Advice for my divorced mother (not sure to sell/not sell house)
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Advice for my divorced mother (not sure to sell/not sell house)
Hello, I'd appreciate any advice you have! Thanks in advance.
My mother (~68) is recently divorced and does not have a retirement plan. My father basically took all retirement finances and is remarried. Finding another job is proving difficult for mom as she spent the last 30 years of her marriage (total 40 yrs) stay-at-home. In the divorce, she received the house, which she rents to tenants to collect income. She also lives there and shares space with tenants. Alimony is very little and barely covers housing expenses. The house is a lot to maintain for her, and she is looking to sell soon. However, I'm worried about her next step if she does sell the property because she won't have a direct source of income anymore.
The house may be worth $800k+, not sure what she can/will get. She still owes on the mortgage, probably $250k.
At her age (~68), is it possible to retire on this amount?
Is renting a good choice?
Instead of selling would it be better to rent out the whole house to a family, and rented an apartment for herself?
Any suggestions regarding what profession may need people her age?
TL;DR: Mother is of retirement age and has no retirement plan due to recent divorce. She still owes the repayment of the loan on her house and uses the house for her income (rents to tenants). The house is a lot of upkeep for her. Is selling a good idea at all? What are your creative alternatives to this sell/not sell quandary? I realize this is all over the place and I would appreciate any advice...thanks so much!
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UPDATE 01/17/2022
Hello all!
I want to post an update to this because I got some great advice in the original post. My mom has accepted an offer on the house, which will sell for around $800k.
She has no other retirement assets, and I was hoping to get some ideas for how to invest in the short term and for the long term. Some of the previous wisdom was to find a condo, for instance, that was around $150k, leaving around $300k plus alimony and Social Security to live on comfortably.
Considering she is 72 and does not have other retirement assets, I was wondering your thoughts on the best way to manage these funds for the long haul. Is a 70/30 split of Bonds:Stocks a good strategy? She wants to remain in the geographic area and there isn't immediate family in the area so their assistance is not an option currently.
What would you do?
My mother (~68) is recently divorced and does not have a retirement plan. My father basically took all retirement finances and is remarried. Finding another job is proving difficult for mom as she spent the last 30 years of her marriage (total 40 yrs) stay-at-home. In the divorce, she received the house, which she rents to tenants to collect income. She also lives there and shares space with tenants. Alimony is very little and barely covers housing expenses. The house is a lot to maintain for her, and she is looking to sell soon. However, I'm worried about her next step if she does sell the property because she won't have a direct source of income anymore.
The house may be worth $800k+, not sure what she can/will get. She still owes on the mortgage, probably $250k.
At her age (~68), is it possible to retire on this amount?
Is renting a good choice?
Instead of selling would it be better to rent out the whole house to a family, and rented an apartment for herself?
Any suggestions regarding what profession may need people her age?
TL;DR: Mother is of retirement age and has no retirement plan due to recent divorce. She still owes the repayment of the loan on her house and uses the house for her income (rents to tenants). The house is a lot of upkeep for her. Is selling a good idea at all? What are your creative alternatives to this sell/not sell quandary? I realize this is all over the place and I would appreciate any advice...thanks so much!
________________________________________________________________________________________________________
UPDATE 01/17/2022
Hello all!
I want to post an update to this because I got some great advice in the original post. My mom has accepted an offer on the house, which will sell for around $800k.
She has no other retirement assets, and I was hoping to get some ideas for how to invest in the short term and for the long term. Some of the previous wisdom was to find a condo, for instance, that was around $150k, leaving around $300k plus alimony and Social Security to live on comfortably.
Considering she is 72 and does not have other retirement assets, I was wondering your thoughts on the best way to manage these funds for the long haul. Is a 70/30 split of Bonds:Stocks a good strategy? She wants to remain in the geographic area and there isn't immediate family in the area so their assistance is not an option currently.
What would you do?
Last edited by FundsABlazin on Mon Jan 17, 2022 3:43 pm, edited 1 time in total.
Re: Advice for my divorced mother (not sure to sell/not sell house)
What are her annual expenses? What is she expecting for social security? Is she taking it now? How much is alimony and for how long will she receive it for?
Personally I wouldn't sell a house with tenants in it. For how long can she manage without the rental income?
Personally I wouldn't sell a house with tenants in it. For how long can she manage without the rental income?
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Re: Advice for my divorced mother (not sure to sell/not sell house)
Thanks so much for the reply!
She started collecting at 62. It's about $820/month. But she received her ex's SS too. See totals below. Thanks so much for your help.
Total Expenses: ~$50,223
Income: ~$85,500
She should receive alimony for life. Her ex is 75 y.o.
She started collecting at 62. It's about $820/month. But she received her ex's SS too. See totals below. Thanks so much for your help.
Total Expenses: ~$50,223
Income: ~$85,500
She should receive alimony for life. Her ex is 75 y.o.
Re: Advice for my divorced mother (not sure to sell/not sell house)
Unless this is a typo, what is the problem with the current plan.FundsABlazin wrote:Thanks so much for the reply!
