Helping My Father

R

RyanTaylor

Confused about dryer sheets
Joined
Jan 1, 2014
Messages
8
Location
Olympia
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.
 
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.
 
No pension, and minimal health insurance pretty much. He works for Lowe's, not very high quality employee benefits.
 
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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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?
 
Why is he not posting here instead of you?
 
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!
 
Katsmeow said:
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
Click to expand...
 
lemming said:
Why is he not posting here instead of you?
Click to expand...

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.
 
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.
 
RyanTaylor said:
He is just embarrassed, and is putting it off. He knows that he should be working on it.
Click to expand...
Just about everyone here knows someone like that. Unfortunately, it is like leading a horse to water.

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.
Click to expand...
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.
 
Walt34 said:
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.
Click to expand...

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.
 
RyanTaylor said:
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.
Click to expand...

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.
 
Walt34 said:
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.
Click to expand...

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?
 
Oops, I misspoke. I contributed to the 401k, not an IRA. But I gather you knew what I meant.
 
RyanTaylor said:
..........

Any other significant ideas to help him get the ball rolling again?
Click to expand...

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.
 
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.
Click to expand...

I have to agree with this. I hate to see him take on student loan debt for something that probably won't do him much good. I've probably listened to Dave Ramsey too much, but he's not a big fan of doing this to get a better job.

Speaking of Dave Ramsey, I think your dad is a good candidate for Financial Peace University. He's got to believe and embrace this - you can't do all the pushing. Kudos to you though for wanting to help.

Good luck.
 
Ryan,

I agree with the excellent suggestions made by previous posters.

I just want to add that your father raised one heck of a son! He is very fortunate to have you in his corner. You are an impressive young man and obviously have a lot on the ball. Best of luck to you and your father in 2014 and beyond.
 
Calico said:
Ryan,

I agree with the excellent suggestions made by previous posters.

I just want to add that your father raised one heck of a son! He is very fortunate to have you in his corner. You are an impressive young man and obviously have a lot on the ball. Best of luck to you and your father in 2014 and beyond.
Click to expand...

Thank you very much! I will pass on every bit of great information to him!
Next.. does anyone know how to close a thread now? Hahaha
 
I actually think your dad might be a candidate to read through Mr. Money Mustache and go to the forum there (he doesn't have to post just read it). I know that Mr. Money Mustache is controversial and I disagree with him on all kinds of things. What I do like though is that reading his blog and the posts on the forum causes me to question my assumptions. There are a lot of ideas of ways to cut expenses. One of the things, for example, that I got from it is how harmful it is to the bottom line to have a long commute to work (I wish I had known that 30 years ago). Also, ideas on how to reduce utility bills, etc.

For your dad, I think that one thing that will help him is to work to cut expenses so he can save more money. I think that he is in a situation where getting more education may help him. However, I would like him to try to end up less or no debt at the end of it. MMM and the forum have lots of ideas to cut expenses.
 
Ryan, your father has time to build his retirement funds, at 42. He should not be at all embarrassed to post here. Some people don't really start until their children are on their own, and he is probably ahead of many people in that he really does not have much debt. His finances sound pretty simple so it should be easy to set up a plan--$x to this, $x to that every paycheck.

He could add the monthly amount he had been paying off his other credit card to his Lowe's payments (I think this is called snowballing by some financial guru) and get the Lowe's paid off much faster with less total interest paid.

Even if he is only planning to be at this job a shortish amount of time, he should still contribute to get the employer match.

I hope you, and your dad if he wants, will keep posting here!
 
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