Advice for mother-in-law

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ChiKid24
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Advice for mother-in-law

Post by ChiKid24 »

I'm in a bit of a tough spot and looking for some help from the brain trust here. My mother-in-law was diagnosed with stage 4 cancer last year. She underwent 8 rounds of chemo which lowered her marker scores, but those have started rising and it looks like it's coming back. She just started back on chemo. She's 60 years old, self-employed, earning a couple thousand a month is my guess. She was living on her own many miles from any family but recently moved to be closer to her two children (my wife and wife's sister). It's been a constant roller coaster the past year and is particularly draining on her and my wife.

She has no retirement savings, but has done relatively well buying, living in, then selling houses. She'll probably net $400-$500k from this recent sale, which represents her entire net worth. At this point, she has asked me for advice/guidance on what to do with the money. I'm by far the most financially savvy in the family and believe I could offer good advice under normal circumstances (low cost index funds with an allocation of bonds and stocks based on her age and risk profile). But at her age and in her condition, I'm having trouble figuring out if that is the best course of action.

Fortunately we all agreed that she shouldn't buy something right away. We live in a HCOL area and she would be cash poor if she did. That said, rent in our area isn't cheap and her ability to earn is likely going to be limited if/when her condition worsens. Obviously we all want her to be cured and fully recover and live a long life. But I worry what that means for her financially given her relatively low nest egg and high expenses.

My plan is to try to get a true grasp on her income and expenses to see what her monthly/annual burn rate is. My guess is she's burning $2-$3k per month. Keep 2-3x her annual burn in cash and find some relatively safe investment for the remainder. Perhaps some stock/bond mix or a stock/bond mix combined with some type of inflation protected instrument or an annuity? Would love some thoughts. Thanks in advance.
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FiveK
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Re: Advice for mother-in-law

Post by FiveK »

ChiKid24 wrote: Wed Sep 16, 2020 7:16 pm My plan is to try to get a true grasp on her income and expenses to see what her monthly/annual burn rate is.
Excellent first step. Consider future SS benefits also.
My guess is she's burning $2-$3k per month. Keep 2-3x her annual burn in cash and find some relatively safe investment for the remainder. Perhaps some stock/bond mix or a stock/bond mix combined with some type of inflation protected instrument or an annuity? Would love some thoughts. Thanks in advance.
Sorry to hear the impetus for the question.

Other than the annuity (60 is usually on the young side for even an SPIA), that plan seems reasonable. Good luck to all.
Cruise
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Re: Advice for mother-in-law

Post by Cruise »

Sorry to hear this news. You MIL is fortunate to have you caring for her.

Stage 4 cancer that appears treatment resistant? I’m guessing that your MIL may have a poor prognosis, and wondering whether you might want to avoid any stocks and possibly avoid bonds. Keep all the proceeds in laddered CDs/etc. until her health status becomes much more stable and therefore predictable.
Penguin
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Re: Advice for mother-in-law

Post by Penguin »

Perhaps some stock/bond mix or a stock/bond mix combined with some type of inflation protected instrument or an annuity
Annuity is an insurance product that protects against living longer than expected. It may not be a good choice in this situation.
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Stinky
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Re: Advice for mother-in-law

Post by Stinky »

Sorry to hear about the diagnosis. I agree with others.

--- Figure out her "cash burn" rate, by doing a budget. That will inform her (and you) as to what her financial situation will be going forward, if she beats off this cancer.
--- Keep her assets extremely liquid until her health situation resolves itself. She's had a roller-coaster year - diagnosis of stage 4 cancer, eight rounds of chemo, now a possible recurrence. Take stock of both her health and financial situation in a year or so when her health situation is further resolved. There will be plenty of time for "investing" starting a year from now if her prognosis improves.
--- Do not buy an annuity. SPIAs are "longevity insurance", and shouldn't typically be bought by those with impaired health. Most other types of annuities are bad consumer values.

Kudos to you for helping your mother, wife, and SIL walk through this situation.
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ChiKid24
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Re: Advice for mother-in-law

Post by ChiKid24 »

Thanks all. Definitely not a great situation but appreciate the feedback and advice.

On the annuity, my thought in considering this as an option is that longevity insurance is actually the risk I want to protect against. She has enough saved to outlast her money if she only lives 5 years. It's outlasting her money if she beats this that is the financial risk. So my thinking was having some guaranteed income in that instance would be a nice option. There are annuities that come with a cash refund if the holder dies that would go to their beneficiaries.

