Help me figure out how to finance MIL's retirement

[crazy connie]

2500 sq foot home Why not downsize to a condo and bank some. Less in taxes insurance and mtc and an improved nest egg. If in a senior type complex then the built in friends and activities cost less.

[FUEGO]

1. Downsize to a smaller house or condo? 2500 sf is a lot for one person. That is why she needs a maid.
2. Get a part time job to fund her pets and other hobbies.
3. In regards to costs that MIL doesn't want to cut because she thinks she still needs the goods/services - propose a compromise. Get her to agree to cut some costs for a three month period. If she misses the goods/services after three months and feels like she is getting value for money, then reinstate the services. I'm thinking newspaper, some cable, pest control, alarm, maid, charity. You don't have to get her to commit permanently, just secure a 3 month commitment and then re-evaluate at the end of 3 months. She may find she doesn't really miss some of the things she gives up.
4. Reverse mortgage - it may help. Or even getting a reverse mortgage on a smaller place. Would renting instead of owning make sense financially? Another interesting idea I have seen where the parent wants to leave a house to a child in their estate is for the child to essentially fund a reverse mortgage and take a note on the house in exchange for payments. It would save all those reverse mortgage fees.

Oh yeah, be careful you do not become an enabler. Sometimes too much help isn't good when it encourages reckless behavior.

[FinanceDude]

I think you're in a tough spot.

I doubt FIL will get a job to support the alimony payments. The fact he voluntarily quit a well paying job speaks volumes, he is trying to punish her......

She HAS to give up the niceties she enjoyed when she and you FIL were together, she's living like the money's still coming in, which is a big problem.

You are getting good advice from the folks on here.......

[charlie]

FIREDREAMER, I sympathize with you and your MIL and wish you all of
the best.

In scanning the posts on this thread, I did not see anyone mention
the obvious (to me anyway) idea of converting her IRA funds to
an immediate annuity.

At age 66 in California, a female could get about $1083 per month for
life with no beneficiaries. This would give her about $12,996 per year
which added to her SS would amount to $26,196.

To make up the $5804 shortfall, she could do a reverse mortgage as
you mentioned. This would keep her in her home, which is probably
very important to her (and keep her out of yours ).

She could then look for a roomie, as others have mentioned, to bring
in a little extra cash to get her to the $36,000 level. Or perhaps
she could look for some part time work like substitute teaching if
she is so inclined.

In any case, staying in her own home will probably make both of you
happier, and since her eyes glaze over on money management issues,
an immediate annuity takes that burden away from both of you.

Many will disagree with the annuity idea, saying it is not inflation
friendlly. This is a valid observation, but her SS is indexed to inflation
and her part time work and roomie income would help make that up.

Good luck and,

Cheers,

charlie

[W2R]

Quote:

Originally Posted by charlie In scanning the posts on this thread, I did not see anyone mention the obvious (to me anyway) idea of converting her IRA funds to an immediate annuity.

Posts #2 and #5 on this thread. An inflation adjusted annuity yields less than one that isn't.

[FinanceDude]

Quote:

Originally Posted by charlie In scanning the posts on this thread, I did not see anyone mention the obvious (to me anyway) idea of converting her IRA funds to an immediate annuity.

The current interest rate environment means she would in effect lock in a LIFETIME low payment, with NO hedge against inflation, that's a bit scary..........

[LOL!]

Since you are over there doing repairs and other things, I don't see why you can't schedule some pet "accidents".

"But Fluffy, ran right into the circular saw blade!"

"Oh, did that rat poison wrapped in raw hamburger that I put out have any effect?"

[ziggy29]

Quote:

Originally Posted by FinanceDude The current interest rate environment means she would in effect lock in a LIFETIME low payment, with NO hedge against inflation, that's a bit scary..........

True, but there *are* a few SPIAs with an inflation kicker. The problem is that the monthly income you receive in the beginning takes a HUGE hit with the inflation rider. The inflation protection can be VERY expensive, as it is with LTCI.

[charlie]

Well, I knew the annuity idea would stir things up.

The annuity would pay about 7.6% on the $170,000 investment.
Where can she get this with safety? No, I don't sell annuities but
I do believe they have a place for some situations. This is one.

True, inflation will eat away at her income over time, but as everyone
has noted, her expenses are way out of line. It will take her some
time to adjust her lifestyle to a more appropriate level. Reducing
expenses and learning how to manage money is very difficult for
a person who has led a sheltered life. Also, her income needs should
be somewhat lower as she reaches advanced years and the LTC
insurance will cover the end game.

If you think about it, an annuity would force her to live within her
means. She would have to learn how to live on a monthly income
and would not be able to tap an IRA for "extras". This is all too easy
and tempting ...... believe me!

Cheers,

charlie

[crazy connie]

Perhaps she could get the pet fix from volunteering at a shelter/rescue group. Also, the Govt has jobs which pay nominal wages but give you a purpose. Check out the Americorp/Vista program for jobs which are not full time and many are geared to nominal work experience. A little extra income can go a long way!

[jimnjana]

I'd have her drop the LTC insurance, sell the house and move into an apartment. She doesn't appear to have the ability to pay for much maintenance and up-keep of the house. LTC insurance rates for her will only go higher as she ages, making them unaffordable considering her projected income.

Jim

[charlie]

I think she should keep the LTC insurance as long as possible. Why
throw it away before the need is obvious? LTC insurance helps
protect FIREdreamer's assets in the event MIL needs it sometime
in the future. Think about it!

As for higher LTC costs as she ages, I don't think this is true as a
general case. My LTC purchased through GE (now Genworth) has
only recently increased for the first time in 15 years. As somebody
mentioned, LTC insurance would be much more expensive for her
to purchase now than when she did so at an earlier age.

