Looking for free advice from all of you

[Cal]

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?

Thanks.

[peggy]

I am not a financial planner, but here are my gut reactions to your post:

Absolutely their wills should come first--simple wills, even when prepared by an attorney, are less than $500, and just having one in place will stave off potential headaches when they die.

Then, depending on the nature of their health problems, long-term care insurance might also be wise.

Then you can talk about getting rid of their planner, reducing debt and saving for the future.

Just my $.02, FWIW.

[Nords]

Quote:

Originally Posted by peggy Then you can talk about getting rid of their planner...

I like the question "If your financial planner is so smart, why is he still working?"

LTC is a huge risk right now, and health insurance until they at least get Medicare.

You guys picked the perfect diplomatic family-oriented approach with the IRA funding & inheritance-- I'm going to remember that one!

[LovesLife]

Cal,

I know the last thing you are seeking here is praise but you really deserve it. What a wonderful daughter you are to your parents. They must feel so blessed to have you on their side.

LL

[Cal]

Quote:

Originally Posted by LL Cal, I know the last thing you are seeking here is praise but you really deserve it.* What a wonderful daughter you are to your parents.* They must feel so blessed to have you on their side.* LL

Thank you for the compliment. It's one of the really great things about my family. We never had a lot in the way of material things when we were younger, but we knew we had each other. Now that my sister and I have escaped our personal nightmares of debt (for several years now) and have gotten our own financial houses in order, we really feel lucky to be able to help my parents out financially.

The financial planner really scares me. My dad has one rollover IRA worth about $70k right now. In 2000, it was worth about $130k and was conservatively invested. My dad listened to the wrong people, got a little bit of the greed monster in him, and let the financial advisor move the whole nut to tech just literally six weeks before the big tech drop started. My dad tells me how the advisor calls him (about every six months) and tells him that market conditions have changed and he needs to change funds. My dad goes along with him because he is a "professional". Ugh!

It was really hard for my dad to listen to his daughters when it came to financial matters. While he has always encouraged us to do whatever we wanted, I still think there's a part of him that has difficulty accepting that a woman knows this kind of stuff.* He's coming around, though.*

Edited because I didn't see the mistake in preview mode.*

As to the question of how to discuss it with them, perhaps you could get a book or video that they could read or watch?? *Then they are getting advice from a neutral third party, but not from an investment advisor with a conflict of interest.

There was a video at fundadvice.com that I was considering getting for someone, but I can't locate it now.

[yakers]

Well, its nice to want to do better and that may be possible but you've done prety well so far. My Dad was a truck driver but would have understood most of the discussions on this board. But several of my uncles sound just like your Dad. You had a good starting point with the IRA.
One possible suggestion, if you Dad may get laid off again, look for a Government job. Now I know entry level govt jobs pay spit but they commonly have good benifits and this may become more important than cash. Getting medical coverage and maybe even group long term care insurance. Some places you have to work 5 years to carry benifits into retirement but that could still work at 58. There is nothing wrong with working later in life if you want to and if you can. But one of the leading causes of early retirement is medical problems and you may want to focus on this issue as much as anything. My Dad stopped working at 62 because of a stroke, he wanted to work. Fortunately he never borrowed a penny in his life (not even for a mortgage) saved enough that my Mom is still solvent at 84 , 13 years after he died.
Anyway, the only insight I want to convey is that medical may become more important than money and to focus on that issue. And if you think folks don't like to talk about money, try discussing health, medicine and death issues.

[Patrick]

Quote:

Originally Posted by Cal Their combined retirement savings is about $140k. Their mortgage and HELOC are about $150k. Right there, we know they have a negative net worth.

Not necessarily. How much is the house worth? If it's worth more than the $150K they owe, they have positive equity in that property. Their other assets and debts would also have to be evaluated to determine their net worth.

[Cal]

Quote:

Originally Posted by Patrick Not necessarily.* How much is the house worth?* If it's worth more than the $150K they owe, they have positive equity in that property.* Their other assets and debts would also have to be evaluated to determine their net worth.

Good point. The house is worth about $170k. They talk about "downsizing" when they retire. I'm not sure they get how little equity there would be (if they keep going at this pace). They've refi'd three times in the past five years - lower rates but cashing out the equity.