Parents with no retirement savings dependent on me

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
User avatar
AllMostThere
Posts: 885
Joined: Sat Dec 31, 2016 1:04 pm

Re: Parents with no retirement savings dependent on me

Post by AllMostThere »

Kb008 wrote: Sat Oct 16, 2021 3:24 pm ......SS benefits of $15K.
Yes, this is a difficult situation and you are a great son to be wanting to help. You still need to investigate the local options for subsidized senior housing, get on the waiting list now. You may be surprised that the offering may actually be pretty good, but you won't know unless you & parents start now. You can still investigate the option of housing in better part of town. Also, the $15K annual SS seems really low, given your DF worked full time. While your DM may have been a stay-at-home spouse, she is still entitled to 50% of DF's SS benefit. Is she collecting this? If so, that would mean your DF is collecting $10K and DM is collecting $5K - Still seems low. Investigate and report back. I realize all the questions from posters may be somewhat aggravating to you (not immediate recommended guidance), but these questions help you peel back the layers of the onion to fully understand situation to allow planned next steps. You are doing all the right things, keep it up and God Bless.
Last edited by AllMostThere on Sat Oct 16, 2021 6:34 pm, edited 1 time in total.
It is not about how much you make; it is about how much you keep and how well you invest it. - Author Unknown | Dream as if you’ll live forever. Live as if you’ll die today. - Author James Dean
Shallowpockets
Posts: 2533
Joined: Fri Nov 20, 2015 9:26 am

Re: Parents with no retirement savings dependent on me

Post by Shallowpockets »

OP, you still haven’t stated what is included in your parents living expenses of 50k year. Others have noted they exist as a family on less than that. They have asked about the same thing, what are those expenses?
Maybe it matters not so much what your finances are as to what the parents expenses are.
We, me and DW, live on less than that. Very comfortably. Own our own house. Could subtract the fat of 10-15k year on travel, and probably some other stuff too.
So, what’s up?
JeanneForever
Posts: 56
Joined: Mon May 31, 2021 8:42 pm

Re: Parents with no retirement savings dependent on me

Post by JeanneForever »

I think people may be underestimating how much these parents might spend on healthcare with health as OP described.

"In 2017, people with traditional Medicare spent an average of $5,801 on insurance premiums and medical services. One in 10 people on Medicare spent at least $10,268." https://www.aarp.org/content/dam/aarp/p ... 05.001.pdf
Topic Author
Kb008
Posts: 39
Joined: Fri Oct 15, 2021 11:25 pm

Re: Parents with no retirement savings dependent on me

Post by Kb008 »

ivgrivchuck wrote: Sat Oct 16, 2021 2:27 pm
Kb008 wrote: Fri Oct 15, 2021 11:56 pm Hello Bogleheads,
Based on your responses so far, it seems you have decided to rent a house for your parents and pay them $3.5k pocket money per month on top of that.

This is not a Boglehead way to manage finances, but it's your money. You can do whatever you want...

It is not clear what you are asking advice for...
I will not be renting for them and also paying 3500/month on top of that. My current situation is when I am able to move on to a higher paying job, hopefully next year, that I will be paying for them to live alone. They need 50k/yr, have 15K is SS benefits, that it be 35k/yr contributed by me which would be about 3K/month. The advice I was looking for was if it sound for them to keep 100K in their checking (all their savings) as an emergency fund while I cover their expense, spend it, or purchase something like long term care insurance or something useful.
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

Re: Parents with no retirement savings dependent on me

Post by JoeRetire »

Kb008 wrote: Sat Oct 16, 2021 12:40 pm They will be dependent on me. Sister is ill and cannot work, her husband is supportive and my parents have been staying with her half the time and I over the past 1.5yrs. Financially I am the one to support them.
Wow. Tough burden to bear at your young age.
I would prefer to not put them in discounted housing in a bad part of town and can afford to not drive a newer car/other luxuries and use that money to pay reasonable rent in a good part of town for them.
In my town, Senior Housing is in a great section - near the town center, neat the library, near the hospital (which has a terrific, inexpensive cafeteria), good places to walk to, places to eat, etc.

Check with your town hall to make sure you are looking at town-subsidized Senior Housing and not just cheap housing. While the wait time is often long (years), they are often very nice.
This isn't just my wallet. It's an organizer, a memory and an old friend.
Topic Author
Kb008
Posts: 39
Joined: Fri Oct 15, 2021 11:25 pm

Re: Parents with no retirement savings dependent on me

Post by Kb008 »

8foot7 wrote: Sat Oct 16, 2021 2:32 pm I certainly would be wanting to dig in to what the 3,500 per month extra is needed for. If I subtract daycare expenses for 3 children from my monthly budget, I spend less than that for a family of 6. Methinks there is a lot of fat to cut in there, and the definition of fat would be quite liberal for me if my parents wanted to live with me and have me subsidize their living.

While I can understand renting a place for them may be as much of a lifestyle decision for you and your family as it is for your parents (I might well consider it vs just permanently having them move in), having rent taken care of should mean SS at 1200/mom should go a long way. My grandmother made it on SS of less than that plus section 8 housing.

In any case I’m not paying 3500 a month while they have six figures in checking. Spend that down first if “dependence” is truly on the table.
Understood, they spend 50K/yr with 15K of that being SS benefits which leave 35K/yr needing assistance from me. I will see what can be trimmed which will be a sit down session with them. I will be looking at moving to a better paying job since parents living with me and my SO starting a family together after marriage is not ideal at this stage of life for us.
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

Re: Parents with no retirement savings dependent on me

Post by JoeRetire »

Kb008 wrote: Sat Oct 16, 2021 3:54 pmThe advice I was looking for was if it sound for them to keep 100K in their checking (all their savings) as an emergency fund while I cover their expense, spend it, or purchase something like long term care insurance or something useful.
You should look into Medicaid if you haven't already done so. They may need to spend down their assets in order to be eligible.
There's no way they will be able to purchase long term care insurance at their age and condition, so don't worry about that.
This isn't just my wallet. It's an organizer, a memory and an old friend.
musicmom
Posts: 338
Joined: Sat Apr 11, 2015 4:48 pm

Re: Parents with no retirement savings dependent on me

Post by musicmom »

OP, your parents are fortunate to have you in their lives.

I encourage you to investigate services that may be available for your parents. They will vary by state and maybe county.
Not exact same situation, but similar.
Our adult disabled (since birth) daughter has SSDI, Medicare, Medicaid and a Section 8 housing voucher. She pays $200 toward her rent in a safe clean home. She receives monthly cash assistance to hire caregivers (could be family) to help her food shop, laundry, transport to doctors appts, etc
She has enough to buy clothes and personal care items and a basic cell phone.

Waiting lists are long. Application paperwork is arduous. But it is a long-term solution.

Wishing you the best.
Herekittykitty
Posts: 930
Joined: Wed Apr 16, 2014 8:11 pm
Location: Flyover Country

Re: Parents with no retirement savings dependent on me

Post by Herekittykitty »

I’ve got a few questions and some suggestions. The questions are mainly to help you and them get the numbers in order, for yourselves. I think the suggestions, or some combination or permutation of the suggestions could give them some dignity and certainty while giving you more financial security (which will help you and them.)

I’ve made some assumptions and I may have misunderstood some of your numbers, and the numbers I’m using might not be what you would use but that likely doesn’t change the general idea.

First: Don’t do anything financially until there is a solid plan in place for your parents that everyone understands. And don’t assume that your current income is the only solution to the problems (although it may be part of the solution) or that using their assets for their support necessarily makes them less secure. You are a loving son and can and will support them if needed – so they can be secure no matter what they have or don’t have. The question should be how to help them be secure with dignity while increasing your financial well-being. They have income and assets, and you have income and assets. They may qualify for benefits with dignity, and which will decrease their expenses. Your income will grow, and your assets can grow as you pay down your SL debt and save and invest.
Now bear with me and stay open minded about these ideas.

If you can write out the following information it will likely help you (if you haven't done it already.) You can give it to us too but you don't need to.

PARENTS:

ASSETS: $100,000 or less

PARENTS' SOCIAL SECURITY RETIREMENT (THIS IS THEIR ONLY INCOME):
Father: early 70’s, poor health, cannot work
Mother: early 70’s, poor health, cannot work
Total (Father + Mother) Social Security Retirement Income: $15,000 per year = $1,250 a month

PARENTS' EXPENSES: Total = $1,250 a month (Social Security) plus $3,500 (from OP) = $4,750 a month for both. Can you break this down further? Separate it out between father and mother when reasonable and add whatever categories I may have left out. I do not see where the $4,750 expenses a month come from.
Medicare payment – Father
Medicare payment – Mother
Health expense copays – Father
Health expense copays – Mother
Housing expense – None (They live with OP who covers rent and utilities.)
Auto expense –
Food –
Recreation –

THE REASONS THE ABOVE MATTERS: For the Social Security amounts – when one passes, the survivor will receive the higher of the two benefits and the lower benefit stops. The numbers will help in your and their planning. The more specific and complete the breakdown in expenses is, the better you and they can plan on a month-to-month basis and predict for the future.

WHAT TO DO WITH THEIR CHECKING ACCOUNT BALANCE OF $100,000: They should have only an amount equal to their current monthly spending plus a buffer, say $1,000 (the buffer is so they don’t accidentally overdraw their account) or whatever makes sense to you and them.

Some of the rest should go in a savings account (or some of the rest could go into laddered CD’s.)

If you and they want them to invest, you might consider a Vanguard Life Strategy Fund: https://investor.vanguard.com/mutual-fu ... trategy/#/ For example, look at the Life Strategy Income Fund or the Life Strategy Conservative Growth Fund.

They can’t afford to take risk for themselves if they had no safety net - but they do. You are their safety net. So the question regarding risk isn’t whether they can afford to take risk (they can’t) but whether you can afford it (you likely can but not as much as if you were not their safety net.)

