Recommendations requested for an annual income strategy for my Sister-In-Law

[aja8888]

Out of curiosity, I ran the numbers on Immediate Annuity for $150,000. Obviously, there is inflation risk. When I had investigated in the past, getting a COLA severely reduced the initial payouts, i.e. there is no free lunch there.

Oh, the RE commission on the house is negotiable. I wouldn't go for more than 3% in particular with the change in commissions for the buyer's broker (and you would probably have to negotiate any commission for her). If the area is very "hot" her house might appeal to a big family - but, you can't force her to sell.

View attachment 55414

Thanks, Marie. She has lots of options for the $200 K, but the house will be a big challenge as we went thru this 2 years ago, and because the area is so expensive, she had a hard time understanding that downsizing was almost a wash especially throwing in moving expenses, etc. Just the move alone would be a nightmare as mine was when I sold after my wife died. I'm still getting rid of stuff and still don't feel comfortable in my smaller, more efficient house.

 

[MarieIG]

Thanks, Marie. She has lots of options for the $200 K, but the house will be a big challenge as we went thru this 2 years ago, and because the area is so expensive, she had a hard time understanding that downsizing was almost a wash especially throwing in moving expenses, etc. Just the move alone would be a nightmare as mine was when I sold after my wife died. I'm still getting rid of stuff and still don't feel comfortable in my smaller, more efficient house.

Oh yes, I understand that. I loathed moving. I am wondering if one of her two friends might, in the future, share her house with her, and contribute $1,000- $1,200 a month towards expenses (which would cover her part time salary when she leaves)?

 

[aja8888]

That's a possibility. When I was there she suggested that I could live with her under that kind of arrangement if I didn't want stay in Texas, but I declined as I was not sure what I wanted to do after my wife passed away. I have known her for 50 years and her husband and I were best friends, so we are close.

The big issue with the house is they built it custom. and she loves it and the neighborhood. She just can't see herself moving into a new area with all new neighbors. It's a very desirable area for families and all the homes are well kept.

 

[dobig]

I hate to even mention it but if she's set on staying in the place would she consider the dreaded reverse mortgage? The income from that along with the additional income from the $200,000 as well as no longer having a mortgage payment seems like it would be sufficient.

 

[aja8888]

I hate to even mention it but if she's set on staying in the place would she consider the dreaded reverse mortgage? The income from that along with the additional income from the $200,000 as well as no longer having a mortgage payment seems like it would be sufficient.

That has not been thought of. Thanks.

 

[RetiredHappy]

Be forewarned that reverse mortgage sounds better than it is. The percentage of reverse mortgage loan is so miniscule of the value of the home that it is a waste of money. They charge you high fees and high interest rates. I priced out my friends' home when they were telling me that they would have to sell their home. The reverse mortgage covered about 20% of the value of the home. Their home value is about $1.8M, still owing about $300K. They are better off selling their home and buying a $700K property and get to spend the rest of it.

 

[ivinsfan]

Even with a reverse mortgage you still have to pay all expenses connected to the home.

 

[aja8888]

I have to agree on the reverse mortgage as a last resort which will not come to pass here.

 

[dobig]

Even with a reverse mortgage you still have to pay all expenses connected to the home.

Yes taxes, insurance and upkeep. From a quick look on $400k equity at age 78 she might get around $650 - $700/month. But for someone dead set on staying with few options of additional income this would provide a $1,600 - $1,700 swing in monthly cash when you take out the current mortgage. Add in another $600 - $700 in income/month from the $200,000 and I'd assume with her other income this would allow her to stay in the home.

Not the best option but it is a viable option if she wants to stay there.

 

[RetiredHappy]

Yes taxes, insurance and upkeep. From a quick look on $400k equity at age 78 she might get around $650 - $700/month. But for someone dead set on staying with few options of additional income this would provide a $1,600 - $1,700 swing in monthly cash when you take out the current mortgage. Add in another $600 - $700 in income/month from the $200,000 and I'd assume with her other income this would allow her to stay in the home.

Not the best option but it is a viable option if she wants to stay there.

How do you "take out the current mortgage"? With reverse mortgage, they give you way less if you have a mortgage, instead of just calculating the amount net of the mortgage.

 

[RetiredHappy]

Here is what one calculator says about the amount that her situation will get, a lump sum of $90K if she were to take on reverse mortgage.

 

[dobig]

How do you "take out the current mortgage"? With reverse mortgage, they give you way less if you have a mortgage, instead of just calculating the amount net of the mortgage. Your number is overly optimistic.

Current mortgage is paid off.

I believe monthly payments for income are what is desired but I could be wrong. This is the calculator I used. Maybe my numbers are wrong but after paying off the mortgage I see an estimated payment of $623/month. When also subtracting the current mortgage payment of $1,000/month it would seem her monthly cash flow would change by +$1,600/month.

Reverse Mortgage Calculator - Retirement Researcher

Reverse Mortgage Calculator on Retirement Researcher

retirementresearcher.com

 

[pb4uski]

Oh yes, I understand that. I loathed moving. I am wondering if one of her two friends might, in the future, share her house with her, and contribute $1,000- $1,200 a month towards expenses (which would cover her part time salary when she leaves)?

This is a good idea if she loves her house, can barely afford the house and doesn't want to move. We had a couple women who shared a condo when we lived in Florida. One owned it and the other one lived there. No sure what the financial arrangements were but they seemed to enjoy each other's company.

 

[Koolau]

Koolau, didn't anyone ever bother to tell you that you can't just tell a woman to sell her house?

