Are there ways to help parents with their anxiety of running out of money?

[COcheesehead]

My Dad had little money, $40,000 to his name at death. He had SS and a small union pension. Paid up house, an older car. He had lots of friends. I never heard him once worry about money.

 

[Yegey]

Most of the rest has been addressed, but renting vs. owning in old(er) age would give me anxiety. Perhaps they live in an area like Manhattan where most people rent and don't have any rent stabilization? But other than that I don't know why they'd not be homeowners of some sort if they have a large portfolio. Maybe time to find a nice condo in a senior friendly neighborhood?

They do not have a large portfolio (at least not compare to many here with multiple million). They live in a senior friendly community. The rent has gone up but it's hardly a threat to their finance. Even condos have rising HOA and they are not good with home maintenance.

They just feel that it's too expensive but it's not expensive for the area The reason they feel is expensive is that they used to live crime-ridden inner city area that was cheaper. It was stressful for them for a different reason.

 

[Yegey]

Another idea. Run FIRECalc with their parameters, but use the Investigate tab to solve for safe spending with 100% success and see how the results compares to their natural spending. It might be eye opening for them.

That's a good idea and I have tried doing that. They are unfortunately threaten by technology. I tried to get around the issue by printing the graph on paper, but they are not used to projection into the future. I feel they are people who only see things in the short term.

 

[Yegey]

Do they have a working budget plan? It might be helpful for them to see detailed expenses including a section for discretionary things like vacations and hobbies perhaps?

They have never used a budget and seems to intuitively not spend more than they earn. I even use Intuit Mint (now defunct) to generate their spending pattern for the year and that they can spend more. However, their spending did not change.

The more I think about this, the more that this is just something psychological that cannot be solve and I just have to push back even if it will lead to some arguments.

 

[Yegey]

My Dad had little money, $40,000 to his name at death. He had SS and a small union pension. Paid up house, an older car. He had lots of friends. I never heard him once worry about money.

I suspect everyone is a bit different. Not worrying would be ideal. Who wants to be stress out in retirement. I feel our dad has his priority right.

 

[flyingaway]

Tell them that you have money to support them if needed.

 

[ERD50]

Another idea. Run FIRECalc with their parameters, but use the Investigate tab to solve for safe spending with 100% success and see how the results compares to their natural spending. It might be eye opening for them.

Yes, but I'd keep it even simpler. At 1% withdrawals, their money would last 100 years!

Of course that's a little too simple, but even with 3% inflation of spending, and zero gains on investments, it would last 47 years. Even with 5% inflation, it lasts 37 years! You could even set aside a "Stuff hits the fan" amount, and show them how long it would last.

edit: I see you mentioned fear of technology, that's OK, don't show them the spreadsheet (that's for you). They can understand that taking 1% will last 100 years. And inflation will affect that somewhat, but you can tell them, not enough to worry about at 1% WR (I'm assuming they are already at an advanced age?).

spreadsheet example enclosed: << we can't upload spreadsheets? Here's a clipping:

 

[harllee]

My mother was the same, born in 1931 and alway reluctant to spend money. Well it turns out it is a good thing she did not spend much money because now at 95 she is running out of money. She was diagnosed with Alzheimers 5 years ago at age 90. She is in very nice skilled nursing, long term care insurance running out, cost of skilled nursing is $12000 per month.

 

[MichaelB]

Do others have this issue with their love ones? How did you help them with this? I don't think it's a mental decline issue. We all have fear that we will run out of money and there is a still a chance they can run out of money (nursing home), but the fear in my opinion isn't rational and I can't seemed to sway their fear. Just live with it I guess?

My mum had this concern, and in her mind it was well founded. When she was young seniors did run out of money and spent their final years in poverty. She lived though a world war, with all the hardship that creates.

My aunt, her younger sister, also thought that. During her final years, when she was ill and in a difficult way, she probably came to realize she had over saved and could have spent more on herself.

Neither had any regrets about not spending enough on themselves. I worked to reassure my mum that she did have enough and she believed me, but still worried. My assurances were not enough to offset her own life experience and the things she saw as a young girl. The thought that she would become a burden on her children horrified her.

There’s not much that can be done here. The best I could do was to show my mum I took her concern seriously, and on occasion would just take her hand, look her in the eye, kiss her cheek, and tell her I would always be there for her like she was for me when I was young.

 

[Kings over Queens]

The more I think about this, the more that this is just something psychological that cannot be solve and I just have to push back even if it will lead to some arguments.

