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Old 07-15-2010, 09:53 PM   #21
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She started receiving SS only 3 months ago, so I don't think that SS repayment would help much. The lady at the SS office did a simulation and found that, in MIL's particular situation, her SS benefits would not increase very much if she waited another year or two (I was there when the lady explained the reason behind it and it made sense at the time, but I do not remember the details). So she decided to start receiving her SS benefits right then. At the moment, she pays over $200 a month for Medicare (due to her income being so high in 2009), but next year it will go back to roughly $100 a month. So her SS check should go up to $1,100 a month after Medicare payment.

I looked at the brochure for Mass Mutual SPIAs. They do not offer full CPI-adjustment but rather 1-4% COLAs. Which COLA would you choose? I was thinking 3%... Still waiting to hear from Penn Mutual.

After trying to find ways to reduce her expenses, she decided that a reverse mortgage was not a bad idea after all. So we'll be looking into that too...
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Old 07-15-2010, 11:19 PM   #22
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After trying to find ways to reduce her expenses, she decided that a reverse mortgage was not a bad idea after all. So we'll be looking into that too...
If I remember correctly, in the past you have brought up the fact that she does not want to give up living in this house, despite it being too large and expensive to maintain for her. Would she be amenable to downsizing, if the local RE market allows it? Seems to me it would reduce her cash outflow while enriching her savings at the same time.
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Old 07-15-2010, 11:43 PM   #23
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If I remember correctly, in the past you have brought up the fact that she does not want to give up living in this house, despite it being too large and expensive to maintain for her. Would she be amenable to downsizing, if the local RE market allows it? Seems to me it would reduce her cash outflow while enriching her savings at the same time.
She won't move. End of discussion. We showed her nice condos and townhouses in nice and safe neighborhoods for half the cost of her current house. I thought the units we showed her were very attractive for a single person in her situation, but she found everything "sordid".
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Old 07-16-2010, 04:42 AM   #24
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You did not mention this.... maybe you already have it covered.

Don't forget extraordinary expenses... for example, the house may need a new roof, or furnace replacement, etc.

Her average life expectancy is 20+ years.

She should probably keep some sort of emergency fund.
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Old 07-16-2010, 07:44 AM   #25
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Shop around hard on the reverse mortgage. There are large disparities in fees from different lenders. And then you have to decide whether to take a lump sump, line of credit, etc. You could buy an annuity with the lump sum if the spendthrift thing is an issue.
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Old 07-16-2010, 08:34 AM   #26
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She won't move. End of discussion. We showed her nice condos and townhouses in nice and safe neighborhoods .... but she found everything "sordid".
Maybe you need to paint her a picture of what life would be like in her current house if she could not pay the bills. I imagine living in that house with the electricity, gas, water and phone shut off and a leaky roof could be pretty 'sordid'.

She does not want to seem to face the reality that she can't afford her lifestyle. Or perhaps she has a very good grasp of reality, and that 'reality' involves you covering any future shortfall?

And you probably will, but it ought to be on your terms then, not hers.

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Old 07-16-2010, 09:34 AM   #27
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You did not mention this.... maybe you already have it covered.

Don't forget extraordinary expenses... for example, the house may need a new roof, or furnace replacement, etc.

Her average life expectancy is 20+ years.

She should probably keep some sort of emergency fund.
She has a small emergency fund right now, and thankfully the house has a new roof and furnace.

My wife and I pointed out to MIL that if she annuitizes all of her savings and gets a reverse mortgage, it is vital for her to save money each month to cover those extraordinary expenses. She agrees.