Total Expenses: ~$50,223
Income: ~$85,500
"Don't trust everything you read on the Internet"- Abraham Lincoln
Re: Advice for my divorced mother (not sure to sell/not sell house)
So roughly $10k is social security. How much is the rental income and how much is alimony?
I wouldn't count on alimony forever. She is basically a 75 year old man's heartbeat away from losing it.
Let's say she nets 500k from the sale. 800k home - 250k mortgage -50k closing costs. At a 4%withdrawal rate that would leave her 25k of expenses/year.
So 25k from her savings plus 10k SS would leave her $35k/yr to live. I'm not counting alimony for reasons stated above. Does she have any other savings or investments? What has she been doing with e $30k additional income above her expenses?
I wouldn't count on alimony forever. She is basically a 75 year old man's heartbeat away from losing it.
Let's say she nets 500k from the sale. 800k home - 250k mortgage -50k closing costs. At a 4%withdrawal rate that would leave her 25k of expenses/year.
So 25k from her savings plus 10k SS would leave her $35k/yr to live. I'm not counting alimony for reasons stated above. Does she have any other savings or investments? What has she been doing with e $30k additional income above her expenses?
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Re: Advice for my divorced mother (not sure to sell/not sell house)
Income: Alimony ($24,000); Rental income ($25,200); Social Security ($9,957 total); SS from Ex ($26,400).mrsytf wrote:So roughly $10k is social security. How much is the rental income and how much is alimony?
I wouldn't count on alimony forever.
Total income: ~$85.5k
Total expenses this year were: $12,574 (mortgage); Property Tax ($12,857); HO Insurance ($3,900); Cable (3360); Oil ($4,482); Electric ($2,299); Water/Sewer ($786); Phone ($720); Cleaning of property ($2,400); Advertising of property ($520); Storage rental ($1560); Snow & Lawn ($1945); Trash ($920); Maintenance ($1,900);
Total Expenses: $50,223
Re: Advice for my divorced mother (not sure to sell/not sell house)
The house sounds like it is difficult now and I would think that in another ten years it may be impossible. In many area housing there is a bit of a bubble now and if that pops home prices could drop 20% or more and so keeping virtually all of her net worth in the house is way too risky. In a bad housing market prices not only drop but it can take a long time to sell a house.FundsABlazin wrote: The house may be worth $800k+, not sure what she can/will get. She still owes on the mortgage, probably $250k.
At her age (~68), is it possible to retire on this amount?
The first thing to do would be to figure out how much she can clear if she sells the house. I'm not sure how the homeowners capital gains exemption and cost basis works in a divorce but I would think that it would be in the ballpark of $450k-$500K. Having rented out rooms will complicate the taxes so it would be worthwhile to get professional tax advice before she sells it so she knows what to expect.
It would work best to move to a lower cost of living area. There are lots of nice areas where you can get a nice low maintenance condo for around $150K or so. With a paid off condo, Social Security, alimony, and maybe $300K in the bank she should be able to live a comfortable retirement. Even if she does not want to move to a different region moving 30+minutes farther out of town will often make a dramatic difference in housing prices. If she has any other kids that live in less expensive area she might consider moving closer to one of them. If she does move somewhere she should rent for a year to try out the area to make sure that it works for her.
If she is open to moving to a different area then college towns are an interesting choice that are worth looking into. They often have a lot of interesting activities going on, reasonable housing away from the college campus, some public transportation which will be important as she ages, and good economics with employment opportunities.
An obvious one would be doing child care for a kid or two in someone's home, possibly for a special needs kid. Even baby sitting or after school care can add up if she does it regularly.FundsABlazin wrote:Any suggestions regarding what profession may need people her age?
She would know how to do that and in the right situation people would love to "rent a grandmother" when they don't have available relatives living nearby.
Re: Advice for my divorced mother (not sure to sell/not sell house)
How in the world is your mom getting ex's SS and her own. Isn't that double dipping?FundsABlazin wrote:Income: Alimony ($24,000); Rental income ($25,200); Social Security ($9,957 total); SS from Ex ($26,400).mrsytf wrote:So roughly $10k is social security. How much is the rental income and how much is alimony?
I wouldn't count on alimony forever.
Total income: ~$85.5k
Total expenses this year were: $12,574 (mortgage); Property Tax ($12,857); HO Insurance ($3,900); Cable (3360); Oil ($4,482); Electric ($2,299); Water/Sewer ($786); Phone ($720); Cleaning of property ($2,400); Advertising of property ($520); Storage rental ($1560); Snow & Lawn ($1945); Trash ($920); Maintenance ($1,900);
Total Expenses: $50,223
If ex dies, it looks like she would lose alimony of 24k which would bring her income down to 61.5 k.
Would she lose ex's SS when he dies?
Selling would and living n a less expensive home/area would be of big benefit. I have a low cost condo without the party room, swimming pool, exercise room extras. It was built for affordability. Property taxes are 15k. HOA fees are $4000k a year but include heating, grounds upkeep, snow removal (mn), cable, underground parking and some other stuff. So yearly costs would be way lower for her here. Residents pay for own phone, internet, electricity.