I doubt if I would do an annuity. If they did do an annuity, an immediate annuity is the only kind to get. But I wouldn’t, as they may need flexibility an annuity wouldn’t give them. (I put their ages as ages at 70 and their state as NY (I just pulled the state out of my hat) and the amount to invest as $75,000 for an immediate annuity with two lives into this site: www.immediateannuities.com and came out with $348 a month income. I wouldn’t tie up their money for that return, but you can put in the correct information and play around with the numbers and see what you think.) Again - I wouldn't.

Don’t discount the possibility of their living in a nice apartment complex for active adults, with other active older adults to keep them company, play cards, and go places with and having a good time, paid for by their assets, and once their assets are spent down, paid for either with a public housing voucher that would bring down their rent in the same apartment they are in, or paid for by you. I live in such an apartment complex and pay full rent and so do most of the residents, but some have housing vouchers bringing down their rent. Our apartments are the same. Everything about it is the same, except some pay lower rent.

HERE’S WHAT I MIGHT DO WITH THEIR MONEY:

Checking account: Keep a month of expenses plus a buffer of around $1,000 or whatever makes sense to you and them. That way everyone looks at their assets and income as a month of expenses in their checking account, not as a checking account with $100,000 or so of cash.

Savings account: Keep 6 months to a year of expenses in a savings account and transfer a set amount once a month into their checking account to cover that month’s expenses. When the savings account gets down to a few month’s expenses, cash a CD and replenish.

CD ladder: Get a series of CD’s for 6 months to a year for a total of whatever number of years makes sense. Cash when due to transfer into their savings account. If a CD has to be cashed early for medical expenses, so be it. The CD’s would have the advantage of making a little income (a few bucks at best) and the advantage of keeping the money separate from their checking (monthly expenses) and savings (monthly supply for the checking account.)
Investing: If they invest at all, consider something like Vanguard Life Strategy Income or Vanguard Life Strategy Conservative. It might make a little improvement in their income (or not) and it might give them the dignity of having an investment (if they think that way.)
(To pull numbers out of my hat – maybe $50,000 - $75,000 divided among savings and a series of CD ladders, and $25,000 to $50,000 in a fund such as Vanguard Life Strategy Retirement or Vanguard Life Strategy Conservative.)

WHETHER TO USE THEIR SAVINGS TO COVER THEIR EXPENSES: Consider using their assets (their Social Security income plus a part or all of their $100,000) to cover a big part of their expenses. For example: Their Social Security of $1,250 goes straight to their checking account. For their remaining monthly expenses, assuming that amount is $3,500 (that seems like a lot) have them transfer somewhere between $1,500 and $2,000 into their account (maybe more,) and you transfer the rest into their account once a month from your account. (Unless it could make more sense to have them cover their entire expenses.)

There are several reasons it is good for them to pay at least a good part (maybe all) of their living expenses out of their assets. The main one is that the amount you pay toward their support is money you could use to pay down your SL debt and invest, saving interest on the debt and increasing your investments which should grow over time. That will benefit you and your parents for the same reason – you are supporting them and the better your financial situation the better you will be able to help them. When you are more secure, they are more secure. You and they do not need to let their savings get down to zero. Maybe it could get down to $10,000 or $25,000 or so. Whatever makes sense. Once their assets get down to whatever point you decide on, you increase the monthly amount you put into their checking account.

I do not know how this works but an accountant and/or elder attorney does: It could be that one or both will end up in assisted living or nursing home care and in order to get Medicaid coverage they may have to pay out of pocket until their assets run out. But if they have been funding part or all of their own expenses in the meantime, those assets will be spent down, and you will have saved that amount of money yourself to pay your SL debt and invest and will therefore be in better financial position to help them.

FINALLY:
1. Talk to a good accountant. Let the accountant know what you propose with your parents and see what the accountant says. There may be tax implications for them or for you or for all of you. You want to get this right. You might be able to declare them your dependents on your income taxes, I have no idea but your account would know. Or there may be some tax liability involved, and you should find out. Also, the accountant might know if there are benefits their assets may prevent them from getting and let you know how much that would amount to – you might a well find out so you and your parents can make the best decisions.

2. Find out (maybe from the accountant and maybe from county social services and maybe from the Senior Center) what benefits are available to seniors, to low income people, and specifically for low income seniors. Some subsidized housing is nice. Some seniors and low income people live in nice apartments where people with regular incomes live, but the low income seniors or low income people of any age might have a housing voucher from the housing authority that lowers their rent. Some low income people get SNAP (food stamps) – which buys the same great food anyone can buy, in the same stores. There may be subsidized or meals available, for example from the Senior Center. There are seniors where I live who get delicious meals delivered from the Senior Center 5 days a week, and the meals are very low cost even without a subsidy.

3. Talk to an attorney specializing in elder law (or possibly family law if the attorney also knows a lot bout elder law.) You and your parents are sharing expenses and mixing funds. Make sure everything is done legally and everyone is protected from any suspicion or accidental legal mishap. This is important.

AND FOR YOU: Have a look at the book The White Coat Investor and have a look at the site of the same name. Live like a resident until your loans are paid off. Invest. The more solid your finances are and the more wealth you build earlier in life the better your life will be and the better you can help others.

You don't have to drive an old car if you don't want to. You can get a medium priced basic middle class car if you want it. Don't get a fancy expensive car, at least not yet.
I don't know anything.
Topic Author
Kb008
Posts: 39
Joined: Fri Oct 15, 2021 11:25 pm

Re: Parents with no retirement savings dependent on me

Post by Kb008 »

JoeRetire wrote: Sat Oct 16, 2021 3:59 pm
Kb008 wrote: Sat Oct 16, 2021 3:54 pmThe advice I was looking for was if it sound for them to keep 100K in their checking (all their savings) as an emergency fund while I cover their expense, spend it, or purchase something like long term care insurance or something useful.
You should look into Medicaid if you haven't already done so. They may need to spend down their assets in order to be eligible.
There's no way they will be able to purchase long term care insurance at their age and condition, so don't worry about that.
Yes thank you. They don’t qualify yet do you their assets.
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

Re: Parents with no retirement savings dependent on me

Post by JoeRetire »

Kb008 wrote: Sat Oct 16, 2021 6:15 pm
JoeRetire wrote: Sat Oct 16, 2021 3:59 pm
Kb008 wrote: Sat Oct 16, 2021 3:54 pmThe advice I was looking for was if it sound for them to keep 100K in their checking (all their savings) as an emergency fund while I cover their expense, spend it, or purchase something like long term care insurance or something useful.
You should look into Medicaid if you haven't already done so. They may need to spend down their assets in order to be eligible.
There's no way they will be able to purchase long term care insurance at their age and condition, so don't worry about that.
Yes thank you. They don’t qualify yet do you their assets.
So then to answer your question, they should first be spending down their savings, until they reach the Medicare limit, rather than you spending your money now. No need to delay the inevitable.
This isn't just my wallet. It's an organizer, a memory and an old friend.
Sandwich
Posts: 254
Joined: Thu Jul 21, 2016 8:04 pm

Re: Parents with no retirement savings dependent on me

Post by Sandwich »

JoeRetire wrote: Sat Oct 16, 2021 6:20 pm
Kb008 wrote: Sat Oct 16, 2021 6:15 pm
JoeRetire wrote: Sat Oct 16, 2021 3:59 pm
Kb008 wrote: Sat Oct 16, 2021 3:54 pmThe advice I was looking for was if it sound for them to keep 100K in their checking (all their savings) as an emergency fund while I cover their expense, spend it, or purchase something like long term care insurance or something useful.
You should look into Medicaid if you haven't already done so. They may need to spend down their assets in order to be eligible.
There's no way they will be able to purchase long term care insurance at their age and condition, so don't worry about that.
Yes thank you. They don’t qualify yet do you their assets.
So then to answer your question, they should first be spending down their savings, until they reach the Medicare limit, rather than you spending your money now. No need to delay the inevitable.
I was the POA for a disabled elderly relative and tracked his expenses. I was monitoring when he would be eligible for government benefits; however, he passed away with assets just above the Medicare Savings program limits.

To give you some specific numbers, Medicare Savings programs provide support for low income / low resourced beneficiaries and can help to pay for Medicare premiums, prescriptions, etc. As an example, the Specified Low-Income Medicare Beneficiary Program (SLMB) has a current asset limit for a married couple is $ 11,960 and an income limit of $ 1,762 for a married couple. Your parents could qualify if they reduced their $ 100,000 savings to $ 11,960.

Would your parents / you feel comfortable if they paid out of their own expenses down to the $ 11,960 level ? Assets such as a car do not count toward the limit. So if they do not have ... but could use a reliable car ... that may be a way to "spend down" in an appropriate way.

A married couple qualifying for the SLMB program can save over $ 3,500 annually since their Medicare part B premium is paid by the government. Further savings can be experienced depending on the prescriptions each has. The key to qualifying is spending down the $ 100k to $ 11,960 or whatever the limit is in the year they qualify. Consider tracking their savings as time goes by so an application can be made at that time.