Well, she can do what she wants to do. I hope she understands the consequences. MIL died because she refused to accept that she had diabetes. It caused her all manner of illness and her family all manner of extra w*rk and grief. But MIL did what SHE wanted to do. Some choice are hard but also simple in concept. Sorry you have to deal with this.

 

[aja8888]

Well, she can do what she wants to do. I hope she understands the consequences. MIL died because she refused to accept that she had diabetes. It caused her all manner of illness and her family all manner of extra w*rk and grief. But MIL did what SHE wanted to do. Some choice are hard but also simple in concept. Sorry you have to deal with this.

I don't mind dealing with this as she is family and lost her spouse like I did. She's a wonderful person. We will work it out. I'm her son's godfather and he is doing great living and working in NYC. Thanks for the concern, as it only a money problem.

Sooner or later, the house thing will work itself out, probably when it gets too much for her to handle. But she's in great physical shape and you would never guess she is in her late 70's. But things happen sooner or later.

 

[dobig]

I've gone thru a similar situation with my mother. 1873 victorian that always needed work and very little income. We tried talking her into every conceivable option including many mentioned here. Roommate, reverse mortgage etc,. She refused to move and didn't like any options. We were giving her $500/month along with spending tens of thousands on needed repairs. A couple years back my mother and my sister were at an estate auction of someone we knew. I bid on the one story rancher and they got caught up in the excitement. My mother was so excited about the new place in a location she loved that she immediatelly let us sell her place and now speaks of her old place with contempt. I simply sigh.


Family.......whaddya do.

 

[aja8888]

I've gone thru a similar situation with my mother. 1873 victorian that always needed work and very little income. We tried talking her into every conceivable option including many mentioned here. Roommate, reverse mortgage etc,. She refused to move and didn't like any options. We were giving her $500/month along with spending tens of thousands on needed repairs. A couple years back my mother and my sister were at an estate auction of someone we knew. I bid on the one story rancher and they got caught up in the excitement. My mother was so excited about the new place in a location she loved that she immediatelly let us sell her place and now speaks of her old place with contempt. I simply sigh.


Family.......whaddya do.

^^^^^^ Proof that houses are an emotional influence!

 

[MarieIG]

There are positives here. She is in good health, lives in an area she loves, and has a VERY supportive family.

 

[aja8888]

There are positives here. She is in good health, lives in an area she loves, and has a VERY supportive family.

Yes, my IMMEDIATE concern for her is how to have the $200 K that she has in cash protected from inflation loss over time. Really, she's cash restricted, but does have enough current income to live well without going into the $200 K account. That's been used as an emergency stash since we pulled it from EJ. If her A/C were to blow after 25+ years of running, the replacement would be paid from the $200 K account.

 

[MarieIG]

Yes, my IMMEDIATE concern for her is how to have the $200 K that she has in cash protected from inflation loss over time. Really, she's cash restricted, but does have enough current income to live well without going into the $200 K account. That's been used as an emergency stash since we pulled it from EJ. If her A/C were to blow after 25+ years of running, the replacement would be paid from the $200 K account.

Yes, I understand that.

 

[gauss]

Out of curiosity, I ran the numbers on Immediate Annuity for $150,000. Obviously, there is inflation risk. When I had investigated in the past, getting a COLA severely reduced the initial payouts, i.e. there is no free lunch there.

Oh, the RE commission on the house is negotiable. I wouldn't go for more than 3% in particular with the change in commissions for the buyer's broker (and you would probably have to negotiate any commission for her). If the area is very "hot" her house might appeal to a big family - but, you can't force her to sell.

View attachment 55414

Thank you for running the numbers. So if I read this right, the payout ratio is close to 10% (ie 9.88%).

Comparing this to a 4% SWR -- and the SWR involves more risk. Sticking by my original suggestion that this might be the most efficient route for her to go.

-gauss

 

[aja8888]

Thank you for running the numbers. So if I read this right, the payout ratio is close to 10% (ie 9.88%).

Comparing this to a 4% SWR -- and the SWR involves more risk. Sticking by my original suggestion that this might be the most efficient route for her to go.

-gauss

Yes, that is one option we will go over when I am there mid month. Thanks.

 

[TickTock]

SIL is *very* fortunate to have aja888 on her side/looking out for her. All the kudos to you!

 

[Teacher Terry]

AJ, it’s great that you’re helping your sister-in-law and looking out for her. I have to say one of the best things I did after my divorce was to buy a small condo. I absolutely love it and it made my life so much easier. I did consider keeping the house, but I would’ve had to get a roommate to afford it and there’s no way I’m living with anybody other than my two dogs.

I have difficulty understanding why some people have so much trouble leaving their homes. But then I’m a realist and I come from a family of realists. My parents downsized into an apartment in their early 60s because my dad‘s health was so bad and they had to hire out all the work. They were really happy in their apartment.

 

[aja8888]

AJ, it’s great that you’re helping your sister-in-law and looking out for her. I have to say one of the best things I did after my divorce was to buy a small condo. I absolutely love it and it made my life so much easier. I did consider keeping the house, but I would’ve had to get a roommate to afford it and there’s no way I’m living with anybody other than my two dogs.

I have difficulty understanding why some people have so much trouble leaving their homes. But then I’m a realist and I come from a family of realists. My parents downsized into an apartment in their early 60s because my dad‘s health was so bad and they had to hire out all the work. They were really happy in their apartment.

Thanks, I will be there next week for 7 days. Some people just feel like they belong in their house after many years. And a few years ago, she remodeled the bathroom to the tune of $40,000 to make it like she wanted. But, I agree, a smaller, less costly place for her (eventually) is in order.