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Re: Advice for my divorced mother (not sure to sell/not sell house)
Watty wrote:
It would work best to move to a lower cost of living area. There are lots of nice areas where you can get a nice low maintenance condo for around $150K or so. With a paid off condo, Social Security, alimony, and maybe $300K in the bank she should be able to live a comfortable retirement. Even if she does not want to move to a different region moving 30+minutes farther out of town will often make a dramatic difference in housing prices. If she has any other kids that live in less expensive area she might consider moving closer to one of them. If she does move somewhere she should rent for a year to try out the area to make sure that it works for her.
Very true.
If she is open to moving to a different area then college towns are an interesting choice that are worth looking into. They often have a lot of interesting activities going on, reasonable housing away from the college campus, some public transportation which will be important as she ages, and good economics with employment opportunities.
An obvious one would be doing child care for a kid or two in someone's home, possibly for a special needs kid. Even baby sitting or after school care can add up if she does it regularly.FundsABlazin wrote:Any suggestions regarding what profession may need people her age?
She would know how to do that and in the right situation people would love to "rent a grandmother" when they don't have available relatives living nearby.
Great suggestion as well on the child care.
Re: Advice for my divorced mother (not sure to sell/not sell house)
[quote]
Income: Alimony ($24,000); Rental income ($25,200); Social Security ($9,957 total); SS from Ex ($26,400).
Total income: ~$85.5k
Total expenses this year were: $12,574 (mortgage); Property Tax ($12,857); HO Insurance ($3,900); Cable (3360); Oil ($4,482); Electric ($2,299); Water/Sewer ($786); Phone ($720); Cleaning of property ($2,400); Advertising of property ($520); Storage rental ($1560); Snow & Lawn ($1945); Trash ($920); Maintenance ($1,900);
Total Expenses: $50,223 [ /quote]
Wow. The house is like a noose around her neck. I would sell yesterday. I think you got good advice regarding finding out how much she would clear from the sale. And what tax liability a sale may create.
It sounds like your mom desires perpetual income. An annuity might be in order once she sells the home. I would do some research on that. Maybe others might chime in.
I didn't know one could collect two social security checks. I thought you could only collect the higher of the two.
With SS, she collects 36k/yr. Alimony as long as it lasts brings that figure up to over 50k. Sounds like she was getting by on 30k minus housing which indicates to me she should be ok. Any credit card debt that you know of?
Potential jobs: retail, crossing guard, school bus driver, receptionist at a gym or community center, seasonal jobs such as elections, census.
A mother figure of mine at work was forced into an earlier retirement than desired. She did all of the above and then some. She networked with other 60ish retirees and managed to piece together a decent income working multiple part time jobs that she heard of through her network.
Income: Alimony ($24,000); Rental income ($25,200); Social Security ($9,957 total); SS from Ex ($26,400).
Total income: ~$85.5k
Total expenses this year were: $12,574 (mortgage); Property Tax ($12,857); HO Insurance ($3,900); Cable (3360); Oil ($4,482); Electric ($2,299); Water/Sewer ($786); Phone ($720); Cleaning of property ($2,400); Advertising of property ($520); Storage rental ($1560); Snow & Lawn ($1945); Trash ($920); Maintenance ($1,900);
Total Expenses: $50,223 [ /quote]
Wow. The house is like a noose around her neck. I would sell yesterday. I think you got good advice regarding finding out how much she would clear from the sale. And what tax liability a sale may create.
It sounds like your mom desires perpetual income. An annuity might be in order once she sells the home. I would do some research on that. Maybe others might chime in.
I didn't know one could collect two social security checks. I thought you could only collect the higher of the two.
With SS, she collects 36k/yr. Alimony as long as it lasts brings that figure up to over 50k. Sounds like she was getting by on 30k minus housing which indicates to me she should be ok. Any credit card debt that you know of?
Potential jobs: retail, crossing guard, school bus driver, receptionist at a gym or community center, seasonal jobs such as elections, census.
A mother figure of mine at work was forced into an earlier retirement than desired. She did all of the above and then some. She networked with other 60ish retirees and managed to piece together a decent income working multiple part time jobs that she heard of through her network.
Re: Advice for my divorced mother (not sure to sell/not sell house)
My guess is that your father is turning over the equivalent of his SS benefit to her, since she can't collect two benefits. If that is the case then she will be eligible to collect that amount directly from SS when he dies, but she will lose her own $9,000 benefit.
Are there provisions for the alimony to continue when your father dies, like a life insurance policy with your mother as beneficiary?
Excluding the rental income, she has about $60,000 in income. If she sells the house, she would have a nest egg of about $500,000. Could she use that nest egg to purchase a condo or townhouse for around $300,000? Then she could draw about $8,000/year from the remaining $200,000 and have a total income of almost $70,000 plus a paid off home. That sounds very doable. (Unless housing costs and property taxes are very high in her area.)