Here's an example of one I priced on immediateannuities.com

Investment: 250k (assuming about 1/2 her nestegg)
Age: 60, with income starting in 5 years
Monthly payout: $1,195 for life
Cash refund: "You receive this income for your lifetime starting at the future date you choose. If you die prior to the start date your beneficiaries receive a refund of the premium. If you die after payments have begun, your beneficiaries receive a cash refund of the remaining unpaid premium amount.

I too have always been a bit hesitant on annuities because I know they tend to have a lot of embedded fees. But looking at that monthly payout implies a 5.74% guaranteed annual return (albeit five years down the road). There's also protection in the form of cash refund in the event that she dies. In today's low interest rate environment where CDs and Savings accounts are paying minimal, could this be an interesting option for part of her nestegg?
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Stinky
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Re: Advice for mother-in-law

Post by Stinky »

ChiKid24 wrote: Thu Sep 17, 2020 1:48 pm Thanks all. Definitely not a great situation but appreciate the feedback and advice.

On the annuity, my thought in considering this as an option is that longevity insurance is actually the risk I want to protect against. She has enough saved to outlast her money if she only lives 5 years. It's outlasting her money if she beats this that is the financial risk. So my thinking was having some guaranteed income in that instance would be a nice option. There are annuities that come with a cash refund if the holder dies that would go to their beneficiaries.

Here's an example of one I priced on immediateannuities.com

Investment: 250k (assuming about 1/2 her nestegg)
Age: 60, with income starting in 5 years
Monthly payout: $1,195 for life
Cash refund: "You receive this income for your lifetime starting at the future date you choose. If you die prior to the start date your beneficiaries receive a refund of the premium. If you die after payments have begun, your beneficiaries receive a cash refund of the remaining unpaid premium amount.

I too have always been a bit hesitant on annuities because I know they tend to have a lot of embedded fees. But looking at that monthly payout implies a 5.74% guaranteed annual return (albeit five years down the road). There's also protection in the form of cash refund in the event that she dies. In today's low interest rate environment where CDs and Savings accounts are paying minimal, could this be an interesting option for part of her nestegg?
What you’re describing is not unreasonable. I was reacting to the idea of purchasing a straight, non-refund SPIA, and you’re looking at an entirely different animal. This seems to fit well with her health situation.

The are no additional fees for a SPIA. What you’ve gotten quoted is what you would get.

You still need to think about getting a handle on her budget and such. But if this refund SPIA fits into her financial plan, that works for me.
It's a GREAT day to be alive - Travis Tritt
egrets
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Re: Advice for mother-in-law

Post by egrets »

Does Social Security for the disabled apply in this case?
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ChiKid24
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Re: Advice for mother-in-law

Post by ChiKid24 »

egrets wrote: Thu Sep 17, 2020 3:51 pm Does Social Security for the disabled apply in this case?
Social security will definitely be a part of her equation. She'll get divorced spouse benefits I believe when she turns 62. Probably need to consult with some SS expert on that to better understand what it would pay. The other thing she wants to do is "manage" her income due to her medical insurance. She is seeing lots of doctors and getting treatments, so that part of the expense equation is probably more significant than the income side of the equation.
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Re: Advice for mother-in-law

Post by Cruise »

OP: Not sure what you seek to gain by making an annuity purchase now vs waiting a year from now when much more is known about your MIL's health prognosis.
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ChiKid24
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Re: Advice for mother-in-law

Post by ChiKid24 »

Cruise wrote: Thu Sep 17, 2020 4:10 pm OP: Not sure what you seek to gain by making an annuity purchase now vs waiting a year from now when much more is known about your MIL's health prognosis.
Fair point and agree waiting to get more clarity would be helpful. This is my first time dealing with cancer and my impression is so far is that it's a roller coaster filled with ups and downs. A year ago things were dire and she basically had everything removed. Then there was chemo and then she was in remission. Then three months later it started coming back and now we're back to chemo. So I guess my only push back on the suggestion would be that I'm not sure waiting actually gives us more information.