Additionally, low income / low resourced seniors may qualify for other programs such as Utility Assistance, Food Stamps, Senior Food boxes, etc. These programs may have different asset and income requirements. Good luck.
biker2035
Posts: 36
Joined: Sun Dec 17, 2017 2:51 pm

Re: Parents with no retirement savings dependent on me

Post by biker2035 »

OP, it would be great if you could specify what the $3000 per month you have to assist with goes towards? You are buying food, they are living with you, what are their monthly bills? It sounded like selling their home paid off debt. What is left? Seems like planning a budget would be worthwhile to at least see where the money is being spent.
stoptothink
Posts: 15368
Joined: Fri Dec 31, 2010 8:53 am

Re: Parents with no retirement savings dependent on me

Post by stoptothink »

biker2035 wrote: Sun Oct 17, 2021 8:16 am OP, it would be great if you could specify what the $3000 per month you have to assist with goes towards? You are buying food, they are living with you, what are their monthly bills? It sounded like selling their home paid off debt. What is left? Seems like planning a budget would be worthwhile to at least see where the money is being spent.
+1. We were in a somewhat similar situation, except my in-laws are in FAR worse financial shape and FIL is still working. They were living with us, we paid for everything while they spent their income on trips/going out/a car they didn't need instead of paying down all their debt. We had a long talk, looked at all the numbers, and when they refused to budge on their spending (they were spending more than us, a family of 4, while we were paying all their basic living expenses) we kindly hinted that they may want to consider finding a place of their own, and that they would always have a room in our home but we would never give them money again. It was hard, but it worked and it didn't hurt the relationship (we had dinner at their place last night). They are in no better shape 3yrs later, but haven't moved back in with us (yet). $3k/month for random living expenses outside of basic survival is a heck of a lot for two people that are broke.
wolf359
Posts: 3207
Joined: Sun Mar 15, 2015 8:47 am

Re: Parents with no retirement savings dependent on me

Post by wolf359 »

KlangFool wrote: Sat Oct 16, 2021 12:49 pm
Kb008 wrote: Sat Oct 16, 2021 12:36 pm
They will need an additional $3,500 a month for total assistance (housing, car, flexible, health expenses etc) from me.
Kb008,

This is not reasonable and does not make any sense.

1) How much is their social security benefits? At least 24K per year?

2) How much is their annual expense and what is the break down?

Please note that this your choice but I am giving you some advice given my observation of my friends and family in similar situation.

A) If you are overly generous and say yes to every demands from your parents, you would be forced to say no later. Then, you would failed their high expectation. YOU would be the PROBLEM.

B) It is easier to say NO and be TOUGH in the beginning. If you say yes to some stuff later, you would be considered as GENEROUS.

4 now and 5 later -> Generous person

5 now and 4 later -> Stingy person

<<They will need an additional $3,500 a month for total assistance (housing, car, flexible, health expenses etc) from me.>>

Where does this number comes from? From their "wants"?

Social Security of at least 24K per year? Plus another 42K from you. This is 66K per year. The median US household income is about 50K to 60K per year.

If you say yes now, they would ask for more. Then, eventually, you would have to say no. You would be the BAD person.

KlangFool
+1

Also note that the median household income number is for a HOUSEHOLD. The average household has 1.93 children, so the income is for a family of 4.
bltn
Posts: 1844
Joined: Mon Feb 20, 2017 8:32 pm

Re: Parents with no retirement savings dependent on me

Post by bltn »

Kb008

Does the 15,000 yearly social security include your mother s spousal payment as well as your father s social security benefit?
FI4LIFE
Posts: 548
Joined: Sun Apr 28, 2019 9:27 am

Re: Parents with no retirement savings dependent on me

Post by FI4LIFE »

HomeStretch wrote: Sat Oct 16, 2021 1:01 pm
Kb008 wrote: Sat Oct 16, 2021 12:36 pm … Only savings is <100K in their checking. They lost the rest. They will need an additional $3,500 a month for total assistance (housing, car, flexible, health expenses etc) from me.
We too are supporting one set of parents in their 80s who through no fault of their own are running out of assets due to one parent with dementia who just required in-facility care with a one year private pay commitment. We are learning there is no shame in needing public assistance as we cannot afford >$300k/yr to support one parent in the facility and another parent living on their own. So my following comments come from that point of view.

Rather than you fund the $3,500/month now, consider having your parents spend down their $100k over the next 28 months. You can provide assistance later as needed. Most needs-based assistance programs are income and/or assets tested so the $100k may make them ineligible. After they spend down their assets, your parents don’t have to utilize all assistance programs like low income housing or food assistance if you are providing that. But at a minimum, utilizing just Medicaid (rather than Medicare) for healthcare costs and possible long-term care costs can take some of the financial burden off you. Healthcare related costs often increase as people reach their 80s.

If you haven’t seen the cost of in-home/in-facility long-term care, it is astonishingly high. My area is $200k-$225k/year for a good skilled nursing facility and the better ones require 6-12 month private pay in order to get in ahead of the 3-4 year waiting list for people trying to enter Day 1 on Medicaid (which reimbursed the facility at a lower rate than private pay people). Very difficult for most families to afford it.
Sorry if this was already asked, but how in the world does anyone get into these facilities with those rates? I would imagine an incredibly small percentage of the population would be able to afford them.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Parents with no retirement savings dependent on me

Post by dbr »

Kb008 wrote: Sat Oct 16, 2021 3:54 pm
ivgrivchuck wrote: Sat Oct 16, 2021 2:27 pm
Kb008 wrote: Fri Oct 15, 2021 11:56 pm Hello Bogleheads,
Based on your responses so far, it seems you have decided to rent a house for your parents and pay them $3.5k pocket money per month on top of that.

This is not a Boglehead way to manage finances, but it's your money. You can do whatever you want...

It is not clear what you are asking advice for...
I will not be renting for them and also paying 3500/month on top of that. My current situation is when I am able to move on to a higher paying job, hopefully next year, that I will be paying for them to live alone. They need 50k/yr, have 15K is SS benefits, that it be 35k/yr contributed by me which would be about 3K/month. The advice I was looking for was if it sound for them to keep 100K in their checking (all their savings) as an emergency fund while I cover their expense, spend it, or purchase something like long term care insurance or something useful.
In theory the $100k should be an emergency fund held in cash. If you fear they will fritter it away and you will eventually cover all their expenses after SS, then they could give you the money now or buy an annuity to act as a spendthrift account giving them maybe $400/mo. additional. There is not going to be anything gained by trying to somehow invest the money excepting that they give it you to add to your assets.

Maybe if they annuitize the income could support LTC insurance. Otherwise you have to somehow prevent them from using the money for anything else. It could also be used for Medigap insurance is they have the discipline to do that.
HomeStretch
Posts: 11415
Joined: Thu Dec 27, 2018 2:06 pm

Re: Parents with no retirement savings dependent on me

Post by HomeStretch »

FI4LIFE wrote: Sun Oct 17, 2021 11:30 am Sorry if this was already asked, but how in the world does anyone get into these facilities with those rates? I would imagine an incredibly small percentage of the population would be able to afford them.
You either have the means to private pay, you have long-term care benefits, you utilize Medicaid long-term care (MLTC) in-home or in-facility if you qualify, or you are supported/cared for by family/friends.

In my parents’ case, their SS + a 5% withdrawal from their modest portfolio remaining after 21 years of retirement would have been more than enough to cover their expenses pre-SNF admittance for one parent.

This experience will modify my/spouse’s retirement planning both in terms of likely supporting the impoverished “well” spouse and our own LTC needs. Fortunately we can afford to cover both and are happy to do so for our parents as we feel very blessed to have them all with us at an advanced age.

The biggest eye-opener out of the whole experience is not the cost of SNF private pay but how incredibly difficult it is (and not for lack of trying) to put together a good, quality, reliable 24/7 in-home care arrangement (assuming one’s home is suitable to age in place) when money is not an issue.
User avatar
8foot7
Posts: 4427
Joined: Mon Jan 05, 2015 6:29 pm

Re: Parents with no retirement savings dependent on me

Post by 8foot7 »

dbr wrote: Sun Oct 17, 2021 11:49 am
Kb008 wrote: Sat Oct 16, 2021 3:54 pm
ivgrivchuck wrote: Sat Oct 16, 2021 2:27 pm
Kb008 wrote: Fri Oct 15, 2021 11:56 pm Hello Bogleheads,
Based on your responses so far, it seems you have decided to rent a house for your parents and pay them $3.5k pocket money per month on top of that.

This is not a Boglehead way to manage finances, but it's your money. You can do whatever you want...

It is not clear what you are asking advice for...
I will not be renting for them and also paying 3500/month on top of that. My current situation is when I am able to move on to a higher paying job, hopefully next year, that I will be paying for them to live alone. They need 50k/yr, have 15K is SS benefits, that it be 35k/yr contributed by me which would be about 3K/month. The advice I was looking for was if it sound for them to keep 100K in their checking (all their savings) as an emergency fund while I cover their expense, spend it, or purchase something like long term care insurance or something useful.
In theory the $100k should be an emergency fund held in cash. If you fear they will fritter it away and you will eventually cover all their expenses after SS, then they could give you the money now or buy an annuity to act as a spendthrift account giving them maybe $400/mo. additional. There is not going to be anything gained by trying to somehow invest the money excepting that they give it you to add to your assets.

Maybe if they annuitize the income could support LTC insurance. Otherwise you have to somehow prevent them from using the money for anything else. It could also be used for Medigap insurance is they have the discipline to do that.
I don’t see the point of this. If they’re too frail to ever earn an income again and have no housing and their expenses already exceed their SS benefit then the emergency is here. Why should son spend 3k a month treating them as dependents when they’re sitting on six figures of just-in-case money? Makes no sense.
Topic Author
Kb008
Posts: 39
Joined: Fri Oct 15, 2021 11:25 pm

Re: Parents with no retirement savings dependent on me

Post by Kb008 »

Herekittykitty wrote: Sat Oct 16, 2021 4:57 pm I’ve got a few questions and some suggestions. The questions are mainly to help you and them get the numbers in order, for yourselves. I think the suggestions, or some combination or permutation of the suggestions could give them some dignity and certainty while giving you more financial security (which will help you and them.)

I’ve made some assumptions and I may have misunderstood some of your numbers, and the numbers I’m using might not be what you would use but that likely doesn’t change the general idea.

First: Don’t do anything financially until there is a solid plan in place for your parents that everyone understands. And don’t assume that your current income is the only solution to the problems (although it may be part of the solution) or that using their assets for their support necessarily makes them less secure. You are a loving son and can and will support them if needed – so they can be secure no matter what they have or don’t have. The question should be how to help them be secure with dignity while increasing your financial well-being. They have income and assets, and you have income and assets. They may qualify for benefits with dignity, and which will decrease their expenses. Your income will grow, and your assets can grow as you pay down your SL debt and save and invest.
Now bear with me and stay open minded about these ideas.