If she decided to rent, then the $500,000 would allow her to draw about $20,000/year, or an income of $80,000 with which to cover her rent and other expenses. Again, very doable barring very high rents.
The big question is how secure her alimony and larger SS payment are.
Are there provisions for the alimony to continue when your father dies, like a life insurance policy with your mother as beneficiary?
Excluding the rental income, she has about $60,000 in income. If she sells the house, she would have a nest egg of about $500,000. Could she use that nest egg to purchase a condo or townhouse for around $300,000? Then she could draw about $8,000/year from the remaining $200,000 and have a total income of almost $70,000 plus a paid off home. That sounds very doable. (Unless housing costs and property taxes are very high in her area.)
If she decided to rent, then the $500,000 would allow her to draw about $20,000/year, or an income of $80,000 with which to cover her rent and other expenses. Again, very doable barring very high rents.
The big question is how secure her alimony and larger SS payment are.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Re: Advice for my divorced mother (not sure to sell/not sell house)
I am guessing that she is not collecting her own Social Security and from the ex (directly) but rather getting some part of his under a property settlement. Perhaps OP can clarify.
I am a bit puzzled:
She may not have a retirement plan, but she gets Social Security and is almost certainly on Medicare.
It seems that the current arrangement (as pointed out) cannot continue because she cannot keep running a shared home - although the money for this actually looks ok.
Renting out the house to a family (and her moving elsewhere and renting) would still involve the issues of being a landlord.
I would lean towards selling the house and using the net proceeds to fund her retirement and consider buying a small condo (depending on your locality). Much of the expenses listed relate to the house, so a lot will go down when she downsizes.
While buying a condo is worth considering, I would investigate whether there may be lower cost Senior housing rental in your area/jurisdiction. With a potential condo purchase, investigate whether there is any real estate tax relief for Seniors that are of low income and low assets (beyond the home). There might even be some senior condos.
Employment at age 68 and having been out of the workforce for decades is a real challenge.
I am a bit puzzled:
Wouldn't she be entitled to a portion of his retirement as part of the divorce/property settlement?My father basically took all retirement finances and is remarried
She may not have a retirement plan, but she gets Social Security and is almost certainly on Medicare.
It seems that the current arrangement (as pointed out) cannot continue because she cannot keep running a shared home - although the money for this actually looks ok.
Renting out the house to a family (and her moving elsewhere and renting) would still involve the issues of being a landlord.
I would lean towards selling the house and using the net proceeds to fund her retirement and consider buying a small condo (depending on your locality). Much of the expenses listed relate to the house, so a lot will go down when she downsizes.
While buying a condo is worth considering, I would investigate whether there may be lower cost Senior housing rental in your area/jurisdiction. With a potential condo purchase, investigate whether there is any real estate tax relief for Seniors that are of low income and low assets (beyond the home). There might even be some senior condos.
Employment at age 68 and having been out of the workforce for decades is a real challenge.
Re: Advice for my divorced mother (not sure to sell/not sell house)
It sounds to me that the father agreed to turn over his SS in return for keeping their retirement savings, but the OP needs to clarify.dm200 wrote:I am guessing that she is not collecting her own Social Security and from the ex (directly) but rather getting some part of his under a property settlement. Perhaps OP can clarify.
I am a bit puzzled:
Wouldn't she be entitled to a portion of his retirement as part of the divorce/property settlement?My father basically took all retirement finances and is remarried
She may not have a retirement plan, but she gets Social Security and is almost certainly on Medicare.
It seems that the current arrangement (as pointed out) cannot continue because she cannot keep running a shared home - although the money for this actually looks ok.
Renting out the house to a family (and her moving elsewhere and renting) would still involve the issues of being a landlord.
I would lean towards selling the house and using the net proceeds to fund her retirement and consider buying a small condo (depending on your locality). Much of the expenses listed relate to the house, so a lot will go down when she downsizes.
While buying a condo is worth considering, I would investigate whether there may be lower cost Senior housing rental in your area/jurisdiction. With a potential condo purchase, investigate whether there is any real estate tax relief for Seniors that are of low income and low assets (beyond the home). There might even be some senior condos.
Employment at age 68 and having been out of the workforce for decades is a real challenge.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Advice for my divorced mother (not sure to sell/not sell house)
delamer wrote:It sounds to me that the father agreed to turn over his SS in return for keeping their retirement savings, but the OP needs to clarify.dm200 wrote:I am guessing that she is not collecting her own Social Security and from the ex (directly) but rather getting some part of his under a property settlement. Perhaps OP can clarify.
Wouldn't she be entitled to a portion of his retirement as part of the divorce/property settlement?
I believe that him writing a check for the amount of his monthly SS is part of that divorce settlement, and there is no term on that transfer. Technically, his current spouse would need to take over that monthly check-writing, if she collects his SS. Unfortunately, I cannot trust that will happen willingly.
Also, I think his claim was that he had no retirement savings.
