Retired Mom Needs 403b, and Home Sale Advice!

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susan123
Posts: 29
Joined: Wed Apr 21, 2021 10:53 am

Re: Retired Mom Needs 403b, and Home Sale Advice!

Post by susan123 »

I don't think there's a simple answer to this. It all depends on how long she'll live, how long you will live, and how bad the inflation will be (you said the survivor benefits have no COL adjustments). Also is it your mom's idea to consider maximizing "mom and child as a whole"?
Helmut Spargle
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Joined: Wed Jan 01, 2020 6:07 pm

Re: Retired Mom Needs 403b, and Home Sale Advice!

Post by Helmut Spargle »

delamer wrote: Mon Oct 11, 2021 9:59 am Your mother is worried about having enough income, so the solution isn’t to reduce her pension. That’s the obvious conclusion.
The author is soliciting opinions on Mom's retirement plan. Mom isn't financially savvy, see the 403b invested in money market funds. Just because Mom thinks that she won't have enough income doesn't necessarily mean that's the case and that there's an obvious conclusion.

--

Author, your mom is retiring with much less than BH's would be comfortable with. There are a lot of assumptions and while it's likely to work out fine, it's far from foolproof. Since a significant amount of this plan hinges on your continued support, I'd recommend getting a cheap and short term life insurance policy with Mom as the beneficary.
Topic Author
dunk1234
Posts: 34
Joined: Mon Sep 06, 2021 10:41 am

Re: Retired Mom Needs 403b, and Home Sale Advice!

Post by dunk1234 »

susan123 wrote: Mon Oct 11, 2021 5:19 pm I don't think there's a simple answer to this. It all depends on how long she'll live, how long you will live, and how bad the inflation will be (you said the survivor benefits have no COL adjustments). Also is it your mom's idea to consider maximizing "mom and child as a whole"?
Thanks Susan.

Yes it was her idea to take the survivor path thinking it would maximize the pension’s return. I’m wondering if it really is the best strategy. I think you’re right, the answer is unknowable, unfortunately. I think we’ll probably do survivor and I’ll make up the difference for her.
Topic Author
dunk1234
Posts: 34
Joined: Mon Sep 06, 2021 10:41 am

Re: Retired Mom Needs 403b, and Home Sale Advice!

Post by dunk1234 »

Helmut Spargle wrote: Tue Oct 12, 2021 7:58 am
delamer wrote: Mon Oct 11, 2021 9:59 am Your mother is worried about having enough income, so the solution isn’t to reduce her pension. That’s the obvious conclusion.
The author is soliciting opinions on Mom's retirement plan. Mom isn't financially savvy, see the 403b invested in money market funds. Just because Mom thinks that she won't have enough income doesn't necessarily mean that's the case and that there's an obvious conclusion.

--

Author, your mom is retiring with much less than BH's would be comfortable with. There are a lot of assumptions and while it's likely to work out fine, it's far from foolproof. Since a significant amount of this plan hinges on your continued support, I'd recommend getting a cheap and short term life insurance policy with Mom as the beneficary.
Helmut,

Thank you. Several members brought up the possibility that I may predecease my mother. I will look into life insurance policies through my employer.
BarbBrooklyn
Posts: 1068
Joined: Fri Aug 24, 2018 9:33 am
Location: NYC

Re: Retired Mom Needs 403b, and Home Sale Advice!

Post by BarbBrooklyn »

Does mom's pension have a "x year certain" option?

This sort of choice means that even if you die within the span of x years, your beneficiary gets the pension amount for the remaining years.

ETA: I just looked up Washinton State TRS. No x years certain, but all mom's contributions, plus interest that have not been distributed at her date if death would go to beneficiary

Option 1: Single Life

This option pays the highest monthly amount of the four choices, but it is for your lifetime only. No one will receive an ongoing benefit after you die. If you die before the benefit you have received equals your contributions plus interest (as of the date of your retirement), the difference will be paid in a lump sum to your designated beneficiary.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."
Topic Author
dunk1234
Posts: 34
Joined: Mon Sep 06, 2021 10:41 am

Re: Retired Mom Needs 403b, and Home Sale Advice!

