In the family background poll, I answered "upper lower class" and not middle class because of the way my family handles money and their attitudes about money. My sister and I are facing a dilema with my parents and need to have a few conversations with them and I'm hoping some of you can give some suggestions.* (Sorry for the long post.)
My parents are 58. Their combined retirement savings is about $140k. Their mortgage and HELOC are about $150k. Right there, we know they have a negative net worth. They may have $1-2k in a regular savings account, but they also have a car loan and a credit card balance with at least $4k on it.
My parents have always paid their bills. But beyond having a couple hundred dollars in the bank, never really thought about investing. The attitude was always "our people" don't have money to invest. Both grandparents subsisted on social security once they retired. It was very bleak and sad to see them sitting around their apartments (that's right - no home ownership in this family) in the latter years because they couldn't afford to do anything.
My sister and I are very worried about their financial future. Money was never discussed in the family and dad has always been sensitive to anything that would suggest he wasn't a good provider so it has been hard to have any of these type of discussions with him.*
Last Christmas, we told them that we were going to fund an IRA for them and make contributions. It was a way to tell them that they didn't have enough to retire on. We got around their objections by telling them that while the primary beneficiary would be my step-mom, the secondary beneficiaries would be me and my sister: we were going to fund our own inheritance.*
* In truth, we know that they will desperately need this money once they retire.
We have used the IRA to start educating my parents about investments. We bought one large cap, dividend paying stock that we liked and a mutual fund. We have discussions with dad about how his IRA is doing and he has started asking us questions which have lead to conversations about how mutual funds work and how you make money with stocks.
Now, I know 58 is young, but in the last 18 months, my parents have had some real health issues pop up. In the last 10 years, my dad has been laid off from three different jobs. Each time he got excellent recommendations which helped him land another job, but each time at great reductions in pay. He currently makes $24k/year and is a delivery driver (and really doesn't have any skills that would get him a better paying job).* My stepmother is in customer service and makes about $33k/year. My fear is that there will be another layoff (his company isn't doing well) and at his age, it will be very hard to find another job. I am also very concerned that there is a possibility that their health conditions might push them out of the work force within the next 5 years.*
Next week, I am going to visit them. The last several conversations with them, they have been much more open talking about their debt and other financial matters. I want to talk with them about making a will, getting a debt reduction plan together and possibly get away from their shark of an investment adviser.* I want them to understand the financial hole they are in without beating them over the head about it.
Any suggestions on how to discuss this with my parents? If they are not wanting to discuss everything on my "agenda" - what are the most important things I should focus on first?