Re: Advice for my divorced mother (not sure to sell/not sell house)
If he had no savings then he must be supported by his current wife, unless he has a pension.FundsABlazin wrote:delamer wrote:It sounds to me that the father agreed to turn over his SS in return for keeping their retirement savings, but the OP needs to clarify.dm200 wrote:I am guessing that she is not collecting her own Social Security and from the ex (directly) but rather getting some part of his under a property settlement. Perhaps OP can clarify.
Wouldn't she be entitled to a portion of his retirement as part of the divorce/property settlement?
I believe that him writing a check for the amount of his monthly SS is part of that divorce settlement, and there is no term on that transfer. Technically, his current spouse would need to take over that monthly check-writing, if she collects his SS. Unfortunately, I cannot trust that will happen willingly.
Also, I think his claim was that he had no retirement savings.
Because your mother was married to your father for at least 10 years, she is entitled to a benefit based on his record paid directly by SS if he dies before her:
http://blog.ssa.gov/ex-spouse-benefits-and-you/
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Re: Advice for my divorced mother (not sure to sell/not sell house)
Agree with recommendation to sell the house, buy an affordable, smaller home or condo with no mortgage (perhaps in a new neighborhood closer to her grown kids or to other family members) and then to do childcare for supplemental income.
Having purpose in life and community is going to be extremely important for your mom's quality of life now, and it will be challenging as a divorcee with an empty nest. Hopefully she can find a childcare position and a new home that will provide her with these things.
Having purpose in life and community is going to be extremely important for your mom's quality of life now, and it will be challenging as a divorcee with an empty nest. Hopefully she can find a childcare position and a new home that will provide her with these things.
Re: Advice for my divorced mother (not sure to sell/not sell house)
Also, all the costs you listed above are related to the house. What are her expenses for food, transport, clothing, phone, etc.? In other words what will her expenses be after selling the house?
Re: Advice for my divorced mother (not sure to sell/not sell house)
This seems to be a high real estate tax area or jurisdiction. This might affect the costs of getting a condo.Property Tax ($12,857);
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Re: Advice for my divorced mother (not sure to sell/not sell house)
$12k on $800K market value is 1.5%. High, but not outrageous, especially if there is no state income tax.dm200 wrote:This seems to be a high real estate tax area or jurisdiction. This might affect the costs of getting a condo.Property Tax ($12,857);
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Re: Advice for my divorced mother (not sure to sell/not sell house)
This is why people should not stop working for 30 years.
Re: Advice for my divorced mother (not sure to sell/not sell house)
True, but the impact of real estate tax and state income tax varies greatly from one person to another.deltaneutral83 wrote:$12k on $800K market value is 1.5%. High, but not outrageous, especially if there is no state income tax.dm200 wrote:This seems to be a high real estate tax area or jurisdiction. This might affect the costs of getting a condo.Property Tax ($12,857);
Re: Advice for my divorced mother (not sure to sell/not sell house)
OP:
Your expenses list is incomplete, neglecting things like food, entertainment, and other personal costs.
It is mainly a list of property related expenses, but some of those expenses are costs that would likely be borne by your mother even if she moved out into an apartment or sold the house and bought a small condo. Others are expenses directly related to renting it, and some are ambiguous or in-between.
What I would suggests is that you construct 4 model budgets:
1) Continuing the current arrangement
2) Keeping the house, but renting it out 100%, and living in a smaller rental apartment/house
3) Selling the house, investing the proceeds, and living in a smaller rental apartment/house
4) Selling the house, using part of the proceeds to buy a smaller rental apartment/house, and investing the remainder
As for investment choices, I would look closely at an SPIA (you can search for it on this forum if you're unfamiliar with it), for perhaps part of the proceeds. Keep in mind that a 68 year old woman could live a LOT longer.
Also, if your mother has spent recent years being a stay-at-home mom/dutiful wife, then perhaps a sort of house caretaker/landlady, then if these activities are gone (in the first case) and potentially gone (in the second), then she will likely benefit from activities and/or a job/work for fulfillment.
Your expenses list is incomplete, neglecting things like food, entertainment, and other personal costs.
It is mainly a list of property related expenses, but some of those expenses are costs that would likely be borne by your mother even if she moved out into an apartment or sold the house and bought a small condo. Others are expenses directly related to renting it, and some are ambiguous or in-between.
What I would suggests is that you construct 4 model budgets:
1) Continuing the current arrangement
2) Keeping the house, but renting it out 100%, and living in a smaller rental apartment/house
3) Selling the house, investing the proceeds, and living in a smaller rental apartment/house
4) Selling the house, using part of the proceeds to buy a smaller rental apartment/house, and investing the remainder
As for investment choices, I would look closely at an SPIA (you can search for it on this forum if you're unfamiliar with it), for perhaps part of the proceeds. Keep in mind that a 68 year old woman could live a LOT longer.
Also, if your mother has spent recent years being a stay-at-home mom/dutiful wife, then perhaps a sort of house caretaker/landlady, then if these activities are gone (in the first case) and potentially gone (in the second), then she will likely benefit from activities and/or a job/work for fulfillment.
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Re: Advice for my divorced mother (not sure to sell/not sell house)
Are there any 55+ and older communities either in the area or near you?
