with 5G a month. AT&T network. I've had it for 5 years for business use and it's great.

$1000 a month for food? :shock: That's more than my family of 4 spends. Is this Ruths Chris steak house every night?

Life insurance? Who is she supporting besides herself? Cancel.

Leasing a car for $450? That's living it up. BMW?

What equity is there in the house? If there's any, sell it and rent. Even if it's the same amount per month. That'll rid her of property tax and reduce insurance.
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Lalamimi
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by Lalamimi »

Asked earlier, but what about her former spouse? If he is deceased, she might be be able to draw his SS. If he is working she can probably draw spousal. Of course, her having a school pension might not allow it. Does she have any SS credits on her own? Was he in the military? I agree, get rid of the house immediately. It is probably too large for her anyway with you kids out of it. Form a family plan on a cell phones, or switch her to something like Consumer Cellular. Drop cable. Shop with her a few times to see why her spending is so high. Is she having food delivered? Shopping at Whole Foods? Feeding the kids that drop in and mooch?
fyre4ce
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by fyre4ce »

As has already been stated, investments matter very little at this point. She just doesn't have enough capital for it to matter.

She needs to boost income and cut expenses. Specific changes that are needed:

-The house needs to be sold. She can't afford it. She needs to rent or buy a cheap place. The only exceptions is if she wants to get a roommate now, and the difference between the house expenses and rent is less than the rent on a one-bedroom apartment.
-Car lease is a bad idea. Leases can be hard to get out of, but I'd start exploring options immediately. She needs to buy a $5,000 used car and keep it until it dies.
-Keep working as long as possible, preferably until at least 70.
-Delay SS until 70.
-Cancel life insurance and cable. I don't see internet service, but an internet connection can stream plenty of shows.
-Food budget seems high. $100/week should be plenty for one person. Cooking cheap, healthy meals at home should be the norm, with eating out a rare treat (few time per month maximum).
-Other opportunities for earning side money should be explored (doing deliveries, moonlighting, etc.)
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CAsage
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by CAsage »

Mortgage: $2800 - a mortgage on $285 should have a payment more like $1350 - what else is in there?
- Homeowner's insurance: $165 - shop around, get the minimum (not much to protect)
- Car lease: $410 - that's $5000 per year and she doesn't own the car. Reconsider a small used car, finance for a lot less.
- Car insurance, Car gas, Gas/electric, Water: - ok
- Life insurance: $40 - drop this entirely, without dependents she does not need life insurance
- Food: $400-500 - ok
- Phone: $100 - Consumer Cellular basic plan with a paid-for phone costs $20~25. No, you can't stream movies on a budget.
- Cable (incl. internet): $170 - basic internet plus Netflix or Amazon would be more like $75.

Your mom needs a serious budget readjustment. Not sure what area, but either get a roommate (or 2) now to pay the mortgage down or sell and downsize to a much more affordable place, The "mortgage payment seems double what it calculates to, are those HOA fees in there? Property taxes? That's way too much housing cost for an imminent retiree. Depending on housing costs, your Mom would make this work, but she's on very thin ice.
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Katietsu
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by Katietsu »

You might not have the whole picture. Good chance that she does not even know what she is spending that last $500 a month on.

If a one bedroom apt in a not so good area is $1800, then she should be able to get a roommate in her current house for $1000. I am not suggesting putting an ad on craigslist but letting coworkers, church members and the like that you are thinking about it. Hopefully, with some time a good situation could be found. As others have said, her bills for cable, phone, car, and especially food are all eye opening. She is spending more in every category than we spend for 2 people (and we have a lot more income.)
HomeStretch
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by HomeStretch »

In your mom’s monthly expenses, I don’t see:
- healthcare premiums/out-of-pocket expenses
- income taxes
- property taxes - are they escrowed and therefore included in the $2800/month mortgage payment?
02nz
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by 02nz »

Your mom is also in a pretty high tax bracket as a single filer. If she could cut expenses a bit and put away say $1K/mo into a tax-deferred 403b (reduction in take-home pay will be less), she can withdraw that at very low tax rates after retiring and defer Social Security for as long as possible.
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by SVT »

I assume the property taxes are in that mortgage payment. The house needs to be sold. Even if an apartment is nearly $2k/mo, that's an $800 monthly savings, plus utilities would probably be lower, renter's insurance is usually lower than homeowner's insurance, less stuff needed to buy/maintain in the residence and there would be no expenses for house maintenance and repairs. Plus, selling would get that equity out to put towards some investments.

I wouldn't pay $410/mo for a car in her financial situation.