If you can write out the following information it will likely help you (if you haven't done it already.) You can give it to us too but you don't need to.

PARENTS:

ASSETS: $100,000 or less

PARENTS' SOCIAL SECURITY RETIREMENT (THIS IS THEIR ONLY INCOME):
Father: early 70’s, poor health, cannot work
Mother: early 70’s, poor health, cannot work
Total (Father + Mother) Social Security Retirement Income: $15,000 per year = $1,250 a month

PARENTS' EXPENSES: Total = $1,250 a month (Social Security) plus $3,500 (from OP) = $4,750 a month for both. Can you break this down further? Separate it out between father and mother when reasonable and add whatever categories I may have left out. I do not see where the $4,750 expenses a month come from.
Medicare payment – Father
Medicare payment – Mother
Health expense copays – Father
Health expense copays – Mother
Housing expense – None (They live with OP who covers rent and utilities.)
Auto expense –
Food –
Recreation –

THE REASONS THE ABOVE MATTERS: For the Social Security amounts – when one passes, the survivor will receive the higher of the two benefits and the lower benefit stops. The numbers will help in your and their planning. The more specific and complete the breakdown in expenses is, the better you and they can plan on a month-to-month basis and predict for the future.

WHAT TO DO WITH THEIR CHECKING ACCOUNT BALANCE OF $100,000: They should have only an amount equal to their current monthly spending plus a buffer, say $1,000 (the buffer is so they don’t accidentally overdraw their account) or whatever makes sense to you and them.

Some of the rest should go in a savings account (or some of the rest could go into laddered CD’s.)

If you and they want them to invest, you might consider a Vanguard Life Strategy Fund: https://investor.vanguard.com/mutual-fu ... trategy/#/ For example, look at the Life Strategy Income Fund or the Life Strategy Conservative Growth Fund.

They can’t afford to take risk for themselves if they had no safety net - but they do. You are their safety net. So the question regarding risk isn’t whether they can afford to take risk (they can’t) but whether you can afford it (you likely can but not as much as if you were not their safety net.)

I doubt if I would do an annuity. If they did do an annuity, an immediate annuity is the only kind to get. But I wouldn’t, as they may need flexibility an annuity wouldn’t give them. (I put their ages as ages at 70 and their state as NY (I just pulled the state out of my hat) and the amount to invest as $75,000 for an immediate annuity with two lives into this site: www.immediateannuities.com and came out with $348 a month income. I wouldn’t tie up their money for that return, but you can put in the correct information and play around with the numbers and see what you think.) Again - I wouldn't.

Don’t discount the possibility of their living in a nice apartment complex for active adults, with other active older adults to keep them company, play cards, and go places with and having a good time, paid for by their assets, and once their assets are spent down, paid for either with a public housing voucher that would bring down their rent in the same apartment they are in, or paid for by you. I live in such an apartment complex and pay full rent and so do most of the residents, but some have housing vouchers bringing down their rent. Our apartments are the same. Everything about it is the same, except some pay lower rent.

HERE’S WHAT I MIGHT DO WITH THEIR MONEY:

Checking account: Keep a month of expenses plus a buffer of around $1,000 or whatever makes sense to you and them. That way everyone looks at their assets and income as a month of expenses in their checking account, not as a checking account with $100,000 or so of cash.

Savings account: Keep 6 months to a year of expenses in a savings account and transfer a set amount once a month into their checking account to cover that month’s expenses. When the savings account gets down to a few month’s expenses, cash a CD and replenish.

CD ladder: Get a series of CD’s for 6 months to a year for a total of whatever number of years makes sense. Cash when due to transfer into their savings account. If a CD has to be cashed early for medical expenses, so be it. The CD’s would have the advantage of making a little income (a few bucks at best) and the advantage of keeping the money separate from their checking (monthly expenses) and savings (monthly supply for the checking account.)
Investing: If they invest at all, consider something like Vanguard Life Strategy Income or Vanguard Life Strategy Conservative. It might make a little improvement in their income (or not) and it might give them the dignity of having an investment (if they think that way.)
(To pull numbers out of my hat – maybe $50,000 - $75,000 divided among savings and a series of CD ladders, and $25,000 to $50,000 in a fund such as Vanguard Life Strategy Retirement or Vanguard Life Strategy Conservative.)

WHETHER TO USE THEIR SAVINGS TO COVER THEIR EXPENSES: Consider using their assets (their Social Security income plus a part or all of their $100,000) to cover a big part of their expenses. For example: Their Social Security of $1,250 goes straight to their checking account. For their remaining monthly expenses, assuming that amount is $3,500 (that seems like a lot) have them transfer somewhere between $1,500 and $2,000 into their account (maybe more,) and you transfer the rest into their account once a month from your account. (Unless it could make more sense to have them cover their entire expenses.)

There are several reasons it is good for them to pay at least a good part (maybe all) of their living expenses out of their assets. The main one is that the amount you pay toward their support is money you could use to pay down your SL debt and invest, saving interest on the debt and increasing your investments which should grow over time. That will benefit you and your parents for the same reason – you are supporting them and the better your financial situation the better you will be able to help them. When you are more secure, they are more secure. You and they do not need to let their savings get down to zero. Maybe it could get down to $10,000 or $25,000 or so. Whatever makes sense. Once their assets get down to whatever point you decide on, you increase the monthly amount you put into their checking account.

I do not know how this works but an accountant and/or elder attorney does: It could be that one or both will end up in assisted living or nursing home care and in order to get Medicaid coverage they may have to pay out of pocket until their assets run out. But if they have been funding part or all of their own expenses in the meantime, those assets will be spent down, and you will have saved that amount of money yourself to pay your SL debt and invest and will therefore be in better financial position to help them.

FINALLY:
1. Talk to a good accountant. Let the accountant know what you propose with your parents and see what the accountant says. There may be tax implications for them or for you or for all of you. You want to get this right. You might be able to declare them your dependents on your income taxes, I have no idea but your account would know. Or there may be some tax liability involved, and you should find out. Also, the accountant might know if there are benefits their assets may prevent them from getting and let you know how much that would amount to – you might a well find out so you and your parents can make the best decisions.

2. Find out (maybe from the accountant and maybe from county social services and maybe from the Senior Center) what benefits are available to seniors, to low income people, and specifically for low income seniors. Some subsidized housing is nice. Some seniors and low income people live in nice apartments where people with regular incomes live, but the low income seniors or low income people of any age might have a housing voucher from the housing authority that lowers their rent. Some low income people get SNAP (food stamps) – which buys the same great food anyone can buy, in the same stores. There may be subsidized or meals available, for example from the Senior Center. There are seniors where I live who get delicious meals delivered from the Senior Center 5 days a week, and the meals are very low cost even without a subsidy.

3. Talk to an attorney specializing in elder law (or possibly family law if the attorney also knows a lot bout elder law.) You and your parents are sharing expenses and mixing funds. Make sure everything is done legally and everyone is protected from any suspicion or accidental legal mishap. This is important.

AND FOR YOU: Have a look at the book The White Coat Investor and have a look at the site of the same name. Live like a resident until your loans are paid off. Invest. The more solid your finances are and the more wealth you build earlier in life the better your life will be and the better you can help others.

You don't have to drive an old car if you don't want to. You can get a medium priced basic middle class car if you want it. Don't get a fancy expensive car, at least not yet.
-----

PARENTS:

ASSETS: $100,000 or less

PARENTS' SOCIAL SECURITY RETIREMENT (THIS IS THEIR ONLY INCOME):
Father: early 70’s, poor health, cannot work
Mother: early 70’s, poor health, cannot work
Total (Father + Mother) Social Security Retirement Income: $15,696 per year = $1,308 a month

Annuity: will not do per your assessment and what I looked at last night as well.

PARENTS' EXPENSES: this projection is for when they stay in my same apartment and we are living apart. I cannot break them down separate from each other and will also need to find out their medicare/copays amount.


Parents living separate:

Fixed expenses
per month
(generous) Rent w/all utilities included/tv/internet : $2000
Car (used, financing until 2025): $350
Auto + Renters insurance: $110
cell phone family (mine included): $120
Total fixed $2580


flexible expense parents
per month
Car Gas: $80
Car maintenance/repair avg: $150
Groceries: $500
clothing/gifts/donations: $500
Out/entertainment/miscellaneous : $300
Total flexible: $1530


Total monthly $4110
Total after SS benefits $2802



Apartment: I will definitely look into this option. Currently I am in a modest 2B/2B instead so they can stay with me. This will change as soon as July/Aug 2022 if I move for the better earning job out of state. I plan to keep them in it for the next year until things are more stable with me and my sister (who may be relocating closer). Then I can look at these housing options. It was already traumatic for my mother to move across the country once into a small apartment after owning a home of 30+ years. I would like to only do this one more time hopefully in 1 yr when everything is settled out and we know where we are at in the country.

WHAT TO DO WITH THEIR CHECKING ACCOUNT BALANCE OF $100,000: I like your solution with savings/CD ladder very much. Will look into it in detail this week.


1. Talk to a good accountant. –Will do.

2. Find out (maybe from the accountant and maybe from county social services and maybe from the Senior Center) what benefits are available to seniors, to low income people, and specifically for low income seniors. – Will do.

3. Talk to an attorney specializing in elder law (or possibly family law if the attorney also knows a lot bout elder law.) – Will do.

The White Coat Investor- I have been following his website and read the book a few years ago. This should be required medical school reading or even pre-med reading in my opinion. It led me to Bogle Heads. Physician on Fire is another good one.