But we don't fool ourselves, we know that she probably won't be able to pay for some of those larger expenses all by herself. DW and I are ready to help, just like we are helping my mom with her own extraordinary expenses.
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Old 07-16-2010, 09:43 AM   #28
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Shop around hard on the reverse mortgage. There are large disparities in fees from different lenders. And then you have to decide whether to take a lump sump, line of credit, etc. You could buy an annuity with the lump sum if the spendthrift thing is an issue.
Thanks Brewer. I have already looked at various scenarios and I do favor some kind of annuity because of MIL's spendthrift tendencies. So the question is, take the monthly payments option or take the lump sum and annuitize... Reverse mortgage calculators say that MIL could either get non COLA'd monthly payments of up to $600 or a lump sum of up to $100K. If the lump sum was annuitized she could get monthly payouts ranging from $437 with a 3% COLA to $588 with no COLA. So I'll have to crunch the numbers to figure out what makes sense.
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Old 07-16-2010, 10:38 AM   #29
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Maybe you need to paint her a picture of what life would be like in her current house if she could not pay the bills. I imagine living in that house with the electricity, gas, water and phone shut off and a leaky roof could be pretty 'sordid'.

-ERD50
I did paint her that picture. But I think it comes down to pride. Until 2007, she was living a fairy tale. Her husband was making over $200K a year, they were living in a huge house nestled in an exclusive suburb of the Northeastern corridor. They never worried about things like living on a budget. But the divorce changed everything. As it turned out, they had few assets to split and her ex stopped paying alimony soon after the divorce (he lost his job and can't pay). So she had to move back to the deep south, settle for a smaller house though it is still very large for a single person... She feels like she already had to cut expenses "to the bone" (I don't think she really knows what it means). In other words, she feels like she has suffered enough humiliation already and selling the house to live in a "sordid" condo would be the straw that breaks the camel's back.


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She does not want to seem to face the reality that she can't afford her lifestyle. Or perhaps she has a very good grasp of reality, and that 'reality' involves you covering any future shortfall?
I think that "reality" hit her in the face a few days ago. With the prospect of her starting to take large distributions from her retirement accounts to pay for living expenses, she realized that the money would be gone in short order. So, she came up with the "plan", which she generously shared with us. Basically, the "plan" was for her to stay in her house and continue living like she does now (she claims she can't cut expenses any more than she has already done which is total BS unless having a cleaning lady has somehow become a necessity nowadays). When her retirement money runs out, then DW and I would have to provide for the shortfall (about $1,500 a month). I noted that her plan did not call for her to get a job and that we were not in a position to give anyone $18K+ per year for, possibly, the next 30 years. She told us that if we couldn't afford it, we should get second jobs... Unbelievable, but true.

After I finally stopped hyperventilating, DW and I told her there was no way this was gonna happen. Ever. She got mad, she pouted, she threatened, she begged, to no avail. We told her to make the best of her resources and not count on us. So right there, she got her big dose of reality. I welcome her to the real world. So, to me, the annuities and reverse mortgage are big insurance policies for her as well as for our own financial well-being.
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Old 07-16-2010, 11:02 AM   #30
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OK, tax wizards,

The Penn Fed representative says that the IRS does not allow COLA to be paid on annuities funded with qualified assets... Sounds like a fib to me () as Vanguard seems to allow it.

Of course, he has a "better suited product" for MIL...
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Old 07-16-2010, 11:07 AM   #31
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OK, tax wizards,

The Penn Fed representative says that the IRS does not allow COLA to be paid on annuities funded with qualified assets... Sounds like a fib to me () as Vanguard seems to allow it.

Of course, he has a "more appropriate product" for MIL...
You are dealing with an agent? If so, call the home office and ask for confirmation/clarification. This sounds like bullpucky. No doubt the home officewould like to hear about this particular agent's sales practices as well.

BTW, just because MIL has everything in annuities does not mean she cannot dig another hole in short order. It would be pretty easy for her to go into debt. You should make it clear that if that happens she is on her own, assuming that has not already been conveyed.
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Old 07-16-2010, 11:15 AM   #32
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You are dealing with an agent? If so, call the home office and ask for confirmation/clarification. This sounds like bullpucky. No doubt the home office would like to hear about this particular agent's sales practices as well.

