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Old 04-01-2011, 07:40 PM   #41
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I would suggest you check around and see if you can buy ANY term insurance on them if possible.
This is not an option as my dad is border line uninsurable. I got several quotes and he was either deemed uninsurable or the payout option is equal or less than what is paid in. A savings account would be the better option.

Michael
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Old 04-01-2011, 07:41 PM   #42
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You have certainly opened up alot with all the information provided. Lots of problems and probably not many solutions. I am personally very fond of real estate. Instead of them paying rent, why not jointly purchase a house. Did this once for my inlaws. DW and I purchased a house and leased it to them. They were really comfortable with the situation. In this day of low prices, it would probably be cheaper than renting and you could have the upper hand on this financial arrangement. What ever you would have to contribute to make this work would eventually be money in your pocket (investment). Your mom would always have a place and you would be in control of that situation. With their financial woes you mentioned, you would probably have to buy the house as I doubt their finannces would secure a loan. Food for thought. Good luck.
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Old 04-01-2011, 08:16 PM   #43
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Instead of the paying rent, why not jointly purchase a house. Did this once for my inlaws. DW and I purchased a house and leased it to them.
I have thought about this option. The problem is i can not afford the house payment and i would be the only source of income if my father passed. This would be an option if there was enough time for inflation, paying the principal down, and salary increases and to make it affordable for me.

My parents currently get a great deal on rent. The mortgage payment on the house they live in would be 20% higher than what they currently pay in rent (its been looked into). I feel this would put me in the position where i would have to sell the house out from under my mother if my father where to pass.

Getting a large loan to help out my family in a failing situation is really exposing me to too much risk.

Michael
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Old 04-01-2011, 08:23 PM   #44
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You are faced with a difficut situation and I think your parents are fortunate that at least one of their children is willing and able to assist them.

Whatever you plan to do, I'd proceed on the basis that whatever money you put on the table is at risk and there is a good chance that you will not see it again. As others have said, however much you want to help your parents, placing your (and any future spouse/children) own financial position at risk is a bad move.

You mention that:

1. your siblings are unable to help. Have you considered at least trying to get your siblings to (individually or collectively/wholly or partially) match your contributions. If you put $X into your Dad's 401K per month and they chip in a few dollars as well then your potential downside/cost is reduced? If they say "no" at least you tried to put a bit of pressure on them to help.

2. they are renting - is there any possibility of downsizing to a lower cost home?

3. your Mum does not/cannot work - does she have any hobbies or interests that could be monetised? If all else fails, setting up a blog where she talks about them has at least some chance (however unlikely) of generating a few dollars.
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Old 04-01-2011, 08:36 PM   #45
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1. your siblings are unable to help. Have you considered at least trying to get your siblings to (individually or collectively/wholly or partially) match your contributions. If you put $X into your Dad's 401K per month and they chip in a few dollars as well then your potential downside/cost is reduced? If they say "no" at least you tried to put a bit of pressure on them to help.
I have already had a talk with them. Currently it is not possible, nor does it look like it will be in the next few years.

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2. they are renting - is there any possibility of downsizing to a lower cost home?
They have rented the same place for about 20 years. The landlord hasn't kept up with raising the rent on them. They are getting a very very good deal on rent. Could they down size to save cash, yes, but they would have to down size to something like a trailer park.

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3. your Mum does not/cannot work - does she have any hobbies or interests that could be monetised? If all else fails, setting up a blog where she talks about them has at least some chance (however unlikely) of generating a few dollars.
Yes, she is an artist but has not had any luck with sales.
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Old 04-01-2011, 08:49 PM   #46
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Creative ideas please.
Idea 1) Stop calling it "creating money"/"inventing money" etc. You're just trying to help your dad get the 401K match from his company and protect yourself.

Idea 2) Simplify this thing and do it year-to-year to reduce your exposure, reduce the paperwork, and reduce risk at his death for the "deal" to go wrong. "Dad, are you getting the free money from your company in your 401K? Would it help if I gave you loan?" Then, the deal with him is that the first year after he gets the company match, he takes out everything--he cleans out the 401K. He'll pay penalties and taxes--so what? He wouldn't have anything without your help, and he shouldn't mind paying taxes on free money. Anyway, if he's 59 I don't think he'd have to pay any penalties, just taxes. (Check all of this--the IRS rules and what his company 401K folks will allow).