Housing and vehicles are usually the 2 things that seem to get a lot of people in trouble. This is an example. Making changes in those 2 areas here would make a huge financial difference, versus cutting or lowering the cost of $100/mo cable bill.
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geerhardusvos
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by geerhardusvos »

rincleo wrote: Thu Jul 16, 2020 3:41 pm
cheese_breath wrote: Thu Jul 16, 2020 2:36 pm
rincleo wrote: Thu Jul 16, 2020 1:53 pm Background and expenses:
- She is 62 and plans to work for 3 more years as a school nurse to get her pension
- She has ~$285K left on the home mortgage and values the home at ~$400-415K
- Mortgage is ~$2,800/mo (but should decrease to ~$2,400) due to taking out a gov loan to pay for the house so we didn't have to move
I don't understand what you're saying. Did she just take out the loan? What are the monthly payments for it?
- She has ~$100 a month after all her expenses are accounted for, which she doesn't invest (pays for a dinner, night out, haircut, etc.)
What are her total expenses. Surely she has more than just the mortgage payment.
She took the loan out years ago and the mortgage payment now accounts for it (~$2,800/mo).

Her total expenses are ~$5,000/mo:
- Mortgage: $2800
- Homeowner's insurance: $165
- Car lease: $410
- Car insurance: $100
- Car gas: $120
- Gas/electric: $170
- Water: $70
- Life insurance: $40
- Food: $800-1,000
- Phone: $100
- Cable: $170

Income amounts to a little over $5,000/mo.
I know this is tough, but you need to be really thankful for the advice you’re getting. People spend time to give you this advice. You came here for a reason, to get advice. I highly recommend you show this thread to your mom. Send her the link, be honest with her that you sought advice for her situation because it’s not good. She needs to significantly lower her standard of living, and the 1800 a month apartment is likely in an area that is just fine and relatively very safe. She has made decisions in her life that it has made it so she doesn’t get some luxuries now. Her current budget is not sustainable.

Don’t be frustrated by anyone’s comments on this thread, because they have been all very reasonable, and I know it’s hard, but you can make a difference by drawing your boundaries and outlining a plan for your mom and it will be her choice whether or not to follow it, but if she doesn’t take action, you need to safeguard yourself and let her know how it impacts you and your siblings. And you should at least thank the people who give you decent advice for free.
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lauberge49
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by lauberge49 »

I may have missed something on the mortgage. She has paid $2800/ mo for 20+ years, and still owes $285,000 on a home valued at $400,000?
What am I missing here? Also, I agree with selling the house and shopping for better deals on all of her expense items. Drop the life insurance. She just need to live more simply, that is all.
Jags4186
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by Jags4186 »

I think the answer is pretty simple. Your mother has $4700/mo in expenses and at retirement will have $3600 of income. You can give her $1100/mo, she can cut expenses by $1100/mo, or you can do something in between.

Easiest way to cut expenses is to sell the house and rent someplace that only costs $1700/mo. With the house proceeds she can absorb rent increases. Renting looks very preferable to me as it does not seem your mother can afford to maintain the house, and when (not if) she is forced to leave the house, it will likely be in a state of disrepair hurting the resale value.

Unfortunately, there is really no way to salvage the savings situation this late in the game.
SantaClaraSurfer
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Re: Mom Has $2K Net Worth at 62 - Want to Help

Post by SantaClaraSurfer »

1. Good Budget is a great tool for her situation.

It lets her create virtual envelopes, fill and track them daily from her phone and/or computer, as well as add in less frequent annual expenses and save for them.

2. Does she bank at a credit union? The savings/benefits can make a real difference. (ie. going from $10 in fees per month to actually earning interest in a Money Market, ours gives 2% on the first $2,000...it all adds up.)

Those are two immediate suggestions. Much of what folks have written above sounds sensible.

Vis a vis other ways to help (and maybe you're not asking this, so pardon me if you're not)

If I were in your situation, I'd think about creating an Emergency Fund of your own earmarked for her, and kept separate from your own finances. We have college age kids, and outside of everything else we do for them short and long term, we also have a couple small cash-like funds for emergencies. It's as much for our peace of mind as theirs. Nothing huge, just money we can add into the mix without even thinking about it to help them out in a pinch. We tell them to save and budget, and they do, but we sleep better knowing we've got a couple small backup funds to add into the mix just in case. In our case, we don't tell them much about it, and they don't ask, we just give if needed.

This may not be in your plans or means, but, in my life experience, which encompasses some ups and downs for myself and those close to me, every little bit can help. And while the relationship is the priority, sometimes just giving some money is a difference maker at key moments. (I do it by transferring directly to their credit union account. It's easy, and hard for them to say no.)
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