As for my car, I like my car (old German car that has been reliable and fun) and I’m a gear head who has always personally maintained and repaired mine and my family’s cars. If it starts needing major repairs or an unexpected catastrophic failure given it getting long in the tooth, I will need to replace it with something reasonable. I cannot afford to be splurging on a tesla/flashy new (and complicated to work on) German car like many of my colleagues.

I just wanted to say thank you so much for your time and advice. I really appreciate it.
Topic Author
Kb008
Posts: 39
Joined: Fri Oct 15, 2021 11:25 pm

Re: Parents with no retirement savings dependent on me

Post by Kb008 »

biker2035 wrote: Sun Oct 17, 2021 8:16 am OP, it would be great if you could specify what the $3000 per month you have to assist with goes towards? You are buying food, they are living with you, what are their monthly bills? It sounded like selling their home paid off debt. What is left? Seems like planning a budget would be worthwhile to at least see where the money is being spent.
This would be when we are living apart in different states:
Parents living separate:

Fixed expenses
per month
(generous) Rent w/all utilities included/tv/internet
2000
Car (used, financing until 2025)
350
Auto + Renters insurance
110
cell phone family (mine included)
120
Total fixed
2580


flexible expense parents
per month
Car Gas
80
Car maintenance/repair avg
150
Groceries
500
clothing/gifts/donations
500
Out/entertainment/miscellaneous
300
Total flexible
1530


Total monthly
4110
Total after SS benefits
2802
User avatar
8foot7
Posts: 4427
Joined: Mon Jan 05, 2015 6:29 pm

Re: Parents with no retirement savings dependent on me

Post by 8foot7 »

Immediate things I’m doing

- $350/mo car gets paid off with the 100k. I also look into whether a beater could be purchased for less. If they’re not in a 2005ish Honda Accord they could be for $4,000. Rule of thumb, if their car is better than yours, things are off.
- $500 clothing/gifts/donations down to $0.
- $300 out/entertainment/misc down to $50.
- $110 auto renter insurance gets cut in half via liability only policy at state mins (they are close to judgment proof)

I Just cut out $1,170. If you’re indigent and wanting me to fund you monthly, you don’t get to spend $500 a month on clothing gifts and donations. They should have plenty of clothing. No gifts or donations because they have no money to give or donate. Sorry.

These will be tough conversations but they are very necessary.
Last edited by 8foot7 on Sun Oct 17, 2021 1:43 pm, edited 3 times in total.
Topic Author
Kb008
Posts: 39
Joined: Fri Oct 15, 2021 11:25 pm

Re: Parents with no retirement savings dependent on me

Post by Kb008 »

Sandwich wrote: Sat Oct 16, 2021 8:45 pm
JoeRetire wrote: Sat Oct 16, 2021 6:20 pm
Kb008 wrote: Sat Oct 16, 2021 6:15 pm
JoeRetire wrote: Sat Oct 16, 2021 3:59 pm
Kb008 wrote: Sat Oct 16, 2021 3:54 pmThe advice I was looking for was if it sound for them to keep 100K in their checking (all their savings) as an emergency fund while I cover their expense, spend it, or purchase something like long term care insurance or something useful.
You should look into Medicaid if you haven't already done so. They may need to spend down their assets in order to be eligible.
There's no way they will be able to purchase long term care insurance at their age and condition, so don't worry about that.
Yes thank you. They don’t qualify yet do you their assets.
So then to answer your question, they should first be spending down their savings, until they reach the Medicare limit, rather than you spending your money now. No need to delay the inevitable.
I was the POA for a disabled elderly relative and tracked his expenses. I was monitoring when he would be eligible for government benefits; however, he passed away with assets just above the Medicare Savings program limits.

To give you some specific numbers, Medicare Savings programs provide support for low income / low resourced beneficiaries and can help to pay for Medicare premiums, prescriptions, etc. As an example, the Specified Low-Income Medicare Beneficiary Program (SLMB) has a current asset limit for a married couple is $ 11,960 and an income limit of $ 1,762 for a married couple. Your parents could qualify if they reduced their $ 100,000 savings to $ 11,960.

Would your parents / you feel comfortable if they paid out of their own expenses down to the $ 11,960 level ? Assets such as a car do not count toward the limit. So if they do not have ... but could use a reliable car ... that may be a way to "spend down" in an appropriate way.


Thank you for the great info- I will definitely look into this.

A married couple qualifying for the SLMB program can save over $ 3,500 annually since their Medicare part B premium is paid by the government. Further savings can be experienced depending on the prescriptions each has. The key to qualifying is spending down the $ 100k to $ 11,960 or whatever the limit is in the year they qualify. Consider tracking their savings as time goes by so an application can be made at that time.

Additionally, low income / low resourced seniors may qualify for other programs such as Utility Assistance, Food Stamps, Senior Food boxes, etc. These programs may have different asset and income requirements. Good luck.
Topic Author
Kb008
Posts: 39
Joined: Fri Oct 15, 2021 11:25 pm

Re: Parents with no retirement savings dependent on me

Post by Kb008 »

bltn wrote: Sun Oct 17, 2021 10:46 am Kb008

Does the 15,000 yearly social security include your mother s spousal payment as well as your father s social security benefit?
Yes
Topic Author
Kb008
Posts: 39
Joined: Fri Oct 15, 2021 11:25 pm

Re: Parents with no retirement savings dependent on me

Post by Kb008 »

8foot7 wrote: Sun Oct 17, 2021 1:40 pm Immediate things I’m doing

- $350/mo car gets paid off with the 100k. I also look into whether a beater could be purchased for less. If they’re not in a 2005ish Honda Accord they could be for $4,000. Rule of thumb, if their car is better than yours, things are off.
- $500 clothing/gifts/donations down to $0.
- $300 out/entertainment/misc down to $50.
- $110 auto renter insurance gets cut in half via liability only policy at state mins (they are close to judgment proof)

I Just cut out $1,170. If you’re indigent and wanting me to fund you monthly, you don’t get to spend $500 a month on clothing gifts and donations. They should have plenty of clothing. No gifts or donations because they have no money to give or donate. Sorry.

These will be tough conversations but they are very necessary.
Valid points, thank you
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

Re: Parents with no retirement savings dependent on me

Post by JoeRetire »

dbr wrote: Sun Oct 17, 2021 11:49 am Maybe if they annuitize the income could support LTC insurance.
In their 70s with health poor enough to preclude working. Any LTC insurance is either completely unavailable or completely unaffordable.
This isn't just my wallet. It's an organizer, a memory and an old friend.
HomeStretch
Posts: 11415
Joined: Thu Dec 27, 2018 2:06 pm

Re: Parents with no retirement savings dependent on me

Post by HomeStretch »

Kb008 wrote: Sun Oct 17, 2021 1:34 pm … This would be when we are living apart in different states:
Parents living separate …
I don’t see line items in either budget for (1) healthcare premiums/OOP or (2) income taxes.
printer86
Posts: 416
Joined: Mon Apr 25, 2016 8:45 am

Re: Parents with no retirement savings dependent on me

Post by printer86 »

Kb008 wrote: Sat Oct 16, 2021 3:54 pm
ivgrivchuck wrote: Sat Oct 16, 2021 2:27 pm
Kb008 wrote: Fri Oct 15, 2021 11:56 pm Hello Bogleheads,
Based on your responses so far, it seems you have decided to rent a house for your parents and pay them $3.5k pocket money per month on top of that.

This is not a Boglehead way to manage finances, but it's your money. You can do whatever you want...

It is not clear what you are asking advice for...
I will not be renting for them and also paying 3500/month on top of that. My current situation is when I am able to move on to a higher paying job, hopefully next year, that I will be paying for them to live alone. They need 50k/yr, have 15K is SS benefits, that it be 35k/yr contributed by me which would be about 3K/month. The advice I was looking for was if it sound for them to keep 100K in their checking (all their savings) as an emergency fund while I cover their expense, spend it, or purchase something like long term care insurance or something useful.
The right thing for your parents to do with the 100k is to put it in an Ally online savings account and move $3,500 to their checking account every month to pay for their own expenses. In the meantime, you can continue to develop your career and personal relationship. In about 2 years, you can reevaluate the situation. You are their backup plan. It doesn't need to be activated just yet. Good luck.
User avatar
vanbogle59
Posts: 1314
Joined: Wed Mar 10, 2021 7:30 pm

Re: Parents with no retirement savings dependent on me

Post by vanbogle59 »

Kb008 wrote: Sat Oct 16, 2021 1:00 pm
AnnetteLouisan wrote: Sat Oct 16, 2021 8:41 am They have you, they have each other, they have $100k, medicare and social security, they paid off all their debts apparently, 70 is the new 50 and they probably are eligible for SNAP or food banks. If they can stay in reasonable health, dine at the local senior center, keep their costs to the bare minimum and stay active by doing chores or getting part time jobs I think you all can pull it off. Where there‘s a will there’s a way. Stay positive!
Thank you!
To say the least, it can be unsettling to become your parents' parent.
I saw it happen with my brother when my mother's health declined.
He never had children, and his new responsibilities "forced" a dramatic lifestyle change.
He came to love what fate threw at him, and he now looks at those years as the best of his life. I was never prouder of him.
Here's hoping your experience is similar.
Best wishes.
User avatar
AnnetteLouisan
Posts: 7261
Joined: Sat Sep 18, 2021 10:16 pm
Location: New York, NY

Re: Parents with no retirement savings dependent on me

Post by AnnetteLouisan »

In their situation, the large line items for a leased car, clothing, gifts and donations and for entertainment, cable and misc would likely have to go, and any credit cards they have could prudently be taken away.

If they are asking you to fund $3500/mo because you are embarking on a medical career without themselves learning from their mistakes or being willing to get a part time job or make sacrifices in their standard of living, this could easily veer into the unreasonable on their part.

