Help for Momma!

[scubamonkey]

This will sound a little crazy, but is true.

I couple of weeks ago I got a call from my sister that my mother was in possible danger from her husband (mom is 76 years old and recently remarried). Come to find out he was verbally abusing her and it was about to become physical and she was scared to leave. So, I fly up to her home and get her out and then get her belongings out.
Now that the drama is over she needs help living alone - as she has always had her spouse take care of her financially. So we are in the process of learning personal finance 101.
Here is the situation. She is 76 years old, very active, and in excellent health. She has about $450K in cash, short term CDs and I -bonds. No debt. A small farm that provides $6000 a year rent. SS and pension of of $850 per month. Projected monthly expenses are unknown at this time - but she lives modestly.
The prelimanry plan is to purchase a condo near her other friends for $87,000. Set up an annuity to cover the difference in her monthly expenses (we are working to establish what they are/will be) and her SS and pension. Keep the remainder of the cash in checking and short term CDs to cover emergencies - Probably $75-$100K. The farm is probably worth $80-100K and the rental return is adequate ($6000 rent less real estate taxes of $700)- so the sale of the farm and conversion to CD's (after capital gains) is not really worth it.
I know this is not really an early retirement issue - more like a emergency retirement issue.

Any suggestions?

Also, she really wants to have her own place and not reside with her children for an extended period.

 

[FinanceDude]

This will sound a little crazy, but is true.

I couple of weeks ago I got a call from my sister that my mother was in possible danger from her husband (mom is 76 years old and recently remarried). Come to find out he was verbally abusing her and it was about to become physical and she was scared to leave. So, I fly up to her home and get her out and then get her belongings out.
Now that the drama is over she needs help living alone - as she has always had her spouse take care of her financially. So we are in the process of learning personal finance 101.
Here is the situation. She is 76 years old, very active, and in excellent health. She has about $450K in cash, short term CDs and I -bonds. No debt. A small farm that provides $6000 a year rent. SS and pension of of $850 per month. Projected monthly expenses are unknown at this time - but she lives modestly.
The prelimanry plan is to purchase a condo near her other friends for $87,000. Set up an annuity to cover the difference in her monthly expenses (we are working to establish what they are/will be) and her SS and pension. Keep the remainder of the cash in checking and short term CDs to cover emergencies - Probably $75-$100K. The farm is probably worth $80-100K and the rental return is adequate ($6000 rent less real estate taxes of $700)- so the sale of the farm and conversion to CD's (after capital gains) is not really worth it.
I know this is not really an early retirement issue - more like a emergency retirement issue.

Any suggestions?

Also, she really wants to have her own place and not reside with her children for an extended period.

Don't forget about filing for a restraining order against the abuser...........

Sounds like you are on the right path. Help her do a budget so you know what she needs every month.

 

[CuppaJoe]

You are such a good monkey (son or daugher)! Does her H know where she is? Is there a restraining order in place? Have you seen a lawyer about a possiblie annulment or other action? She looks solvent to me as long as he doesn't have access to her accounts.

 

[scubamonkey]

Regarding the restraining order - his children are having him committed. Evidently he is pretty mean to them also and kinda crazy too.

There was no commingling of assets during the marriage so he does not have access to her assets.

Kinda strange marital arrangement - just glad she is out of there.

 

[haha]

I mirror what the other guys said. Be sure physical and financial protections are in place.

You outlined her situation very clearly-good job!

Only thing I can add is that it appears that she may well not need annuity. By my figuring, if you spend $87,000 cash for the condo, she still will have income of $6000 from the farm, and $10,200 from pension and SS. After buying the condo, she will still have $363,000. At her age she could certainly take 5% per year, or $18,150 from a very conservative allocation of mostly government bonds plus a maximum or 20-25% conservative equities.

Add this all up and she has $34,350 left over to pay what should be minimal taxes and live.

I would also at least consider taking a mortgage on that condo, instead of being a cash buyer. Not a big deal either way, but depending on costs it might be smart.

And you are right not to sell the farm. Not only would you pay taxes, but assuming that it is quality dirt- you are getting a good and secure rental, which is often bumped up as productivity or commodity prices increase.