They are often substantially cheaper than normal "market" properties.
How is her health? I think it's probably a mistake to buy another property unless she's planning on living there for 10 years. If she's approaching 70 now I wonder if owning is a wise idea. Having a LL take care of maintenance and capital repairs sounds like a much better idea.
They are often substantially cheaper than normal "market" properties.
How is her health? I think it's probably a mistake to buy another property unless she's planning on living there for 10 years. If she's approaching 70 now I wonder if owning is a wise idea. Having a LL take care of maintenance and capital repairs sounds like a much better idea.
Every day I can hike is a good day.
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Re: Advice for my divorced mother (not sure to sell/not sell house)
Yes, clearly need to account for all expenses. I didn't catch this before, thank you.psteinx wrote:OP:
Your expenses list is incomplete, neglecting things like food, entertainment, and other personal costs.
It is mainly a list of property related expenses, but some of those expenses are costs that would likely be borne by your mother even if she moved out into an apartment or sold the house and bought a small condo. Others are expenses directly related to renting it, and some are ambiguous or in-between.
We will need to account for these scenarios too by creating mock-up budgets. Good suggestions. I was not aware of the SPIA and have looked into it. That's a great option to consider as well.psteinx wrote:OP:
What I would suggests is that you construct 4 model budgets:
1) Continuing the current arrangement
2) Keeping the house, but renting it out 100%, and living in a smaller rental apartment/house
3) Selling the house, investing the proceeds, and living in a smaller rental apartment/house
4) Selling the house, using part of the proceeds to buy a smaller rental apartment/house, and investing the remainder
As for investment choices, I would look closely at an SPIA (you can search for it on this forum if you're unfamiliar with it), for perhaps part of the proceeds. Keep in mind that a 68 year old woman could live a LOT longer.
Re: Advice for my divorced mother (not sure to sell/not sell house)
The availability and quality of such places varies greatly by area and jurisdiction. Definitely worth checking out.Carefreeap wrote:Are there any 55+ and older communities either in the area or near you?
They are often substantially cheaper than normal "market" properties.
How is her health? I think it's probably a mistake to buy another property unless she's planning on living there for 10 years. If she's approaching 70 now I wonder if owning is a wise idea. Having a LL take care of maintenance and capital repairs sounds like a much better idea.
Re: Advice for my divorced mother (not sure to sell/not sell house)
I would also scrub some of those expenses hard - the HO insurance is about 8 times what I pay, and the cable bill is clearly a luxury. What about the storage unit? It adds up - get rid of the junk and don't pay to keep it. And work on filling out the missing, like food, medical, clothing...FundsABlazin wrote: Total expenses this year were: $12,574 (mortgage); Property Tax ($12,857); HO Insurance ($3,900); Cable (3360); Oil ($4,482); Electric ($2,299); Water/Sewer ($786); Phone ($720); Cleaning of property ($2,400); Advertising of property ($520); Storage rental ($1560); Snow & Lawn ($1945); Trash ($920); Maintenance ($1,900);
Total Expenses: $50,223
Also, your prior posts indicated that the alimony was from record royalties - for your planning purposes, read the divorce decree carefully to see whether you can expect those to drop over time, or whether they really continue past her ex-husbands death (and what the mechanism for that is).
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
Re: Advice for my divorced mother (not sure to sell/not sell house)
Couple other points re taxes:
1) Are you confident taxes are being handled correctly, CURRENTLY, with proper deductions offsetting rental income? Depending on the nature of the partial house rental, these may be complex/nuanced/unclear.
2) On a similar note: If the house is to be sold, don't forget that taxes may be due. Depends on the cost basis of the house, and potentially, various special cases in the tax code, notably that gains on primary homes can be excluded up to certain amounts, subject to certain caveats. In particular, that exclusion depends, I think, on the it being the seller's primary residence or some such for X out of the previous Y years (3 out of 5?).
I'm not an accountant, etc, so please do your own research on these. But at least be aware that there are potential issues here, with potentially big tax bills attached, and perhaps the opportunity to achieve tax savings if things are done the right way.
Don't forget state & local tax issues too. In many cases, these may flow directly from federal tax issues (i.e. income at the federal level is often taxable along similar lines at the state level, albeit on a different structure). But there may be wrinkles/nuances/special differences for your mother's state, and possibly even at the local (city or other jurisdiction) level.
1) Are you confident taxes are being handled correctly, CURRENTLY, with proper deductions offsetting rental income? Depending on the nature of the partial house rental, these may be complex/nuanced/unclear.
2) On a similar note: If the house is to be sold, don't forget that taxes may be due. Depends on the cost basis of the house, and potentially, various special cases in the tax code, notably that gains on primary homes can be excluded up to certain amounts, subject to certain caveats. In particular, that exclusion depends, I think, on the it being the seller's primary residence or some such for X out of the previous Y years (3 out of 5?).
I'm not an accountant, etc, so please do your own research on these. But at least be aware that there are potential issues here, with potentially big tax bills attached, and perhaps the opportunity to achieve tax savings if things are done the right way.