They are in survival mode, at least temporarily. I would even recommend, as an example, renting a room in someone’s house instead of having their own place, and cutting out all non-necessary beverages in their situation and limiting them to water, coffee/tea, juice and milk. I do that myself with no ill effects.
Last edited by AnnetteLouisan on Sun Oct 17, 2021 3:38 pm, edited 2 times in total.
User avatar
FrugalInvestor
Posts: 6214
Joined: Thu Nov 06, 2008 11:20 pm

Re: Parents with no retirement savings dependent on me

Post by FrugalInvestor »

musicmom wrote: Sat Oct 16, 2021 4:11 pm OP, your parents are fortunate to have you in their lives.

I encourage you to investigate services that may be available for your parents. They will vary by state and maybe county.
Not exact same situation, but similar.
Our adult disabled (since birth) daughter has SSDI, Medicare, Medicaid and a Section 8 housing voucher. She pays $200 toward her rent in a safe clean home. She receives monthly cash assistance to hire caregivers (could be family) to help her food shop, laundry, transport to doctors appts, etc
She has enough to buy clothes and personal care items and a basic cell phone.

Waiting lists are long. Application paperwork is arduous. But it is a long-term solution.

Wishing you the best.
Contact your local Area Agency on Aging for all sorts of resources ranging from assistance with subsidized housing, Medicaid, spend-down requirements and strategies, etc. They can provide information and direct you to other sources for it as well.

See here.... https://acl.gov/programs/aging-and-disa ... cies-aging

It sounds like you are planning to be a primary source of financial support indefinitely but what if something happens to you or your income? It's best if your parents are financially independent and they probably would prefer that. There are ways to make that happen so seek them out.
Have a plan, stay the course and simplify. Then ignore the noise!
kelvan80
Posts: 356
Joined: Sun Jan 12, 2014 9:06 pm

Re: Parents with no retirement savings dependent on me

Post by kelvan80 »

I'm not sure the type of area your parents are looking at but maybe you could find a one bedroom that is walkable to grocery stores, parks, etc. I wouldn't be footing the bill of $600 in car expenses even though you can afford it. They need to go bare bones and it sounds like they are used to spending a certain amount of money per month whether or not its yours or theirs. I would make sure that medical is covered, and food. But everything else is fluff. There are plenty of ways to stay entertained for free. And just so you know we will probably be in the same position with my parents but I've already set these boundaries in my mind. My parents didn't cancel cable once in their lives but filed bankruptcy once and almost did it again. They didn't cut when they could have so this is the result of poor money management.
Oatmeal
Posts: 22
Joined: Mon Dec 31, 2018 1:02 pm
Location: Portland

Re: Parents with no retirement savings dependent on me

Post by Oatmeal »

Hey OP, if I were in your shoes here's what I would do.

Luckily your parents have each other. And from the thread it seems if finances are not an issue they can live independently. That is good too. So you got good things going :-). What I, complete Internet stranger, would do is invest the $100k in say a 50/50 taxable account and let them draw about $12k a year from it. If my guess is right it will take about 10 years to deplete. That means you can reduce the amount you have to provide to them by $1k a month. So now you are down to $2k/month.

I would then look into state aids like others mentioned upthread. Maybe your sister can get some income from looking after your parents on the side. And your parents can get some assistance to pay rent and other expenses. Ideally Medicaid to help with cost of meds and additional expenses not covered by Medicare. If yes, hopefully this would reduce your burden down to $1500/month (ie state assistance about $500/month?). You are not looking for the state to solve the entire picture. I think $500/month is reasonable.

So my guess for the next 10 years you could potentially, while moving and building your career and starting a family, lower that expense by half. Yeah there is risk especially investing in a taxable account. So you have to decide if it is worth the risk.

Like I said, luckily, they have each other. My mom lives with us. And she can't live on her own. She also has health issues and about the same age as your parents (and zero savings). Not really a choice for her to live independently even if money is not an issue. So while your parents got each other I think you got a manageable situation. How about that for optimism :-)
Da5id
Posts: 5065
Joined: Fri Feb 26, 2016 7:20 am

Re: Parents with no retirement savings dependent on me

Post by Da5id »

ivgrivchuck wrote: Sat Oct 16, 2021 2:27 pm
Kb008 wrote: Fri Oct 15, 2021 11:56 pm Hello Bogleheads,
Based on your responses so far, it seems you have decided to rent a house for your parents and pay them $3.5k pocket money per month on top of that.

This is not a Boglehead way to manage finances, but it's your money. You can do whatever you want...

It is not clear what you are asking advice for...
Unclear what specific tenet of "the boglehead way" you think OP is violating. He sounds like he is living within his means and saving enough. That he chooses to spend his money helping his parents who are too unhealthy to work support themselves seems laudable to me. If my parents were still around and needed support I'd do that too.

Good luck OP, sounds like you have a plan to make it happen.
smectym
Posts: 1530
Joined: Thu May 26, 2011 5:07 pm

Re: Parents with no retirement savings dependent on me

Post by smectym »

Outer Marker wrote: Sat Oct 16, 2021 1:36 pm
Kb008 wrote: Fri Oct 15, 2021 11:56 pm I am a new physician graduate starting on a low salary compared to my peers with no room for growth where I am. I am blessed to do what I do but currently in process of changing jobs hopefully by August 2022 since I know my earning potential is much more in a different location (out of state) and practice setting. This will help with my current financial obligations not to mention the non-ideal work environment due to corporate acquisition of the practice I am in.
Sorry to hear of your difficult situation. I commend you for stepping up and helping your parents. Sooner or later in life, the roles tend to reverse.

I think the single most important thing you can do is maximize your own earning potential. Fortunately, you have a degree and the ability to make a great deal of money. Don't let the other stuff become a distraction to your career, life and happiness. I'm currently paying $3,500 a month in so-called "child support" which I am able more or less take in stride. Your obligation, like mine, has an endpoint, particularly considering your parents are in poor health.

Be careful about being "too close" in living arrangements. You're single, starting out your career, and need a home and space of your own. I wouldn't want to share a house with elder relatives unless it was a true separate quarters with separate entrance, etc. Your date or significant other might not be comfortable with close shared living space.

If you're earning good money, you can have your own life and support your parents too. There might be some opportunity for arbitrage if you live and work in a HCOL city, and rent them a modest place in a different geographic area. I do think that $3,500/mo in addition to social security, albeit modest, is a lot to pay in support.

No magic bullet here on re-arranging investments or buying an annuity. Your income is going to be what carries you though this.
Outer Marker says what I was thinking also: the best case for all involved is for OP to maximize career prospects and earnings. Nor should OP neglect, or sacrifice, the potential for marriage, having kids, etc. if that’s part of the program. That goes to the matter of living arrangement, and further, sounds like parents, especially dad, might prefer an independent living space, if that’s doable, rather than close quarters as a daily reminder of their dependent situation.
BarbBrooklyn
Posts: 1717
Joined: Fri Aug 24, 2018 9:33 am
Location: NYC

Re: Parents with no retirement savings dependent on me

Post by BarbBrooklyn »

JoeRetire wrote: Sat Oct 16, 2021 6:20 pm
Kb008 wrote: Sat Oct 16, 2021 6:15 pm
JoeRetire wrote: Sat Oct 16, 2021 3:59 pm
Kb008 wrote: Sat Oct 16, 2021 3:54 pmThe advice I was looking for was if it sound for them to keep 100K in their checking (all their savings) as an emergency fund while I cover their expense, spend it, or purchase something like long term care insurance or something useful.
You should look into Medicaid if you haven't already done so. They may need to spend down their assets in order to be eligible.
There's no way they will be able to purchase long term care insurance at their age and condition, so don't worry about that.
Yes thank you. They don’t qualify yet do you their assets.
So then to answer your question, they should first be spending down their savings, until they reach the Medicare limit, rather than you spending your money now. No need to delay the inevitable.
Very important for you and your parents to visit an edercare attorney who understands Medicaid in your state. A Medicaid compliant annuity may be the answer to your question of what to do with the 100k down the road when/if one of them requires nursing home care. It is equally important now for you to get advice so that you don't inadvertently disqualify your parents.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."
User avatar
dratkinson
Posts: 6116
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: Parents with no retirement savings dependent on me

Post by dratkinson »

Kb008 wrote: Fri Oct 15, 2021 11:56 pm...

My Roth IRA (stopped contributions since do not qualify due to income bracket)
31% AMERICAN 2055 TARGET DATE RETIREMENT CL C (CCJTX) (1.48%... I know…sold to me when I was a new resident by a “financial advisor”)
I'll defer to others, for ideas to solve your parents' problem as I don't have that knowledge. But, "Good on ya, mate."

You might want to update your OP (original post/poster). Why? Your parents' information (expenses, sources/amounts of income, desires,...), which I've gathered from reading these two pages, would have been much more helpful if I'd known it in your OP. So by updating your OP to include all of your parents' information, a knowledgeable person could "hit the ground running" with ideas to help, instead of spending time searching for more information.



For you. Some ideas so you may tax-shelter more money each year in your TA (tax-advantaged) and taxable accounts.


Backdoor Roth IRA.

If you would prefer to resume contributing to your rIRA (Roth IRA), you can use the backdoor Roth technique.
See "Backdoor Roth IRA": https://www.bogleheads.org/wiki/Backdoor_Roth

In above, see "Cautions", as your existing tIRA (traditional IRA) will cause a pro-rata problem if you want to use the backdoor Roth technique. But one simple way to sidestep the problem is to roll your tIRA into a traditional 401k, if your employer will allow it. (Pro-rata problem only applies to backdoor Roth, not to mega-backdoor Roth.)


Mega-backdoor Roth IRA.

If your employer allows you to make after-tax contributions to your 401k, and you would prefer that after-tax money be in a Roth instead of remaining in your traditional 401k, then can use the mega-backdoor Roth technique.
See "Mega-backdoor Roth": https://www.bogleheads.org/wiki/Mega-backdoor_Roth


Self-employed retirement plan. If at any time you are considered to be a "self-employed" employee (not eligible to contribute to an employer's retirement plan), then you are eligible to invest in your own self-employed retirement plan.