Input (example):
$10K loaned from you
$10K match from his company

Output ($20K):
$3 K: covers taxes
$7K: Reimbursement to you for loan. He will still owe you $3k due in one year.
$10K: Back to Dad. You and he keep the money in a joint ("AND," not "OR" signatures needed) account, it gets transferred back to his employer every month to pay for his 401K contribution (if they must take it from his paycheck, then work some kind of "trust but verify" arrangement whereby it goes to him to reimburse him for the withheld money). If they'll take it as a lump sum, that's easier still.

After that, everything is on autopilot. At the end of year 2 he pays you back the $3K (plus interest if you want), and he just withdraws a little over 1/2 of the money in his 401K. He pays taxes on the withdrawal and uses the rest to "pay himself" every month to make up for the the 401K contribution he is making. He'll get the match. If he's happy using the same joint account you used for year one, then that's great and he won't have an opportunity to blow the money. If he can give it to his employer as a single lump sum, better yet. If he lacks the discipline to do this and blows the money, you repeat the actions from year one--give him a loan and get most of your money back right away.

None of this is optimum: He'll be paying taxes he shouldn't need to pay, and a smaller amount of money will be growing tax-deferred in his 401K. But it may be the best way to get the company money without creating a legal or paperwork nightmare or deep risk for you.

Also: If they are married, your Mom should have a spousal IRA. It can reduce their taxes. More importantly, it will be money in her name that she controls, has some protection from creditors (I think--check this) and which he can't access. She doesn't need income of her own to have a spousal IRA. If she DID get a job, she could put a lot of money into an IRA, or her own 401K. Depending on her/their income she could possibly get "free money" via the Savers Credit, etc.
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Old 04-01-2011, 08:57 PM   #47
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I don't see what the problem is. Your mom has got to be used to living cheaply already. Life insurance proceeds should get her to SS benefits age. Then she can live off of SS.

This The millionaire’s dilemma | Vanguard Blog says that
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Switching to a slightly different set of statistics, from the Social Security Administration, about 8% of age 65+ households have incomes above $100,000, and about 12% below $10,000.
So she fits in the 12%. Not a big deal. She will want to make some good friends now who will be her roommates in the future.
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Old 04-01-2011, 08:57 PM   #48
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Unless your mother is a complete invalid it IS possible for her to work. At 33 it might seem that 58 is old, but it isn't. Raising kids and running a household develops skills. Don't shortchange that. She might get minimum wage, but so what. She's been a part of this fiasco.
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Old 04-01-2011, 08:58 PM   #49
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Did you mean "invest" and not "invent?"
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Old 04-01-2011, 09:46 PM   #50
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I talked to a wealth manager and this was his suggesion. Only problem is it requirement me to front 50K which i will never see again.
If this will relieve your guilt, go for it. If not, don't waste your money and get on with your life. Your priority is you which is nothing more than your parents are doing for themselves.
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Old 04-01-2011, 09:47 PM   #51
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Idea 2) Simplify this thing and do it year-to-year to reduce your exposure, reduce the paperwork, and reduce risk at his death for the "deal" to go wrong. "Dad, are you getting the free money from your company in your 401K? Would it help if I gave you loan?" Then, the deal with him is that the first year after he gets the company match, he takes out everything--he cleans out the 401K. He'll pay penalties and taxes--so what? He wouldn't have anything without your help, and he shouldn't mind paying taxes on free money. Anyway, if he's 59 I don't think he'd have to pay any penalties, just taxes. (Check all of this--the IRS rules and what his company 401K folks will allow).
I think this is what im going to go with.

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Did you mean "invest" and not "invent?"
No, invent was deliberate. I was using the term to illistrate that i don't have a substaintial amount of money to invest nor give away.

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If this will relieve your guilt, go for it
I guess I should point out, i don't have access to 50K to buy the annuity either. Even if I had 50K in a savings account i wouldn't do it as giving that type of money away is beyond my means.


I would like to thank everyone for contributing to this thread. I think I have a very good solution that limits my exposure.
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Old 04-01-2011, 11:06 PM   #52
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I talked to a wealth manager and this was his suggesion. Only problem is it requirement me to front 50K which i will never see again.
Poe....I think there is a way...for you to see that money...
If the point is to give your mom some money at your dads death and for you to get back some percentage of the money....there is a way for you to structure that.