Cheers,

charlie

[NW-Bound]

My mother, a widow, lives alone in a 1,700 sqft home that is paid for. Her annual expenses are around $20-22K. She has everything that she needs, and all the food she cares to eat. And yes, she likes to shop for clothes - they overflow the closets of the 3 bedrooms in the house, and then some. What I am trying to say is that she probably could be fine with less.

I do not know her budget, but suspect it is similar to what W2R proposed. I feel sorry for people like FireDreamer who have to deal with financially ignorant people.

A friend of mine complained about his non-working wife's spending. According to him, she spends $2K a month on miscellaneous things that are simply not accounted for. I found that hard to believe, but he said it was sadly true. When I told my wife, she suggested that the wife could be on drugs, or had a boyfriend. Of course I couldn't tell my friend that. Perhaps his wife may just be squandering money on stupid things which add up. It's a mind-boggling mistery to me, but then she is not my wife. A highly-paid tech worker, he has very little assets to show for his income.

[ziggy29]

Quote:

Originally Posted by charlie I think she should keep the LTC insurance as long as possible. Why throw it away before the need is obvious? LTC insurance helps protect FIREdreamer's assets in the event MIL needs it sometime in the future. Think about it!

How so? This sounds like a commissioned insurance salesman's pitch (even though presumably you're not one).

If MIL runs out of assets, she can receive long term care through some government assistance at various levels; other people are not obligated to throw their own assets into it unless they insist on long term care of their own choosing. Depending on circumstances, the ability to choose your own caregivers may or may not justify the expense. But it's flat out wrong to imply that he would automatically be on the hook for the cost of her care if MIL runs out of money. IMO, it's a common scare tactic I've heard used from time to time.

[charlie]

Ziggy29, I am 75 years old, retired at 59 from a mid level engineering job.
I am not an insurance salesman. So back off!

As for protecting FIREdreamer's assets, of course he is not "required"
to support MIL in a nursing home, but perhaps he might feel obligated
for the sake of his wife's feelings. As for me, I want some say as to
how and where I spend my end days and I don't want my children to
worry about how that time is financed. Thus LTCI for me. To each
his own.

Cheers,

charlie

[Bimmerbill]

Hmm, interesting pickle you are in. Would she sell the home and move into a small condo or apartment? That would reduce utils and maint. Maybe get some cash in the bank?

Either way, I am sure its hard for someone to suddenly have to change the way they live.

Good luck to you and your DW.

[ziggy29]

Quote:

Originally Posted by Bimmerbill Hmm, interesting pickle you are in. Would she sell the home and move into a small condo or apartment? That would reduce utils and maint. Maybe get some cash in the bank? Either way, I am sure its hard for someone to suddenly have to change the way they live.

I'm sure it's a hard thing to accept, but yeah, it looks like being willing to sell the house and rent (or trade down into a small condo) would probably be a huge boost to the cash flow -- not only in reducing expenses (particularly property taxes, home insurance and maintenance) but also by injecting cash back into her balance sheet.

[DangerMouse]

Quote:

Originally Posted by NW-Bound A friend of mine complained about his non-working wife's spending. According to him, she spends $2K a month on miscellaneous things that are simply not accounted for. I found that hard to believe, but he said it was sadly true. When I told my wife, she suggested that the wife could be on drugs, or had a boyfriend. Of course I couldn't tell my friend that. Perhaps his wife may just be squandering money on stupid things which add up. It's a mind-boggling mistery to me, but then she is not my wife. A highly-paid tech worker, he has very little assets to show for his income.

Actually it would be quite easy to blow thru $2k a money on uncounted miscellaneous without really trying. Think books, magazines, getting nails done every week, going out for lunch, take the car to the car wash can cost $40, a bit of shopping, buying gifts that aren't really necessary, some new makeup and going to the drugstore you can spend $100 in a heartbeat with no real effort. I spent $80 this morning at Target buying a couple of door mats and a pyrex dish so $2,000 would not be that difficult to do.

[FIREd]

Selling the house and moving to an apartment might be complicated because of the pets and she will never agree to give them up. Unless I follow LOL!'s suggestion and off the pets one by one (just kidding!), I believe that she will categorically refuse to move. That's why I like the roommate idea (DW likes it a lot too).

As far as annuities, I will leave the option on the table. If interest rates are up substantially in a few years, we might convert part of her nest egg if it can significantly increase her income.

[jimnjana]

Quote:

Originally Posted by charlie I think she should keep the LTC insurance as long as possible. Why throw it away before the need is obvious? LTC insurance helps protect FIREdreamer's assets in the event MIL needs it sometime in the future. Think about it! As for higher LTC costs as she ages, I don't think this is true as a general case. My LTC purchased through GE (now Genworth) has only recently increased for the first time in 15 years. As somebody mentioned, LTC insurance would be much more expensive for her to purchase now than when she did so at an earlier age. Cheers, charlie

you do have a point if firedreamer felt the need to pay for MIL nursing care, but as ziggy pointed out, MIL would be able to get govt support. I'm all in favor of someone paying their own way if they can afford to do so. In her case, if he is lucky enough to have her cut back, she still cannot afford her home (she's not putting anything away for maintenance). Also, likely that she will live a long life, LTC will get increasingly expensive, with LTC, the past is not a good guide for the future in terms of rate increases. When FEDLTC plan jacks their rates 25%, for those under 65, I can only imagine what other plans will be asking their policy holders to pony up. At any rate, she simply doesn't appear to be a candidate for LTCI, but if it lets firedreamer sleep better, and he is willing to cover the costs in the future for the insurance then go for it.


jim