Don't forget state & local tax issues too. In many cases, these may flow directly from federal tax issues (i.e. income at the federal level is often taxable along similar lines at the state level, albeit on a different structure). But there may be wrinkles/nuances/special differences for your mother's state, and possibly even at the local (city or other jurisdiction) level.
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Re: Advice for my divorced mother (not sure to sell/not sell house)
My mortgage payment includes property tax and homeowner's insurance (a condition of getting the mortgage). Are you counting those expenses twice, or have you broken PITI into PI + T + I?$12,574 (mortgage);
Property Tax ($12,857);
HO Insurance ($3,900);
Cable (3360);
Oil ($4,482);
Electric ($2,299);
Water/Sewer ($786);
Phone ($720);
Cleaning of property ($2,400); Advertising of property ($520);
Storage rental ($1560);
Snow & Lawn ($1945);
Trash ($920);
Maintenance ($1,900);
I know you didn't ask about expenses, but it seems your Mom is paying $280/month for cable. Does she really watch $280/month of cable? Really? I realize in some areas, it's cable TV or no TV. If that is her case, could she not get a basic cable package for about $50/month? Or, could she drop cable and watch TV over the air?
On top of that, she's paying $60/month for phone. Does she speak on the phone a great deal? My local cable company would charge me a flat fee of about $40/month for a phone that calls anywhere in North America for no additional charge. But I prefer to carry a pre-pay cell phone I got at Wal-mart. It costs me about $100/year (but not as cheap if you talk a lot).
Search the web for lots of alternatives to cable TV and for cheap cell phone service based on her usage pattern.
Just saying! Good luck!
He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity.
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Re: Advice for my divorced mother (not sure to sell/not sell house)
If it were me, I'd sell the house before it needed major repairs, but meanwhile keep it as long as there is stable rental income and she has not decided where else she would live.
Once the house was sold I'd put $500k into an immediate annuity. Keep the rest in cash and CD's. Any job income would help, but it is likely to be erratic.
I would not rely on the settlement of paying an SS equivalent by check forever. When ex dies or stops paying, start collecting directly from SS and forfeit her own lower SS benefit. I do not know if there is a time limit for a divorced spouse to make a claim -- I never heard of it, but she should find out.
Dreadful situation to be in, but she is not completely without resources.
Once the house was sold I'd put $500k into an immediate annuity. Keep the rest in cash and CD's. Any job income would help, but it is likely to be erratic.
I would not rely on the settlement of paying an SS equivalent by check forever. When ex dies or stops paying, start collecting directly from SS and forfeit her own lower SS benefit. I do not know if there is a time limit for a divorced spouse to make a claim -- I never heard of it, but she should find out.
Dreadful situation to be in, but she is not completely without resources.
16% cash 49% stock 35% bond. Retired, w/d rate 2.5%
Re: Advice for my divorced mother (not sure to sell/not sell house)
Well, the property taxes are more than the mortgage, so double counting there is unlikelyChurch Lady wrote:My mortgage payment includes property tax and homeowner's insurance (a condition of getting the mortgage). Are you counting those expenses twice, or have you broken PITI into PI + T + I?$12,574 (mortgage);
Property Tax ($12,857);
HO Insurance ($3,900);
Cable (3360);
Oil ($4,482);
Electric ($2,299);
Water/Sewer ($786);
Phone ($720);
Cleaning of property ($2,400); Advertising of property ($520);
Storage rental ($1560);
Snow & Lawn ($1945);
Trash ($920);
Maintenance ($1,900);
I know you didn't ask about expenses, but it seems your Mom is paying $280/month for cable. Does she really watch $280/month of cable? Really? I realize in some areas, it's cable TV or no TV. If that is her case, could she not get a basic cable package for about $50/month? Or, could she drop cable and watch TV over the air?
On top of that, she's paying $60/month for phone. Does she speak on the phone a great deal? My local cable company would charge me a flat fee of about $40/month for a phone that calls anywhere in North America for no additional charge. But I prefer to carry a pre-pay cell phone I got at Wal-mart. It costs me about $100/year (but not as cheap if you talk a lot).
Search the web for lots of alternatives to cable TV and for cheap cell phone service based on her usage pattern.
Just saying! Good luck!
The cable bill probably reflects the need to attract renters and includes wifi. But still is on the high side, based on my experience.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Advice for my divorced mother (not sure to sell/not sell house)
No there's no double counting.delamer wrote:
Well, the property taxes are more than the mortgage, so double counting there is unlikely
That cost must come down. But you're right that it's part of attracting renters. Good eye.delamer wrote: The cable bill probably reflects the need to attract renters and includes wifi. But still is on the high side, based on my experience.
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Re: Advice for my divorced mother (not sure to sell/not sell house)
Senior housing?Carefreeap wrote:Are there any 55+ and older communities either in the area or near you?
They are often substantially cheaper than normal "market" properties.
