Funding my mom's SEP IRA

[early_retirement_or_bust]

Hi guys! I'm 28, have a young son, but am still helping to fund my mom's IRA. Why?

-- She's self-employed and spends the majority of her money reinvesting in her business and on taxes.
-- She's 56 but has had several small strokes over the years. Most put her in the hospital.
-- She had to clean out her annuities/retirement.

My concern is that my mom can't work forever, and I realize now how costly it'll be to support her in old age, which is why I pleaded with her to start the SEP IRA.

My questions:
1) How much should we collectively spend to fund it monthly?
2) Should she go more moderate/aggressive despite her age? She really needs growth.
3) Are there any other ways we can maximize her savings?


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[Walt34]

Um, wow. From the information on the other thread I don't think you are in a position to fund anyone's retirement than your own.

It's very generous and kind that you want to help your Mom with her retirement, but then your son may very well be funding yours unless your income is very high and your expenses are very low.

 

[early_retirement_or_bust]

Um, wow. From the information on the other thread I don't think you are in a position to fund anyone's retirement than your own.

It's very generous and kind that you want to help your Mom with her retirement, but then your son may very well be funding yours unless your income is very high and your expenses are very low.

But caring for a parent is very expensive...won't it cost me more down the line? I really don't want to tap into my own retirement to do this.


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[Walt34]

If her income is low enough she will qualify for a lot of help from govt. programs. Not luxury living to be sure but she'll have a roof overhead and enough to eat. A relative of mine (but only by marriage!) has a SS income of ~$900/month and that's it. She's in a nice senior apartment and until recently had a car but health issues forced her to stop driving. I'm sure she's getting help with rent and food, and perhaps other expenses as well. But she is in a relatively wealthy area with generous social benefits.

At your mother's age of 56, unless her income is very high I think her retirement funding ship has sailed. From the numbers in the other thread I doubt the little you could contribute will make a noticeable difference.

Wait for a few others to comment though, they may have other thoughts.

Another thought is that if most of her income is being put back into her business, how well is that business really doing? I mean, after business expenses, is it paying more than what she could earn doing something else?

 

[YeahNo]

You have a negative net worth. I would certainly fix that first before I'd be contributing to my parent's retirement accounts. If she truly has some serious medical issues (which is sounds like she does) and a low income (which sounds possibly), the state will definitely fork over some cash to help her out one way or another.

 

[Whisper66]

I would not contribute directly to your mothers assets from your own. As others have said, she may qualify for social programs if she gets in need. Boosting her net worth artificially by contributing your own would cause me to wonder if this would lessen the program help she could get. I assume most are need based.

We have a similar concern with a member of my family. My wife and I have simply recognized that our retirement savings may be needed for helping this family member. The aggressiveness of savings can be adjusted to better plan for future problems. More importantly, the decision on timing of retirement can be deferred if needed to allow for added cost of assisting family. May also want to ensure your regular savings include contributions to a conservatively invested taxable account that can easily be accessed if needed.

Sorry for your mom's difficulties. Hope this has been helpful.


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[Whisper66]

After posting that last one, felt like I really should add a couple other thoughts.

My MIL had two strokes. First was minor. Last one left her paralyzed over half her body and unable to communicate in any effective way. She ended up needing 24 her care in her home for about 9 years until her passing. Clearly the family made many sacrifices to help support her but our parents deserve whatever we can offer. I guess my point is that strokes can lead to a heavy family responsibility down the road so be careful not to underestimate the possible needs she may have. It would be worth thinking about the longer term outlook for your mom and consider how that may impact other decisions you make. For example, your other post mentioned upgrading your home to a better one. We chose to upgrade to one that we could take care of MIL in if it was needed. An alternative might be to forgo an upgrade and use that money as emergency savings to help her if needed. You also mentioned sending kids to very strong (I assume private) schools. That can be very, very expensive. May be worth considering the value you see in this vs being more able to assist your mom, especially in the early school years. There is no right answer but it's really important to make knowledgable choices that you are comfortable with and won't regret in the future.

Another thought is that you are in your late 20's. You are doing great thinking about your financial future now. You have plenty of time going forward, especially if you and your husband are of like minds. My wife and I didn't seriously start financial planning until about your age. We were a single income family with several kids that all went to college, the MIL situation mentioned above, and at least one other family member that may need help at some point. We still managed to be FIRE at 55 yrs old. Everyone's situation is different but it's amazing what steady savings, investing and early planning can accomplish.


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[pb4uski]

+1 with the others. By funding your Mom's IRA you are just shortchanging your own finances and deferring her qualifying for government help if the worst should happen. Cross the bridge of helping your Mom when and if she needs it. I don't see how caring for her later would cost you more.

 

[early_retirement_or_bust]

Thanks for your honesty everyone. I guess I need to put on my own oxygen mask before I help others. My dad is in even worse shape smh.

And yeah I have a long way to go on my financial journey. My fiancé is doing way better than me and he's caring for my son and I, really. I need to start doing my part, which is why I went back to work.


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[pb4uski]

Slow and steady wins the race.

 

[samclem]

The oxygen mask analogy is perfect. You'll be of more long term help to your folks if you are financially strong, and it sounds like this approach will help your relationship with your fiance, too. If I were in her position, I know I'd be looking at your actions/priorities pretty hard, and given your own situation and her sacrifices . . . anyway, I'm sure your folks want everything to go well with your marriage.

Regarding your question about other means to sock away money: your mom has a SEP, so she's self employed. If she's the only employee, or it is just her and her hubby, she could do a Solo 401K instead of the SEP. That often allows higher tax deductible contributions. Still, if her health problems are big, the costs will be huge and there's no way she, or you, will be able to meet them. That's a silo with a huge hole in the side, and throwing your own seed corn into it won't make a bit of difference. Once her assets are depleted, there will be some assistance from taxpayers.

Sorry to hear about the health problems your folks are having.

 

[early_retirement_or_bust]

The oxygen mask analogy is perfect. You'll be of more long term help to your folks if you are financially strong, and it sounds like this approach will help your relationship with your fiance, too. If I were in her position, I know I'd be looking at your actions/priorities pretty hard, and given your own situation and her sacrifices . . . anyway, I'm sure your folks want everything to go well with your marriage.

Regarding your question about other means to sock away money: your mom has a SEP, so she's self employed. If she's the only employee, or it is just her and her hubby, she could do a Solo 401K instead of the SEP. That often allows higher tax deductible contributions. Still, if her health problems are big, the costs will be huge and there's no way she, or you, will be able to meet them. That's a silo with a huge hole in the side, and throwing your own seed corn into it won't make a bit of difference. Once her assets are depleted, there will be some assistance from taxpayers.

Sorry to hear about the health problems your folks are having.

Yes this would be perfect for her!


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[Sunset]

Vanguard has a low cost solo 401K your mother can set up.

https://investor.vanguard.com/what-we-offer/small-business/individual-401k

Limit her fund choices to 2 or 3 and it will be good.

By the way when she contributes to some retirement funding, she pays less taxes.

 

[early_retirement_or_bust]

Vanguard has a low cost solo 401K your mother can set up.

https://investor.vanguard.com/what-we-offer/small-business/individual-401k

Limit her fund choices to 2 or 3 and it will be good.

By the way when she contributes to some retirement funding, she pays less taxes.

I will help her set this up ASAP. Thanks!


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