BTW, just because MIL has everything in annuities does not mean she cannot dig another hole in short order. It would be pretty easy for her to go into debt. You should make it clear that if that happens she is on her own, assuming that has not already been conveyed.
Yes I am dealing with an agent. I will try the home office.

MIL seems pretty debt-averse. She rarely uses credit cards, and so far, she has always paid in full at the end of the month. So, at least, she is not completely irresponsible with money. But our message was clear. There will be no bailout coming from us.
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Old 07-16-2010, 12:05 PM   #33
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She won't move. End of discussion. We showed her nice condos and townhouses in nice and safe neighborhoods for half the cost of her current house. I thought the units we showed her were very attractive for a single person in her situation, but she found everything "sordid".
Sooo, she would rather stay put than move and be able to fund her retirement

I will tell you... my mother tells everybody that the high rise condo she moved into was the best decision she could have made in decades... she was 'wed' to her house for many years (but it was not large and she could afford it)... but she is 90 and could not do as much.... and the house was falling apart around her... we did not want to put money into it...

It will be hard to convince her... but why not see if you can rent a place for a month or two.. so she can 'test drive' the place... also, show her the benfits of moving... with my mom, she is now a few miles from her oldest and youngest... we get to see her at least once a week.. my sister maybe 3 times a week.. we were lucky to see her once a month where she used to live... and my sister was less than that...
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Old 07-16-2010, 12:13 PM   #34
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I did paint her that picture. But I think it comes down to pride. Until 2007, she was living a fairy tale. Her husband was making over $200K a year, they were living in a huge house nestled in an exclusive suburb of the Northeastern corridor. They never worried about things like living on a budget. But the divorce changed everything. As it turned out, they had few assets to split and her ex stopped paying alimony soon after the divorce (he lost his job and can't pay). So she had to move back to the deep south, settle for a smaller house though it is still very large for a single person... She feels like she already had to cut expenses "to the bone" (I don't think she really knows what it means). In other words, she feels like she has suffered enough humiliation already and selling the house to live in a "sordid" condo would be the straw that breaks the camel's back.




I think that "reality" hit her in the face a few days ago. With the prospect of her starting to take large distributions from her retirement accounts to pay for living expenses, she realized that the money would be gone in short order. So, she came up with the "plan", which she generously shared with us. Basically, the "plan" was for her to stay in her house and continue living like she does now (she claims she can't cut expenses any more than she has already done which is total BS unless having a cleaning lady has somehow become a necessity nowadays). When her retirement money runs out, then DW and I would have to provide for the shortfall (about $1,500 a month). I noted that her plan did not call for her to get a job and that we were not in a position to give anyone $18K+ per year for, possibly, the next 30 years. She told us that if we couldn't afford it, we should get second jobs... Unbelievable, but true.

After I finally stopped hyperventilating, DW and I told her there was no way this was gonna happen. Ever. She got mad, she pouted, she threatened, she begged, to no avail. We told her to make the best of her resources and not count on us. So right there, she got her big dose of reality. I welcome to the real world. So, to me, the annuities and reverse mortgage are big insurance policies for her as well as for our own financial well-being.

WOW>>>>>

Has this lady worked before Does she have other kids

I hope you would not have done what I would have... told her she was dreaming if she thinks we are going to pay her bills if she was not willing to fix her problem RIGHT NOW... and let me tell you where you can cut... and start the list...

I then would be in the dog house with my wife... but hey... those kind of stupid statements deserve a response...
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Old 07-16-2010, 12:13 PM   #35
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It seems like it is a PITA to find an insurance company willing to offer straight forward COLA'd SPIA. Now I wonder if we should get 2 non-COLA SPIAs (about $1,200 a month from non-COLA SPIAs + $1,100 from SS = $2,300 a month income - partially COLA'd) and keep the reverse mortgage in the wing for now until she needs more income down the road when her income falls behind again due to inflation...
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Old 07-16-2010, 12:34 PM   #36
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WOW>>>>>

Has this lady worked before Does she have other kids

I hope you would not have done what I would have... told her she was dreaming if she thinks we are going to pay her bills if she was not willing to fix her problem RIGHT NOW... and let me tell you where you can cut... and start the list...