Sometimes, when I've had enough, I tell my mother in law "ok cool, probably shouldn't buy that, this way there is more for us to inherit." She knows I'm kidding and it usually snaps her back to reality.

 

[pb4uski]

That's a good idea and I have tried doing that. They are unfortunately threaten by technology. I tried to get around the issue by printing the graph on paper, but they are not used to projection into the future. I feel they are people who only see things in the short term.

They have never used a budget and seems to intuitively not spend more than they earn. I even use Intuit Mint (now defunct) to generate their spending pattern for the year and that they can spend more. However, their spending did not change.

The more I think about this, the more that this is just something psychological that cannot be solve and I just have to push back even if it will lead to some arguments.

I would suggest that you explain to them that FIRECalc isn't a projection, but rather, is based on actual history with respect to investment returns and inflation. So for example, if the time horizon is 30 years, then FIRECalc has actual historical results for investment returns and inflation starting in 1871. So FIRECalc starts with the input portfolio balance assuming that you retired in 1871 and rolls it forward increasing it for actual investment returns and reducing it for inflation-adjusted withdrawals for 30 years and as long as the money never runs out over the 30 years from 1871- 1901, then that is a success. Then it does the same calculations for 1872-1902, 1873-1903, etc. Some of those 30 year sequences failed, in other words, ran out of money. If you set Investigate to solve for spending level then FIRECalc solves for the maximum amount of safe spending at a given success rate based on all of its history. For a portfolio that is only 5% stocks, that safe withdrawal rates at 95% success is 3.05% of the beginning portfolio balance with subsequent year withdraals increased for actual inflation. For 100% success the safe withdrawal rate would be 2.75%.

It probably is psychological, so if you push, push gently. Its isn't worth arguing over and damaging your relationship.

 

[harllee]

But how do you plan for $12,000 a month for a nursing home for years and years and years?

 

[Lemonade]

Sometimes we just need someone to listen, not to fix. Maybe your parents just need to verbalize their concerns (over and over again?)

Older adults are bombarded from all sides (TV, news, media, other seniors) about the rapid rise in the cost of healthcare, the scamming of seniors by unscrupulous individuals, inflation, etc. It can be frightening. People in my mother's senior living home sometimes have to move to smaller units or to another location due to money issues. As posted above, today's older folks are often children of the depression and have seen real need and poverty. If you are regularly reassuring them, I would then move the conversation to other topics. Don't let it become something you rehash each time you talk. Encourage them to be active and engage their minds so this topic is not all they think about.

(And frankly, why should it be a surprise that they worry about money? Many folks on financial forums like this have multiple million$ and still talk about saving for unexpected illness or care needs. Having a finite resource demands care in its use.)

 

[Yegey]

Tell them that you have money to support them if needed.

Knowing my parents, I will be real careful about saying that since they will feel that they need that support right now

 

[pb4uski]

But how do you plan for $12,000 a month for a nursing home for years and years and years?

It depends on how long you need care and if you have a spouse. If you are single and end up in that situation then you end up in private pay until the $12,000 per month less your SS adjusted for a $75 monthly stipend eats up your savings and then you go on Medicaid LTC for the rest of your life. If you are married it is more complicated but a similiar concept that you are expected to use personal resources until you can't (with some reservations for the spouse).

 

[engineernerd]

Knowing my parents, I will be real careful about saying that since they will feel that they need that support right now

Ha, ha, I think you are right not to open that can of worms, they sound quite presumptuous. Telling you that you need to find them ways to save money!

When you said they check their net worth every day, I thought maybe you could try distracting them with something else to care about and do with their time. Now I think the best you can probably do is protect your own sanity by leaving well enough alone.

 

[Slim11]

A lot of good advice here. Same with my mom. She thought she worried she didnt have any money and was worried to the point of atually crying. I asked her to get all her accounts and we would sit down and add up the money. She didnt have a lot, but it was way more then she though. After I showed her she could take a certan amount out each month and have the money last her for the rest of her life she relaxed a bit. I also stopped her drips and transfer some money to her each month. I think the problems are that they are not used to the huge cost of things compared to what they remember them being. So, part of that is forgetting a few little things. Saying wow, how did my electric bill go from 80 bucks to 225? The other part is just forgetting what they atually do have in the bank. My mom thought she only had 30 thousand dollers and her SS. Turns out she had 12x that and SS. She just remembered what she started some of the accounts with, others she forgot she opened them. So, best to sit down and go over it with them of they are confterble.