Post by dunk1234 »

krow36 wrote: Sun Oct 10, 2021 11:16 pm I think your mom has “separated from service”, but has not started drawing on her pension? Does she plan to actually “retire” (start receiving her pension) at age 65 next year? The pension is the state funded part of the hybrid plan. That defined benefit payment is based on a formula: (years teaching)*(final average salary)*(1%). I didn’t read anything about the pension having a COLA.

Is she planning to annuitize her Self-Directed Investment Program account (her defined contribution part of TRS 3)? The TRS 3 hybrid plan offers a Total Allocation Portfolio (TAP) Annuity for taking withdrawals from her Investment Program account. It would give her a monthly income for the rest of her life, with a guaranteed 3% annual COLA. If there’s any of her contributions (plus interest at the time of annuitization) remaining on her passing, it would go to her beneficiary. She can start the TAP annuity anytime after separation.

An alternative to using TAP, is to invest the 264k in the state 403b and leave it to grow, taking distributions as needed. That is what you have asked for suggestions about. If you scroll down in “Available Investments” in the TRS website, you’ll get to the FEES information. The stock and bond funds have a total fee of about 0.11% (not free) or more, and the Retirement Strategy funds about 0.22%. I believe that you can defer taking the TAP annuity option indefinitely, as long as you still have your Investment Program account.

The state 403b is not as low-cost as an IRA, into which she could roll it. A Vanguard IRA would have fees about half those of the WA state 403b account. I don’t think you have mentioned her current income needs and where they are coming from? Which of her assets is she using?

I would roll the VALIC 403b (probably a variable annuity) of 64k into an IRA at Vanguard, Fidelity or Schwab. VALIC levies an annual fee around 2%, while Vanguard’s fee is around 0.1% to 0.2%. You/she needs to call the VALIC 800 help # and ask for her surrender fee. It’s possible it’s waived due to her time in the contract and/or her age. In any case, it’s usually worth paying the fee to escape the 2% annual expense.
Krow36 -

Thank you very much. Your post has left me with more questions than answers. I’ll follow up with Mom and definitely look at prioritizing the VALIC problem. Will follow up here soon as I can. I appreciate your response!
MHA556
Posts: 15
Joined: Wed Sep 01, 2021 8:01 am

Re: Retired Mom Needs 403b, and Home Sale Advice!

Post by MHA556 »

I quit reading halfway down this thread. Some serious concerns about you working on this stuff for your mom.


First things first- your mom is a WA TRS Plan 3 pension member. This means she gets 1% X years worked x final average salary. This is CPI inflation adjusted up to 3%. This is half of her retirement system- the other half was her investments that she was required to invest into at a 5, 10, or 15% rate.

If she goes to the WA state retirement website and makes an account, it will show how Plan 3 works. She should do this. Actually it is ridiculous that it hasn’t already been done. Talking to someone on the phone doesn’t cut it. If you want to look at differences in pensions for retiring now vs working another year or three this is the way to do it.

Also, there actually are about 3 or 4 different survivorship possibilities, starting at 100% and working downwards.

In my opinion there is zero reason for her to take a greatly reduced pension to leave an adult child a survivorship benefit. If she wants to help you out she can get an insurance policy, or help you invest in a Roth account or something like that. You advising her on this stuff, and setting it up for you to benefit substantially, is concerning. Seen too many elder financial abuse cases to not have some concern about this kind of a setup. Especially if there are other heirs. If she wants to take care of you great. But she will be losing a lot to do it. And you should expect to have people feeling uneasy with the situation. In law enforcement, something like this is where you take the older person aside and make sure they are cognizant, understand the consequences, and then you say “OK” and move on if the answer to both is yes.
MHA556
Posts: 15
Joined: Wed Sep 01, 2021 8:01 am

Re: Retired Mom Needs 403b, and Home Sale Advice!

Post by MHA556 »

I forgot to add- sounds like with those options she still has all her money in the WA state plan- very limited options and those are the standard funds for the Plan 3 self directed and deferred comp accounts. No need to keep it there if she is actually retired. The state charges a fee, so while the Blackrock S&P index fee of 0% sounds good, the state is still charging a fee themselves.

And I know Blackrock makes up for that fund somehow- maybe on the other funds the state offers. Currently my wife is in that index fund, but once she retires all the money is coming out of the state plan and going into lower fee options with more choices.
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