Fund selection. A cheap TDF (target-date fund) is appropriate for all of your TA accounts. Why? Simplicity. Since you know the fund is self-managing---automatically rebalancing between US/international, stocks/bonds as the market fluctuates---then you are somewhat inoculated against feeling the need to obsessively peek/tweak. This means you can spend all of your time living your life, while your investments manage themselves. Your only remaining investment requirement is to get new contributions into the accounts each year.


Taxable investing. In a taxable account, it's recommended to use discrete funds (total US stock market index fund, total international stock market index fund, national/single-state municipal bond funds). Why?

While a TDF fund is appropriate for your TA accounts, it is not appropriate for your taxable account (when you begin taxable investing---after you max all annual TA contributions, and have more money to invest). Why? Because TDFs use taxable bonds. And in your assumed higher tax brackets (fed+state), a municipal bond fund should provide more after-tax income.
See "Tax-efficient fund placement": https://www.bogleheads.org/wiki/Tax-eff ... _placement


When you are ready to use any of these ideas, come back and ask forum for advice.


Welcome.


Edit. Clarity, second thoughts.
Last edited by dratkinson on Mon Oct 18, 2021 4:49 pm, edited 1 time in total.
d.r.a., not dr.a. | I'm a novice investor; you are forewarned.
User avatar
HanSolo
Posts: 2312
Joined: Thu Jul 19, 2012 3:18 am

Re: Parents with no retirement savings dependent on me

Post by HanSolo »

Based on my experience with my own elderly parents, I see the following as the best way forward in this kind of situation.
HomeStretch wrote: Sat Oct 16, 2021 1:01 pm Rather than you fund the $3,500/month now, consider having your parents spend down their $100k over the next 28 months. You can provide assistance later as needed. Most needs-based assistance programs are income and/or assets tested so the $100k may make them ineligible. After they spend down their assets, your parents don’t have to utilize all assistance programs like low income housing or food assistance if you are providing that. But at a minimum, utilizing just Medicaid (rather than Medicare) for healthcare costs and possible long-term care costs can take some of the financial burden off you. Healthcare related costs often increase as people reach their 80s.
AllMostThere wrote: Sat Oct 16, 2021 3:43 pm You still need to investigate the local options for subsidized senior housing, get on the waiting list now. You may be surprised that the offering may actually be pretty good, but you won't know unless you & parents start now. You can still investigate the option of housing in better part of town.
FrugalInvestor wrote: Sun Oct 17, 2021 2:57 pm
musicmom wrote: Sat Oct 16, 2021 4:11 pm I encourage you to investigate services that may be available for your parents. They will vary by state and maybe county. ...

Waiting lists are long. Application paperwork is arduous. But it is a long-term solution.
Contact your local Area Agency on Aging for all sorts of resources ranging from assistance with subsidized housing, Medicaid, spend-down requirements and strategies, etc. They can provide information and direct you to other sources for it as well.

See here.... https://acl.gov/programs/aging-and-disa ... cies-aging
BarbBrooklyn wrote: Mon Oct 18, 2021 2:55 am
JoeRetire wrote: Sat Oct 16, 2021 6:20 pm So then to answer your question, they should first be spending down their savings, until they reach the Medicare limit, rather than you spending your money now. No need to delay the inevitable.
Very important for you and your parents to visit an edercare attorney who understands Medicaid in your state. A Medicaid compliant annuity may be the answer to your question of what to do with the 100k down the road when/if one of them requires nursing home care. It is equally important now for you to get advice so that you don't inadvertently disqualify your parents.
As for Medicaid, I had one parent who was "dual eligible" (Medicare/Medicaid) and also in the QMB program (Qualified Medicare Beneficiary). That helped a lot.
Strategic Macro Senior (top 1%, 2019 Bogleheads Contest)
susan123
Posts: 49
Joined: Wed Apr 21, 2021 10:53 am

Re: Parents with no retirement savings dependent on me

Post by susan123 »

You are a good person to try to help elderly parents.

Are they in reasonable health? If health allows, they should both find a job.

Also 15K of SS seems low. Does that include spousal SS?

Best wishes.
btakla
Posts: 35
Joined: Mon Dec 18, 2017 1:07 pm

Re: Parents with no retirement savings dependent on me

Post by btakla »

Kb008 wrote: Sat Oct 16, 2021 1:18 pm
HomeStretch wrote: Sat Oct 16, 2021 1:01 pm
Kb008 wrote: Sat Oct 16, 2021 12:36 pm … Only savings is <100K in their checking. They lost the rest. They will need an additional $3,500 a month for total assistance (housing, car, flexible, health expenses etc) from me.
We too are supporting one set of parents in their 80s who through no fault of their own are running out of assets due to one parent with dementia who just required in-facility care with a one year private pay commitment. We are learning there is no shame in needing public assistance as we cannot afford >$300k/yr to support one parent in the facility and another parent living on their own. So my following comments come from that point of view.

Rather than you fund the $3,500/month now, consider having your parents spend down their $100k over the next 28 months. You can provide assistance later as needed. Most needs-based assistance programs are income and/or assets tested so the $100k may make them ineligible. After they spend down their assets, your parents don’t have to utilize all assistance programs like low income housing or food assistance if you are providing that. But at a minimum, utilizing just Medicaid (rather than Medicare) for healthcare costs and possible long-term care costs can take some of the financial burden off you. Healthcare related costs often increase as people reach their 80s.

If you haven’t seen the cost of in-home/in-facility long-term care, it is astonishingly high. My area is $200k-$225k/year for a good skilled nursing facility and the better ones require 6-12 month private pay in order to get in ahead of the 3-4 year waiting list. Very difficult for most families to afford it.
Very sorry to hear that. I really appreciate your insight. My though was that the $100K should be untouched and used only for the emergencies you have described. I guess I felt more comfortable providing assistance while they held on to that money with their backup safety fund that they would not have touched. That is why I was wondering if to save that money, convert to annuity, or invest with lower risk mix rather than they burn through it.

I like the idea of them spending the 100k over the next couple of years to qualify for some medical assistance. you can even replenish this money under your name in the same time period. i.e. while they spend their 100k you save for them what you would have budgeted for them in a saving account under your name to qualify them for government assistance.
Topic Author
Kb008
Posts: 39
Joined: Fri Oct 15, 2021 11:25 pm

Re: Parents with no retirement savings dependent on me

Post by Kb008 »

vanbogle59 wrote: Sun Oct 17, 2021 1:59 pm
Kb008 wrote: Sat Oct 16, 2021 1:00 pm
AnnetteLouisan wrote: Sat Oct 16, 2021 8:41 am They have you, they have each other, they have $100k, medicare and social security, they paid off all their debts apparently, 70 is the new 50 and they probably are eligible for SNAP or food banks. If they can stay in reasonable health, dine at the local senior center, keep their costs to the bare minimum and stay active by doing chores or getting part time jobs I think you all can pull it off. Where there‘s a will there’s a way. Stay positive!
Thank you!
To say the least, it can be unsettling to become your parents' parent.
I saw it happen with my brother when my mother's health declined.
He never had children, and his new responsibilities "forced" a dramatic lifestyle change.
He came to love what fate threw at him, and he now looks at those years as the best of his life. I was never prouder of him.
Here's hoping your experience is similar.
Best wishes.

Thank you appreciate the support
Topic Author
Kb008
Posts: 39
Joined: Fri Oct 15, 2021 11:25 pm

Re: Parents with no retirement savings dependent on me

Post by Kb008 »

AllMostThere wrote: Sat Oct 16, 2021 3:43 pm
Kb008 wrote: Sat Oct 16, 2021 3:24 pm ......SS benefits of $15K.
Yes, this is a difficult situation and you are a great son to be wanting to help. You still need to investigate the local options for subsidized senior housing, get on the waiting list now. You may be surprised that the offering may actually be pretty good, but you won't know unless you & parents start now. You can still investigate the option of housing in better part of town. Also, the $15K annual SS seems really low, given your DF worked full time. While your DM may have been a stay-at-home spouse, she is still entitled to 50% of DF's SS benefit. Is she collecting this? If so, that would mean your DF is collecting $10K and DM is collecting $5K - Still seems low. Investigate and report back. I realize all the questions from posters may be somewhat aggravating to you (not immediate recommended guidance), but these questions help you peel back the layers of the onion to fully understand situation to allow planned next steps. You are doing all the right things, keep it up and God Bless.
Will do. Not aggravating at all I completely understand and appreciate different view points. Sort of like a complex surgical case coming up and getting different perspectives and experiences from senior docs then ultimately deciding on the course of action.
Bogle Learner
Posts: 46
Joined: Mon Jul 26, 2021 10:56 pm

Re: Parents with no retirement savings dependent on me

Post by Bogle Learner »

Hello,

The thread had quite a number of extensive replies, so I apologize if my feedback doesn't benefit from the information that has been already shared, but I thought I would provide some perspective from what I have seen. I think I would tackle this from the most potentially large/catastrophic items.

1. Health Insurance
Even through your parents may be alright now, there's no assurance that it will remain so as they age further. I discovered this the hard way. Unforeseen medical expenses in this country unfortunately can really sink everything and it would easily eat into their 100K remaining savings very quickly if a catastrophic event broke out. So instead of focusing on regular recurring expenses, this is the first item I would tackle. You mention that they have Medicare - do they have a Medicare HMO plan or do they have regular Medicare? If the latter, do they have supplemental coverage for the 20% that regular Medicare does not cover? If they have a Medicare HMO plan, have you checked limits/what's not covered and have a good back up plan?