 

[Yegey]

It depends on how long you need care and if you have a spouse. If you are single and end up in that situation then you end up in private pay until the $12,000 per month less your SS adjusted for a $75 monthly stipend eats up your savings and then you go on Medicaid LTC for the rest of your life. If you are married it is more complicated but a similiar concept that you are expected to use personal resources until you can't with some reservations for the spouse.

I believe I think can probably have enough money to have say about 3-5 years of nursing home. Even if I purchase LTC, it will probably run out in a couple of years. I believe some people plan to use their house.

 

[Car-Guy]

My parents both grew up during the great depression so I think that affected them, especially my dad. He retire at 65 with a NW of maybe 300k and a very, very small pension. They lived in small modest house and drove a cheap car that were both paid for. Tried to get them to spend "some" but no way. Most All of the nice/new things that had over the years were gifts from me. When they passed away thirty years later, their NW was ~1m.

 

[PlayinwithFIRE]

I think showing a bunch of math/models to the older generation is mostly a waste of their time and yours.

Doing the math/modelling for yourself to make sure they are OK is fine.

I am in the middle of this with my mom at the moment. She has done things a certain way for so long, and with some modicum of success...she doesnt want to risk this on something she doesnt understand.

To be honest, what she has for investments etc, she doent understand but its "familiar". Find out what they are "familiar" with and try to optimize in those directions for them. For instance, if they like CDs..work on finding them the best rates in CDs.

Theyve been successful at their financial game for what 35 years ? Can you say the same ? hehe

Im sure its not optimal but trying to completely rejigger their finances wont work unless you go the POA route and ride roughshod over them.

pwf

 

[Act2]

If they are getting their healthcare taken care of, have decent housing and appropriate clothing and assistive devices if needed, and are eating ok, why does it matter that they won’t BTD? As one of the replies above stated about someone in their life: “The security of the cash, provides more comfort than spending provides enjoyment.” So they could spend more, but what they are “buying” by not spending is more comfort/security. Seems like a question of priorities.

I have someone in my life who has said he’d surely spend quite a bit of money on toys (read: expensive cars) if he had my level of assets. Ok, but I prefer to have the assets for now. I can always buy a toy or more later if I change my priorities. I’m not suffering; I have everything I need.

 

[jollystomper]

Sometimes it can be easy to determine how others should spend their money . Unless they are doing things like choosing to live in a tent in a field when they could be living in an apartment or house, I would not be that concerned. I agree with the suggestions above regarding listening sympathetically, respecting what they may have gone through in the past, and watching their numbers yourself so that you can keep track of how they are.

I am probably biased. If we had that problem with MIL, I would not call it a problem. But we have the opposite, MIL thinking she can spend without regard to what she has, and still wanting to come with schemes to try to get more.

 

[Koolau]

Both parents went through the depression. Mom saw the results of deprivation and unemployment and grinding poverty. As "farm" people, they never actually went hungry.

My dad's family depended on coal mining and they went hungry. When his dad died of black lung, dad became the man of the house and had to travel (under trains or in box cars) to find w*rk.

They were profoundly affected by their experiences. Until they slipped into Alzheimers, they were always concerned about having enough. Ironically, they broke even upon the death of my mom (the last to pass).

Most times when I got together with mom (after dad passed) she wanted to go over her finances and I had to assure her that she was fine. Of course, when she went into memory care, the money simply evaporated. One more month in care and she would have been penniless.

You really can't "fix" the kind of anxiety that some people have "learned" in their formative years.

 

[Yegey]

Sometimes it can be easy to determine how others should spend their money . Unless they are doing things like choosing to live in a tent in a field when they could be living in an apartment or house, I would not be that concerned. I agree with the suggestions above regarding listening sympathetically, respecting what they may have gone through in the past, and watching their numbers yourself so that you can keep track of how they are.

I am probably biased. If we had that problem with MIL, I would not call it a problem. But we have the opposite, MIL thinking she can spend without regard to what she has, and still wanting to come with schemes to try to get more.

You are correct that I should count myself lucky. Having parents who underspent while complaining about it is annoying, but has no material effect on me. In contrast, there was a post from Boglehead forum a while back where the forum member mentioned that his parents seems successful with a house with large pool that turned out to be build on debt. They end up bailing their parents out because it's was hard to say no to their parents. Better to have miserly parents than super spenders.

 

[Koolau]

^^^^^^^^^


True. I was prepared to step in to help my parents if need be. They never wanted that, of course. Their natural frugality went a long way in insuring that they came out even. Of course, things could have been very different due to both needing memory care at the end. Most people have no idea just how expensive nursing home car really is. With meds and "extras" it's amazing how fast savings can evaporate.