I then would be in the dog house with my wife... but hey... those kind of stupid statements deserve a response...
She hasn't worked in decades. She has only one kid, DW (she is estranged from 2 step kids). She is used to having money falling on her lap when she needs it, so she has trouble understanding that the gravy train has left the station.

DW and I are on the same page. MIL is the one in the dog house right now. I have been brutally honest with MIL about her financial situation and what needs to happen to make it work. So she knows what she is up against. What irritates us the most, is that she doesn't seem to want to help herself. In her situation, DW and I would be ruthless. We'd be cutting expenses, selling the house and do whatever it takes to make it work. But it's like she is still waiting for her knight in shining armor to come save the day. Fine, as long as she understands, we are not it...
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Old 07-16-2010, 01:27 PM   #37
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Sounds like you and DW are nearing an impasse with your MIL.

Has your MIL worked the numbers about what expenses to cut to save to money needed? Sometimes folks just make a blanket statement and say, "no it won't work" before even considering looking at actual numbers. Maybe if she had it spelled out in front of her in black and white (some type of Budget, there I said the B word ) she'd come on board and give it a try. A bitter pill to swallow, but maybe the toughest part is getting her to start.
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Old 07-16-2010, 01:44 PM   #38
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No advice, but my condolences to you and your DW.

Actually, here's a little advice. Tell your MIL that you and DW are barely scraping by, and that you were expecting her to leave you a large inheritance to help fund your eventual retirement. And then pout when she says there's nothing to inherit. This would require getting your DW on board and manipulating your MIL. On second thought honesty is probably easier...

Now excuse me while I go update the "Why I urgently need a HELOC" thread...
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Old 07-16-2010, 02:09 PM   #39
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She hasn't worked in decades. She has only one kid, DW (she is estranged from 2 step kids). She is used to having money falling on her lap when she needs it, so she has trouble understanding that the gravy train has left the station.

DW and I are on the same page. MIL is the one in the dog house right now. I have been brutally honest with MIL about her financial situation and what needs to happen to make it work. So she knows what she is up against. What irritates us the most, is that she doesn't seem to want to help herself. In her situation, DW and I would be ruthless. We'd be cutting expenses, selling the house and do whatever it takes to make it work. But it's like she is still waiting for her knight in shining armor to come save the day. Fine, as long as she understands, we are not it...

OK.... so suggest to her to get out to the golf course... or wherever some of the old rich guys hang out... and try and snag one... (well, I guess I should first ask if she is a 'looker' or not).... because, short of that you are not going to like what happens to you when you run out of money....

And say... we will love to come over and visit... and love for you to come over and visit... but your finances are yours... ours our ours and we plan on keeping it that way...

I have never understood children or others who bail out their parents when they are irresponsbile and can do something about it long before it becomes a real problem... Just as an FYI, my mom lives on less than your MIL and is living quite well.... and she does have a cleaning crew come in every two weeks... she is a bit to old to do the beds etc... so not a problem...
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Old 07-16-2010, 02:44 PM   #40
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Actually, here's a little advice. Tell your MIL that you and DW are barely scraping by, and that you were expecting her to leave you a large inheritance to help fund your eventual retirement. And then pout when she says there's nothing to inherit. This would require getting your DW on board and manipulating your MIL. On second thought honesty is probably easier...
No need to lie. I am losing my job in 2 weeks (everyone thinks that I feel like about it, when in fact I feel like ). Plus, in 2-3 years, my wife will "lose" her high paying job and we will become seriously "underemployed" or (with a bit of luck) become even permanently "unemployed". Soooo, how could a couple of 40 year old bums be in a position to help anyone financially? We will have enough problems on our own, like decide what to do all day as unproductive members of society...
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