Hey everybody,
My question concerns helping my parents retire. My situtation is somewhat unique.
My parents are currently in there mid 50s (54 & 56 too be exact). They were financially stable until around 3-4 years ago when my father "retired" early and started day-trading. Long story short, he lost their savings and they declared bankruptcy and lost their house to foreclosure. Right now, they have both re-entered the work force but aren't doing much in the form of retirement savings. My mom makes around 35-40K a year, and my father's income is entirely dependent upon commission but lets say 2 grand a month.
I would like to take steps to help them retire. My first priority is to help my mother get out of the work force. Fortunately, I believe that I am in a position to do that. I am 24 and recently graduated from law school and will start a new job in march after I take the bar. The job pays around $120K/year. I do, however, have around 150K worth of student loans.
I am currently living with my parents while studying for the bar, and figured I could continue to do this for a couple years or so to keep expenses down and pay off my student loans, so say I could live $1500/month or around $20 grand a year. Here are my projected annual expenses assuming no car-payment/no-housing-costs.
$20,000 personal expenses (food, gas, ext)
$25,000 income tax liability (considering deductions for student loans)
$21,500 401K + IRA (own retirement savings)
-----------------------------
= $66,500
I have omitted my personal health insurence costs because I don't know what they will be, but round it up to $70K.
So I figure to have $55,000 ($125k-$70K) annual investment capital.
Assuming I can refinance my student loans at a reasonable interest rate 6.8%, I figure my minimum monthyly payment would be around $1000/month.
Question #1: How should I structure my plan?
Option 1: Pay back student loans ASAP, then focus on parent's retirement.
Option 2: Make minimum payments, and sock away money in semi-liquid investment medium to accomplish parents retirement.
Option 3: Somewhere in between
Option 2: What is the best way to Help my parents?
1) Obviously, lowering their expenses by eliminating their rental expense would be a good start. I was thinking that purchasing a house in a decent neighborhood (say $150,000) would be the first step. Of course I would keep it in my name to for tax purposes (i.e. avoid gift tax, income tax deductions ext.), but probably give them a "life estate" or something of that nature.
2) Next, I would look into some income producing investment. I figure $3K/month or so would be a good start. It may not allow them both to retire, but I figure it would at least allow my mom to get out of the work-force. I have thought of several ways to accomplish this
Any thoughts, tips, or advice is appreciated.
My question concerns helping my parents retire. My situtation is somewhat unique.
My parents are currently in there mid 50s (54 & 56 too be exact). They were financially stable until around 3-4 years ago when my father "retired" early and started day-trading. Long story short, he lost their savings and they declared bankruptcy and lost their house to foreclosure. Right now, they have both re-entered the work force but aren't doing much in the form of retirement savings. My mom makes around 35-40K a year, and my father's income is entirely dependent upon commission but lets say 2 grand a month.
I would like to take steps to help them retire. My first priority is to help my mother get out of the work force. Fortunately, I believe that I am in a position to do that. I am 24 and recently graduated from law school and will start a new job in march after I take the bar. The job pays around $120K/year. I do, however, have around 150K worth of student loans.
I am currently living with my parents while studying for the bar, and figured I could continue to do this for a couple years or so to keep expenses down and pay off my student loans, so say I could live $1500/month or around $20 grand a year. Here are my projected annual expenses assuming no car-payment/no-housing-costs.
$20,000 personal expenses (food, gas, ext)
$25,000 income tax liability (considering deductions for student loans)
$21,500 401K + IRA (own retirement savings)
-----------------------------
= $66,500
I have omitted my personal health insurence costs because I don't know what they will be, but round it up to $70K.
So I figure to have $55,000 ($125k-$70K) annual investment capital.
Assuming I can refinance my student loans at a reasonable interest rate 6.8%, I figure my minimum monthyly payment would be around $1000/month.
Question #1: How should I structure my plan?
Option 1: Pay back student loans ASAP, then focus on parent's retirement.
Option 2: Make minimum payments, and sock away money in semi-liquid investment medium to accomplish parents retirement.
Option 3: Somewhere in between
Option 2: What is the best way to Help my parents?
1) Obviously, lowering their expenses by eliminating their rental expense would be a good start. I was thinking that purchasing a house in a decent neighborhood (say $150,000) would be the first step. Of course I would keep it in my name to for tax purposes (i.e. avoid gift tax, income tax deductions ext.), but probably give them a "life estate" or something of that nature.
2) Next, I would look into some income producing investment. I figure $3K/month or so would be a good start. It may not allow them both to retire, but I figure it would at least allow my mom to get out of the work-force. I have thought of several ways to accomplish this
- Buy 4-5 residential rental properties and pay off the notes aggressively.
- Commercial Real Estate- say a strip mall or something of that nature.
Any thoughts, tips, or advice is appreciated.