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Re: Advice for my divorced mother (not sure to sell/not sell house)
Sort of. Think of the Sun City communities in CA or AZ. They are privately owned but the CC&Rs for the development restrict occupancy to those 55 and older. They can be a good fit for some people as they often have pools, a rec center and a social program which helps people meet other people.FundsABlazin wrote:Senior housing?Carefreeap wrote:Are there any 55+ and older communities either in the area or near you?
They are often substantially cheaper than normal "market" properties.
Every day I can hike is a good day.
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Re: Advice for my divorced mother (not sure to sell/not sell house)
UPDATE 01/17/2022
Hello all!
I want to post an update to this because I got some great advice in the original post. My mom has accepted an offer on the house, which will sell for around $800k.
She has no other retirement assets, and I was hoping to get some ideas for how to invest in the short term and for the long term. Some of the previous wisdom was to find a condo, for instance, that was around $150k, leaving around $300k plus alimony and Social Security to live on comfortably.
Considering she is 72 and does not have other retirement assets, I was wondering your thoughts on the best way to manage these funds for the long haul. Is a 70/30 split of Bonds:Stocks a good strategy? She wants to remain in the geographic area and there isn't immediate family in the area so their assistance is not an option currently.
What would you do?
Hello all!
I want to post an update to this because I got some great advice in the original post. My mom has accepted an offer on the house, which will sell for around $800k.
She has no other retirement assets, and I was hoping to get some ideas for how to invest in the short term and for the long term. Some of the previous wisdom was to find a condo, for instance, that was around $150k, leaving around $300k plus alimony and Social Security to live on comfortably.
Considering she is 72 and does not have other retirement assets, I was wondering your thoughts on the best way to manage these funds for the long haul. Is a 70/30 split of Bonds:Stocks a good strategy? She wants to remain in the geographic area and there isn't immediate family in the area so their assistance is not an option currently.
What would you do?
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Re: Advice for my divorced mother (not sure to sell/not sell house)
Five years ago you stated the house was worth around $800K and had a $250K mortgage (you thought). Fast forward to now in a time of rising real estate prices and the house is still worth $800K? How much of a mortgage does your mother have on the house now?
How much is the cost to rent in the area she is in? How much annual social security is she receiving? Is it feasible and affordable to remain in the area she is accustomed to living in?
How much is the cost to rent in the area she is in? How much annual social security is she receiving? Is it feasible and affordable to remain in the area she is accustomed to living in?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Re: Advice for my divorced mother (not sure to sell/not sell house)
The cost is fairly high in the area. The plan is to rent an apartment nearby for 6 months until something longer-term is found. She collects her own SS and receives a check in the amount of her ex-husband's SS. Will have to check on the specific amount.Grt2bOutdoors wrote: ↑Mon Jan 17, 2022 4:03 pm Five years ago you stated the house was worth around $800K and had a $250K mortgage (you thought). Fast forward to now in a time of rising real estate prices and the house is still worth $800K? How much of a mortgage does your mother have on the house now?
How much is the cost to rent in the area she is in? How much annual social security is she receiving? Is it feasible and affordable to remain in the area she is accustomed to living in?
She is interested in the "house hacking" technique. I.e. buying something more manageable than her last house to fix up and rent out and live with housemate(s). This would give an income stream and serve as an investment asset.
Re: Advice for my divorced mother (not sure to sell/not sell house)
This did not age well.Watty wrote: ↑Sun Apr 09, 2017 6:28 pmThe house sounds like it is difficult now and I would think that in another ten years it may be impossible. In many area housing there is a bit of a bubble now and if that pops home prices could drop 20% or more and so keeping virtually all of her net worth in the house is way too risky. In a bad housing market prices not only drop but it can take a long time to sell a house.FundsABlazin wrote: The house may be worth $800k+, not sure what she can/will get. She still owes on the mortgage, probably $250k.
At her age (~68), is it possible to retire on this amount?
"Don't trust everything you read on the Internet"- Abraham Lincoln
Re: Advice for my divorced mother (not sure to sell/not sell house)
How so?denovo wrote: ↑Tue Jan 18, 2022 12:04 amThis did not age well.Watty wrote: ↑Sun Apr 09, 2017 6:28 pmThe house sounds like it is difficult now and I would think that in another ten years it may be impossible. In many area housing there is a bit of a bubble now and if that pops home prices could drop 20% or more and so keeping virtually all of her net worth in the house is way too risky. In a bad housing market prices not only drop but it can take a long time to sell a house.FundsABlazin wrote: The house may be worth $800k+, not sure what she can/will get. She still owes on the mortgage, probably $250k.
At her age (~68), is it possible to retire on this amount?
I would likely say just about the same thing if this was a new post today.
There obviously has not been a large price drop yet but the house sold for $800K which is the same prices as what the OP thought the house was worth five years ago so she did have a lot of price gains either.
In fact with inflation, especially over the last year, the 800K is worth more than 10% less than it would have been five years ago.
If it had been sold five years ago then the she would have also have had several hundred thousand dollars invested for five years and those investments would have likely done very well.
Even if the home price had gone up a lot they may have just been fortunate even if the prior suggestions to sell were reasonable.