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Helping My Father
Old 01-01-2014, 03:37 PM   #1
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Helping My Father

Hi, I'm new to this forum and have been looking around for quite a while now. I'm focusing on helping my dad get started for retirement. He's extremely far behind and need to know the best way to get him back on track. He's 42 years old, has 8k in an IRA and another 8k in a past 401k. He makes approximately 45k a year. He has an AA degree, and has about 20 years of experience in logistics/distribution. He is planning on going back for his Bba next fall.

He isn't contributing in his current employer's retirement plan because he wants to go back to school. He has a 165k mortgage on 225k home. This is just some general background information, we're from the northwest (U.S.).

I'm looking for specific guidance on what his options are, he's really lost and definitely knows that he is far behind.
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Old 01-01-2014, 04:15 PM   #2
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Does he have any pension or health insurance benefits coming? From what you posted he's going to be working for quite a while yet.
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Old 01-01-2014, 04:49 PM   #3
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No pension, and minimal health insurance pretty much. He works for Lowe's, not very high quality employee benefits.
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Old 01-01-2014, 04:55 PM   #4
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No pension, and minimal health insurance pretty much. He works for Lowe's, not very high quality employee benefits.
Does Lowe's offer a 401K with employee matching contributions?
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Old 01-01-2014, 04:59 PM   #5
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What are his minimum "required" expenses. Bills, food, mortgage.
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Old 01-01-2014, 05:04 PM   #6
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If I were in his shoes, I would start contributing to the company 401k: get the benefits of a lower tax bill and free money of the company match. If he would contribute 8% of his salary, get some company match, and get a 7% return on a portfolio of stocks and bonds he could have around $500,000 by the time he retires at 66. Better yet, every year at pay raise time, add 1% to his contribution.

I personally have doubts that more education at his age will pay off. A degree, in and of itself, is no guarantee of higher pay.

I found Lowe's 401k- http://careers.lowes.com/benefits_retirement.aspx
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Old 01-01-2014, 05:06 PM   #7
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Is he married?

Does he support anyone other than himself?

Does he live in a high or low cost of living area (or something in between).

Does he have any debt other than the mortgage?

How does his budget match up with his income?

Is he going to go into debt for school? How long will it take him to finish school?

Has he really looked into whether getting a BBA will improve his income or not? What kind of BBA does he plan to get? (Management, marketing, accounting, etc?)

Does he have an emergency fund that would cover his expenses in the event of job loss?
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Old 01-01-2014, 05:09 PM   #8
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Why is he not posting here instead of you?
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Old 01-01-2014, 05:22 PM   #9
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Racy +1
Questions posed are very important and will effect other replies.
Also, if time can permit (in other words hes not caring for youngsters, etc., ) Iwould look into some part time work. Its amazing how much can be earned and saved with a little extra work, which will make life just a bit easier....and allow for the occasional movie and pizza! Its already evident he's raising a great kid who has these concerns for him. Good luck!
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Old 01-01-2014, 05:29 PM   #10
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[QUOTE=Katsmeow;1397525]Is he married?
No

Does he support anyone other than himself?
No

Does he live in a high or low cost of living area (or something in between).
Low to mid cost of living, average home about 225-250k

Does he have any debt other than the mortgage?
About 3500 on Lowes cc. Only about 60/month

How does his budget match up with his income?
Hes left with maybe 200 to 400 a month if no expenses come up. (They usually do.)

Is he going to go into debt for school? How long will it take him to finish school?
Debt to go back to school would be maybe 10-15k. It would take about 3 years to go back and finish

Has he really looked into whether getting a BBA will improve his income or not? What kind of BBA does he plan to get? (Management, marketing, accounting, etc?)

He used to have a job of about 70k/year but was laid off and replaced with a bachelor degree holder. A degree has held him back in several situations.

Does he have an emergency fund that would cover his expenses in the event of job loss?
He has about 3k for emergencies
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Old 01-01-2014, 05:32 PM   #11
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Why is he not posting here instead of you?
He is just embarrassed, and is putting it off. He knows that he should be working on it. As for a 401k, in reply to the other poster, I believe he has access to one, but isnt planning to contribute as he doesn't want to stay with Lowe's for much longer than a couple years.
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Old 01-01-2014, 05:35 PM   #12
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He needs to work on getting that credit card paid off. Credit cards are the financial "death by a thousand cuts" since the interest rates are so high. Can he reduce savings by say $200/month and apply that to the cc debt?