It's going to take a bit of time for me to sit down with her and pull together all her information before we do anything. So nothing will be happening immediately. Just gathering information from her and this forum at this point.
Lalamimi
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Re: Advice for mother-in-law

Post by Lalamimi »

talk to SS now. She should be entitled to some disability. Spousal at 62 will not be that much.
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ChiKid24
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Re: Advice for mother-in-law

Post by ChiKid24 »

One piece of advice I'm definitely giving her, and please correct me if this isn't sound, would be to devote the max $6k to ROTH every year. She has no sort of IRA now and no exposure to equity, so putting $6k a year in FXAIX feels like a no brainer for the tax benefits. She would have the income to support it. Understand it isn't risk free, but it's a pretty small equity allocation to hopefully provide some growth.
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Re: Advice for mother-in-law

Post by delamer »

ChiKid24 wrote: Thu Sep 17, 2020 4:01 pm
egrets wrote: Thu Sep 17, 2020 3:51 pm Does Social Security for the disabled apply in this case?
Social security will definitely be a part of her equation. She'll get divorced spouse benefits I believe when she turns 62. Probably need to consult with some SS expert on that to better understand what it would pay. The other thing she wants to do is "manage" her income due to her medical insurance. She is seeing lots of doctors and getting treatments, so that part of the expense equation is probably more significant than the income side of the equation.
Her benefit on her record could be more than her spousal benefit.
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FiveK
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Re: Advice for mother-in-law

Post by FiveK »

ChiKid24 wrote: Thu Sep 17, 2020 4:24 pm One piece of advice I'm definitely giving her, and please correct me if this isn't sound, would be to devote the max $6k to ROTH every year. She has no sort of IRA now and no exposure to equity, so putting $6k a year in FXAIX feels like a no brainer for the tax benefits. She would have the income to support it. Understand it isn't risk free, but it's a pretty small equity allocation to hopefully provide some growth.
ChiKid24 wrote: Wed Sep 16, 2020 7:16 pm She's 60 years old, self-employed, earning a couple thousand a month is my guess.
She has no retirement savings, but has done relatively well buying, living in, then selling houses. She'll probably net $400-$500k from this recent sale....
It could be worth understanding her tax rate this year to judge whether traditional or Roth would be a better choice.

If she will pay a high marginal rate this year due to the sale, but expects little annual income in the future, using traditional now is likely better.
Cruise
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Re: Advice for mother-in-law

Post by Cruise »

ChiKid24 wrote: Thu Sep 17, 2020 4:16 pm
Cruise wrote: Thu Sep 17, 2020 4:10 pm OP: Not sure what you seek to gain by making an annuity purchase now vs waiting a year from now when much more is known about your MIL's health prognosis.
Fair point and agree waiting to get more clarity would be helpful. This is my first time dealing with cancer and my impression is so far is that it's a roller coaster filled with ups and downs. A year ago things were dire and she basically had everything removed. Then there was chemo and then she was in remission. Then three months later it started coming back and now we're back to chemo. So I guess my only push back on the suggestion would be that I'm not sure waiting actually gives us more information.

It's going to take a bit of time for me to sit down with her and pull together all her information before we do anything. So nothing will be happening immediately. Just gathering information from her and this forum at this point.
One of the things I did when I took over as trustee to my parents' estate was to evaluate the life expectancy of my father, who was the prime beneficiary. In his case, he was in relatively good health, so I just plugged numbers into https://www.ssa.gov/oact/population/longevity.html , which gave me a baseline for planning purposes.

If I was in your situation, I would also look at the type of Stage 4 cancer your MIL has, and research longevity probabilities. For example, the survival rates for breast cancer depend on stage and grade and type: https://www.cancer.org/cancer/breast-ca ... rates.html Note that if you click some links, different subtypes of breast cancer show markedly different survival rates.

While hoping for the best, I'm not sure about what you would want to achieve by rapidly moving into various investment spaces if your MIL's prognosis is limited in time. You may need rapid access to liquid investments in order to provide round-the-clock care as her health diminishes.

Hope this helps you help your MIL and wife.
123
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Re: Advice for mother-in-law

Post by 123 »

ChiKid24 wrote: Wed Sep 16, 2020 7:16 pm ...She's 60 years old, self-employed, earning a couple thousand a month is my guess...
It might be a good idea to look at her tax returns for the last few years. Sometimes people, even a MIL, have more assets than is immediately apparent. In regard to her business is she still running it? Can/should it be sold? What was her net (if any) shown on schedule C of her tax return. Many self-employed people may have a reasonable gross income but often they charge most, if not all, off to expenses and there is little or no social security credit earned, this is particularly importent with regard to the recent earnings requirements for social security disability benefits.