You buy the annuity so you become the owner of it. You designate your Dad as the annuitant which means it is based on his life expectancy. You list both your mom and you as beneficiaries so that at his death...you both receive the money. You could designate percentages if you wish. 30% paid to your mom and 70% paid to you.

Your dad doesn't have to know...about this annuity...unless you want to tell him. His signature is not required. At least my Dads signature was not required when I did it.

The only risk you run with this is if your Dad found out about it...and as the annuitant...and if he claimed hardship...you might have to pay him something out of it...but if he never knows about it...what risk is that.?
As the owner...you control the annuity.

Like I said, I used one...in this exact manner...(granted for a different reason) and it worked. I controlled it every step of the way...and when my Dad passed the beneficiaries...had the money needed for the estate taxes.

This is the only instrument I know of where you can control things ...
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Old 04-01-2011, 11:11 PM   #53
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I guess I should point out, i don't have access to 50K to buy the annuity either. Even if I had 50K in a savings account i wouldn't do it as giving that type of money away is beyond my means.
You don't need 50K to start a variable annuity...but it sounds like you don't want to go that route...so.....

p.s. I started one years ago with $5k payments each year. I'm sure you could start one with less....
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Old 04-02-2011, 09:28 AM   #54
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While it is admirable for your to help mom and dad out, just remember that you and your financial future comes first. They have created this situation themselves and you shold only help them to the extent that you can without messing up your financial future.

I like the idea of lending him money to help him with the 401k match but having him continually paying you back so your exposure to loss is limited. My concern would be that he doesn't seem very responsible with money so I'm not sure that once a substantial sum is in there he won't find a way to access it and fritter it away.

Another thing to explore would be guaranteed issue life insurance on your dad. There are a number of companies out there that issue small ($10k or so) term insurance policies without any underwriting and play the law of large numbers. You may be able to buy a number of these small guaranteed insurable policies even if your Dad's health is poor. However, be sure to read the fine print and make sure that the information on the application is rock-solid so that the insurance company can't later deny the claim on a basis that the application was fradulent. and be sure to pay every premium on time. While I'm not particularly keen on this idea, it may be a possible solution in your situation. You can make yourself the beneficiary and use the proceeds to help your mom. While I don't know a lot about this there may be others on this board who know about it and whether it would be a good idea or not. It might even be better than lending your dad for the 401k match.
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Old 04-02-2011, 08:00 PM   #55
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One thing not mentioned is your dad's current income. I assume he's worked most of his life and his Social Security check will be at a reasonable level. Figuring out the difference between his current take home pay and potential SS, will give you an idea of how much money he needs. It might be less of a difference than what you think.

Does he used credit to live above his means, or because he doesn't earn enough money? The credit problem usually solves itself for older people. The ability to borrow ceases, and creditors have no recourse against people on SS without assets.
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Old 04-02-2011, 11:19 PM   #56
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Did you mean "invest" and not "invent?"
Bingo!!

I had that thought while scanning the thread. Your turn.
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Old 04-03-2011, 04:30 AM   #57
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Help your mom find a job. Even if it is a minimum wage job. Wall Mart Greeter... something.

This may be difficult, because she has not worked. But they need to increase their income and save. She will probably need to work during normal retirement years.

Can your father get a 2nd job.

I would not recommend that you not compromise your future financial well being. If you must pay their way... then you can either find a career that pays much much more or get a 2nd job.

There is no easy way out of the dilemma.

You mother will be eligible for SS (because of your father), but that is not going to be much. There are other govt and social programs she may be able to take advantage of for food and services. Check in your local community.
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Old 04-03-2011, 04:34 AM   #58
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One caution. If you intend to give them any lump of money... you better make sure they do not have hidden debts you do not know about!

He filed bankruptcy... often people who are financially careless go right back out and get into debt if they cleared the books.

Get a credit report!

You would be wise to retain control of the money!
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Old 04-03-2011, 11:03 AM   #59
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I would stay out of their affairs, save as much of your own money as possible, don't tell anyone you have anything, and if at some point down the road you need to slip your mom some $$ you can do it at the right time in the right way without any pressure from your other siblings, etc.

Your dad sounds too ignorant to be helped in any meaningful way. Steer clear.
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Old 04-03-2011, 11:32 AM   #60
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She knows they are broke. I pretty sure she thinks her kids will take care of her or she will get by on SS.
I think I'd sit down with her and their ss estimate worksheet and clear up any misconceptions that she has that ss will take care of her. Then give her the help wanted section of the news paper.
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