And I second the suggestions to start contributing to the 401k. If there's any company match at all that's free money!

Ditto on the suggestion for a part time job, as long as he has the ability to save/invest it all.
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Old 01-01-2014, 05:38 PM   #13
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He is just embarrassed, and is putting it off. He knows that he should be working on it.
Just about everyone here knows someone like that. Unfortunately, it is like leading a horse to water.

Quote:
As for a 401k, in reply to the other poster, I believe he has access to one, but isn't planning to contribute as he doesn't want to stay with Lowe's for much longer than a couple years.
He can roll his 401(k) over to an IRA and take it with him anywhere. If there is a 401(k) match, he is leaving money on the table needlessly.
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Old 01-01-2014, 05:41 PM   #14
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I believe he has access to one, but isnt planning to contribute as he doesn't want to stay with Lowe's for much longer than a couple years.
Big mistake. He's giving up free money if Lowe's has a matching 401k plan.
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Old 01-01-2014, 05:41 PM   #15
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He needs to work on getting that credit card paid off. Credit cards are the financial "death by a thousand cuts" since the interest rates are so high. Can he reduce savings by say $200/month and apply that to the cc debt?

And I second the suggestions to start contributing to the 401k. If there's any company match at all that's free money!

Ditto on the suggestion for a part time job, as long as he has the ability to save/invest it all.
Thank you guys, I will bring up these points to him. As for the part time job, he doesn't have a set schedule and that would make working part time for him difficult.

Second, his Lowe's cc is only $60 a month, and just recently paid off a cc bill of 5k. That alone is saving $150 a month. He is working on it, but didn't want to deplete the last of his emergency fund to save $60 a month.
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Old 01-01-2014, 05:50 PM   #16
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Second, his Lowe's cc is only $60 a month, and just recently paid off a cc bill of 5k. That alone is saving $150 a month. He is working on it, but didn't want to deplete the last of his emergency fund to save $60 a month.
That is wise. If he did that then Murphy's Law dictates that's when the furnace or roof would need replacing.

I contributed to an IRA in my last job even though I knew I'd be leaving within a year or so just for the 50% company match. When I left I immediately rolled the 401k into an IRA. That got it out of the clutches of a screwed-up company and I won't have to hunt them down to get the money later.

He can do the same thing, and then he gets to pick what it is invested in. Even if I had just put it in cash I was still 50% ahead right out of the gate.
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Old 01-01-2014, 05:56 PM   #17
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That is wise. If he did that then Murphy's Law dictates that's when the furnace or roof would need replacing.

I contributed to an IRA in my last job even though I knew I'd be leaving within a year or so just for the 50% company match. When I left I immediately rolled the 401k into an IRA. That got it out of the clutches of a screwed-up company and I won't have to hunt them down to get the money later.

He can do the same thing, and then he gets to pick what it is invested in. Even if I had just put it in cash I was still 50% ahead right out of the gate.
Funny that you mention things needing to be replaced. He just fixed the furnace for about $150 and is in need of a new roof. Always something, isnt it. I will have to sit down with him and let him know all of this! Key things ive learned so far about what to do
Roll over past 401k into his IRA
Start his 401k with Lowe's
Contribute at least the minimum to gain employers contribution
Pay off lower cc with money left over at the end of the month

Any other significant ideas to help him get the ball rolling again?
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Old 01-01-2014, 06:06 PM   #18
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Oops, I misspoke. I contributed to the 401k, not an IRA. But I gather you knew what I meant.
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Old 01-01-2014, 06:10 PM   #19
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..........

Any other significant ideas to help him get the ball rolling again?
Big picture: If you retire at around 65, you can only expect to withdraw about 4% of your savings a year if it is to last your life time. So, he (or you) need to figure out what he needs to live a comfortable life, subtract out Social Security payments and then do the calculation to see how much money he will need to accumulate before retirement.

There are numerous on-line calculators that allow you to calculate this, but you need to understand basically what you need to live on and what growth you can expect from various combinations of stocks and bonds.
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Old 01-01-2014, 06:17 PM   #20
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Thank you all! Very good feedback!
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