2. Housing
While I note that you said you don't want to live with them under the same roof, I would echo some of the posters who suggested whether you can find a subdivided space (a mother/daughter) to live with them with sufficient privacy. They can also pursue that type of housing with your sister and maybe you can subsidize a part of their collective housing expense. Housing is the biggest expense item in any one's budget and there's hidden costs like utilities, cable/internet, etc. that can add up and that, if you were under one roof, you can save on. On senior housing, I would look into it - I think less popular living areas tend to have a much smaller waitlist and take less time. Forget popular areas - you will probably be on the waiting list forever and not get anywhere. As parents age, their independence decreases, and there will come a point where physical proximity is needed/might actually save time as you care for them.

3. $3000 Budget
I just wanted to note that while the $3000 budget may work today, it may not tomorrow. It almost never works out exactly as budgeted. As such, I would focus on getting #1 and #2 worked out, and the rest would become how to keep their $100K going to cover their recurring expenses (whether part invested or not). Also, the $3000 per month, while you may not feel it now, it really eats into your ability to save and thus build your own future nest egg as you yourself age (you won't be young forever and those kids will become expensive). So if it was me, I would try to get 1&2 tied down and see if I can turn the $100K into a recurring income source to ride them through whatever time that is left. In terms of investment, I think some good dividend funds and savings come to mind (although the savings interest rate is so low these days, it's almost nothing, still better than checking).

For those who keep on asking where the $3000 is going, it really takes quite a bit to maintain a "separate household". Utilities, cable/internet, car repairs, etc. all add up, in addition to basic rent and basic medical expenses. I wasn't shocked by the number at all.
User avatar
ram
Posts: 2281
Joined: Tue Jan 01, 2008 9:47 pm
Location: Midwest

Re: Parents with no retirement savings dependent on me

Post by ram »

You have indicated that you want to support them to the extent of 35000/ yr.

The best way for you to earn the extra income would be to find a job at a location with physician shortages such that you have opportunities to do extra ER or urgent care shifts to make more money.
Ram
Topic Author
Kb008
Posts: 39
Joined: Fri Oct 15, 2021 11:25 pm

Re: Parents with no retirement savings dependent on me

Post by Kb008 »

AnnetteLouisan wrote: Sun Oct 17, 2021 2:49 pm In their situation, the large line items for a leased car, clothing, gifts and donations and for entertainment, cable and misc would likely have to go, and any credit cards they have could prudently be taken away.

If they are asking you to fund $3500/mo because you are embarking on a medical career without themselves learning from their mistakes or being willing to get a part time job or make sacrifices in their standard of living, this could easily veer into the unreasonable on their part.

They are in survival mode, at least temporarily. I would even recommend, as an example, renting a room in someone’s house instead of having their own place, and cutting out all non-necessary beverages in their situation and limiting them to water, coffee/tea, juice and milk. I do that myself with no ill effects.
thank you
Topic Author
Kb008
Posts: 39
Joined: Fri Oct 15, 2021 11:25 pm

Re: Parents with no retirement savings dependent on me

Post by Kb008 »

kelvan80 wrote: Sun Oct 17, 2021 4:08 pm I'm not sure the type of area your parents are looking at but maybe you could find a one bedroom that is walkable to grocery stores, parks, etc. I wouldn't be footing the bill of $600 in car expenses even though you can afford it. They need to go bare bones and it sounds like they are used to spending a certain amount of money per month whether or not its yours or theirs. I would make sure that medical is covered, and food. But everything else is fluff. There are plenty of ways to stay entertained for free. And just so you know we will probably be in the same position with my parents but I've already set these boundaries in my mind. My parents didn't cancel cable once in their lives but filed bankruptcy once and almost did it again. They didn't cut when they could have so this is the result of poor money management.
Yes, I have cut down cable and showed them how to use Sling instead. As for car I am working on that. The apartment downsizing will happen.

Thank you
Topic Author
Kb008
Posts: 39
Joined: Fri Oct 15, 2021 11:25 pm

Re: Parents with no retirement savings dependent on me

Post by Kb008 »

kelvan80 wrote: Sun Oct 17, 2021 4:08 pm I'm not sure the type of area your parents are looking at but maybe you could find a one bedroom that is walkable to grocery stores, parks, etc. I wouldn't be footing the bill of $600 in car expenses even though you can afford it. They need to go bare bones and it sounds like they are used to spending a certain amount of money per month whether or not its yours or theirs. I would make sure that medical is covered, and food. But everything else is fluff. There are plenty of ways to stay entertained for free. And just so you know we will probably be in the same position with my parents but I've already set these boundaries in my mind. My parents didn't cancel cable once in their lives but filed bankruptcy once and almost did it again. They didn't cut when they could have so this is the result of poor money management.
Yes, I have cut down cable and showed them how to use Sling instead. As for car I am working on that. The apartment downsizing will happen.

Thank you
Topic Author
Kb008
Posts: 39
Joined: Fri Oct 15, 2021 11:25 pm

Re: Parents with no retirement savings dependent on me

Post by Kb008 »

Oatmeal wrote: Sun Oct 17, 2021 10:43 pm Hey OP, if I were in your shoes here's what I would do.

Luckily your parents have each other. And from the thread it seems if finances are not an issue they can live independently. That is good too. So you got good things going :-). What I, complete Internet stranger, would do is invest the $100k in say a 50/50 taxable account and let them draw about $12k a year from it. If my guess is right it will take about 10 years to deplete. That means you can reduce the amount you have to provide to them by $1k a month. So now you are down to $2k/month.

I would then look into state aids like others mentioned upthread. Maybe your sister can get some income from looking after your parents on the side. And your parents can get some assistance to pay rent and other expenses. Ideally Medicaid to help with cost of meds and additional expenses not covered by Medicare. If yes, hopefully this would reduce your burden down to $1500/month (ie state assistance about $500/month?). You are not looking for the state to solve the entire picture. I think $500/month is reasonable.

So my guess for the next 10 years you could potentially, while moving and building your career and starting a family, lower that expense by half. Yeah there is risk especially investing in a taxable account. So you have to decide if it is worth the risk.

Like I said, luckily, they have each other. My mom lives with us. And she can't live on her own. She also has health issues and about the same age as your parents (and zero savings). Not really a choice for her to live independently even if money is not an issue. So while your parents got each other I think you got a manageable situation. How about that for optimism :-)
Will look into the 50/50 taxable account option and weigh the risks and pros. Thank you for your input and best of health for your mother.
Topic Author
Kb008
Posts: 39
Joined: Fri Oct 15, 2021 11:25 pm

Re: Parents with no retirement savings dependent on me

Post by Kb008 »

dratkinson wrote: Mon Oct 18, 2021 4:20 am
Kb008 wrote: Fri Oct 15, 2021 11:56 pm...

My Roth IRA (stopped contributions since do not qualify due to income bracket)
31% AMERICAN 2055 TARGET DATE RETIREMENT CL C (CCJTX) (1.48%... I know…sold to me when I was a new resident by a “financial advisor”)
I'll defer to others, for ideas to solve your parents' problem as I don't have that knowledge. But, "Good on ya, mate."

You might want to update your OP (original post/poster). Why? Your parents' information (expenses, sources/amounts of income, desires,...), which I've gathered from reading these two pages, would have been much more helpful if I'd known it in your OP. So by updating your OP to include all of your parents' information, a knowledgeable person could "hit the ground running" with ideas to help, instead of spending time searching for more information.



For you. Some ideas so you may tax-shelter more money each year in your TA (tax-advantaged) and taxable accounts.


Backdoor Roth IRA.

If you would prefer to resume contributing to your rIRA (Roth IRA), you can use the backdoor Roth technique.
See "Backdoor Roth IRA": https://www.bogleheads.org/wiki/Backdoor_Roth

In above, see "Cautions", as your existing tIRA (traditional IRA) will cause a pro-rata problem if you want to use the backdoor Roth technique. But one simple way to sidestep the problem is to roll your tIRA into a traditional 401k, if your employer will allow it. (Pro-rata problem only applies to backdoor Roth, not to mega-backdoor Roth.)


Mega-backdoor Roth IRA.

If your employer allows you to make after-tax contributions to your 401k, and you would prefer that after-tax money be in a Roth instead of remaining in your traditional 401k, then can use the mega-backdoor Roth technique.
See "Mega-backdoor Roth": https://www.bogleheads.org/wiki/Mega-backdoor_Roth


Self-employed retirement plan. If at any time you are considered to be a "self-employed" employee (not eligible to contribute to an employer's retirement plan), then you are eligible to invest in your own self-employed retirement plan.


Fund selection. A cheap TDF (target-date fund) is appropriate for all of your TA accounts. Why? Simplicity. Since you know the fund is self-managing---automatically rebalancing between US/international, stocks/bonds as the market fluctuates---then you are somewhat inoculated against feeling the need to obsessively peek/tweak. This means you can spend all of your time living your life, while your investments manage themselves. Your only remaining investment requirement is to get new contributions into the accounts each year.


Taxable investing. In a taxable account, it's recommended to use discrete funds (total US stock market index fund, total international stock market index fund, national/single-state municipal bond funds). Why?

While a TDF fund is appropriate for your TA accounts, it is not appropriate for your taxable account (when you begin taxable investing---after you max all annual TA contributions, and have more money to invest). Why? Because TDFs use taxable bonds. And in your assumed higher tax brackets (fed+state), a municipal bond fund should provide more after-tax income.
See "Tax-efficient fund placement": https://www.bogleheads.org/wiki/Tax-eff ... _placement


When you are ready to use any of these ideas, come back and ask forum for advice.


Welcome.


Edit. Clarity, second thoughts.
Re: parents info in the OP, done, thanks for the suggestion.

The tax efficiency strategies sound great and I'll have to do my due diligence so as to do it by the book. I like the idea of TDF for TA accounts from a simplicity standpoint and taxable for the reason above. The only issue at my current job is the high expense ratio of the avail TDF in the 401k offered so I am using my method of diversifying with the IRA and other offered funds at this time). I will look to implement when possible as it makes excellent sense. Thank you so much for your advice and information!
Post Reply