As for investments in an uncertain situation I would agree that CDs or a high yield savings account might be the best option. No Penalty CDs from Ally Bank could be a good option. They generally allow you to lock-in a rate similiar to their high-yield savings account for 11 months and, if rates go up you can withdraw (after 6 days) without any penalty.
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Re: Advice for mother-in-law

Post by ram »

If she keeps the money under her pillow and spends at 36K/year then 468 K will last 13 years which may be more than her life expectancy. Presumably she will start getting something from SS at 62 yrs.
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ChiKid24
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Re: Advice for mother-in-law

Post by ChiKid24 »

Cruise wrote: Thu Sep 17, 2020 5:39 pm
ChiKid24 wrote: Thu Sep 17, 2020 4:16 pm
Cruise wrote: Thu Sep 17, 2020 4:10 pm OP: Not sure what you seek to gain by making an annuity purchase now vs waiting a year from now when much more is known about your MIL's health prognosis.
Fair point and agree waiting to get more clarity would be helpful. This is my first time dealing with cancer and my impression is so far is that it's a roller coaster filled with ups and downs. A year ago things were dire and she basically had everything removed. Then there was chemo and then she was in remission. Then three months later it started coming back and now we're back to chemo. So I guess my only push back on the suggestion would be that I'm not sure waiting actually gives us more information.

It's going to take a bit of time for me to sit down with her and pull together all her information before we do anything. So nothing will be happening immediately. Just gathering information from her and this forum at this point.
One of the things I did when I took over as trustee to my parents' estate was to evaluate the life expectancy of my father, who was the prime beneficiary. In his case, he was in relatively good health, so I just plugged numbers into https://www.ssa.gov/oact/population/longevity.html , which gave me a baseline for planning purposes.

If I was in your situation, I would also look at the type of Stage 4 cancer your MIL has, and research longevity probabilities. For example, the survival rates for breast cancer depend on stage and grade and type: https://www.cancer.org/cancer/breast-ca ... rates.html Note that if you click some links, different subtypes of breast cancer show markedly different survival rates.

While hoping for the best, I'm not sure about what you would want to achieve by rapidly moving into various investment spaces if your MIL's prognosis is limited in time. You may need rapid access to liquid investments in order to provide round-the-clock care as her health diminishes.

Hope this helps you help your MIL and wife.
Thanks, great idea. Will look at that data to help inform our course of action.
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Re: Advice for mother-in-law

Post by BarbBrooklyn »

Just to add;

I have a good friend and an ex DH both with stage 4 cancers, The first has been on oral chemo for going on 6 years now; the ex for about 3.

Before you make any financial assumptions, you need to get a bead on what the docs are saying about prognosis AND you want to make sure that her medical and prescription plans are top notch.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."
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ChiKid24
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Re: Advice for mother-in-law

Post by ChiKid24 »

123 wrote: Thu Sep 17, 2020 6:01 pm
ChiKid24 wrote: Wed Sep 16, 2020 7:16 pm ...She's 60 years old, self-employed, earning a couple thousand a month is my guess...
It might be a good idea to look at her tax returns for the last few years. Sometimes people, even a MIL, have more assets than is immediately apparent. In regard to her business is she still running it? Can/should it be sold? What was her net (if any) shown on schedule C of her tax return. Many self-employed people may have a reasonable gross income but often they charge most, if not all, off to expenses and there is little or no social security credit earned, this is particularly importent with regard to the recent earnings requirements for social security disability benefits.

As for investments in an uncertain situation I would agree that CDs or a high yield savings account might be the best option. No Penalty CDs from Ally Bank could be a good option. They generally allow you to lock-in a rate similiar to their high-yield savings account for 11 months and, if rates go up you can withdraw (after 6 days) without any penalty.
She has a CPA prepare her taxes, so I think I'm comfortable with her financial position. Thankfully she has all her wits to her so we can have an open discussion and I'm confident I'll get the full picture.

As to her business, she basically does therapy sessions and life coaching. Used to do them in person out of her house, but shifted her business to now be all over the phone. She does a few sessions a week with clients when she isn't feeling super dragged down and worn out by the effects of chemo. So nothing really to sell. She had also rented out a studio apartment attached to her home for additional income, which will go away now with the sale. My guess is the SS benefit on her own will be minimal, so the divorced spouse benefit would be her payout.
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