Read the thread on PenFed 6% CDs. A ladder of those might be just right for her cash holdings.

Ha

 

[CuppaJoe]

Regarding the restraining order - his children are having him committed. Evidently he is pretty mean to them also and kinda crazy too.

There was no commingling of assets during the marriage so he does not have access to her assets.

Kinda strange marital arrangement - just glad she is out of there.

Whew, you may have averted a catastrophe. The "marriage" sounds like a good candidate for annulment.

 

[haha]

There was no commingling of assets during the marriage so he does not have access to her assets.

If they were married, nothing is cut and dried. An annulment would be a perfect solution to unforseeable problems and hassles, if an annulment is available.

Kinda strange marital arrangement

Aren't they all, Dearie?

Ha

 

[scubamonkey]

I like the idea of avoiding the annuity with the 5% withdrawal rate. She is so conservative that the portion in stocks may make her too nervous, although I will discuss it with her.

 

[Robert the Red]

I like the idea of avoiding the annuity with the 5% withdrawal rate. She is so conservative that the portion in stocks may make her too nervous, although I will discuss it with her.

A quick glance at immediateannuities.com shows she can get over 8% for an immediate annuity. (Pros and cons don't really need discussing yet again, I think.) Do-it-yourself isn't for everybody, and such an option could make having to go past Personal Finance 101 unnecessary.

 

[TexasGal]

How does mom feel about this jerk she married? Hopefully she is thrilled to be rid of him and NEVER wants to have anything to do with him again. People surprise you and "go back together" when you think there is no way in the world that they will, yes even seniors. I read where you said his children are going to have him committed, but that can take a while, can't it? What happens in the meantime? Does he know where she is? If he is able to move around freely, she might need someone with her for a while. Her safety is the most important thing.

As long as he is permanently physically out of her life, pursue an annulment as fast as you can. If that works, it would be the best option. A divorce from someone who is unstable and unpredictable could just be a real PITA. Obviously, they need to be legally disconnected as soon as the law allows regardless of which way you go.

I don't know how much money she wants to spend each month, but it seems to me that she is going to have a nice tidy sum by the time you add an auto withdrawal from her nest egg. Laddered CD's that pay into her account might be sufficient. Vanguard has some new retirement income funds that "supposedly" will pay regular income of 3% or 5% or 7% without eating into your egg. I don't know anything about them but it peaked my interest . . . it was discussed on this forum a few days ago. That would avoid an annuity which seems less flexible than what you might need later. The new VG funds are supposed to work like an annuity without being an annuity. Whatever you choose needs to be simple and automatic so that she does not have to make any decisions.

HaHa had a good point to consider about whether to buy the condo outright or have a mortgage. At her age, and depending on the terms, it might possibly be more financially sensible to make payments than to drain her egg by $87K. Did you say who owns the place she lived with her husband? You moved her belongings so I assume he owned it.

It is so sad to see our parents get into trouble, but at least it doesn't sound as if she is fighting you on anything, at least not yet . I am taking care of my 91 yr old mother who lives with me thus the grin! My mother will argue with a fence post! If your mom follows your advice and is willing to learn, everything will work out just fine.

Good luck!

TG

 

[honobob]

Scubamonkey
You should be aware that the husband and/or step children can attempt to take or control Mom's assets. My father had property in his name only (real estate and CD's) that the children were able to freeze so that my father did not have access. The step grandson was able to take possession of my fathers home for a period of time and it was costly to have him removed. I would see an attorney right away.

And as crazy as it sounds, are you sure Mom won't go back?

 

[scubamonkey]

I don't know the rules about annulment/divorce, but they have been married several years so divorce will probably be the way they will seperate legally. They had a post - nuptial agreement that supposedly took care of any asset division.

Regarding going back with him - people will do what they are going to do - but, I don't think there would be any way she would go back with him. She is staying at my sister's home and is safe. They have taken the car keys away from him - so I think she is safe from him.

I will check out the Vanguard funds, sounds interesting. Her portfolio managment needs to be simple and relatively safe.

Thanks!