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Author: georgez101 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19221  
Subject: Retirement Advice For Momma Date: 9/17/2008 3:44 PM
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My father passed away a little over a year ago and I'm trying to do a little financial research for my mom who seems to be "out to sea" with her finances right now. She keeps spending money on trips and other unnecessary things that are adding up. I feel like she needs a financial plan of action for the little bit of money she has saved up or she's just going to blow through all of it. I was hoping that someone on the boards here could be of help. Here is her current financial situation:

1. She is 67
2. She is currently still working at a beauty salon making about $500 per week.
3. She has 80,000 in an interest bearing savings account (making probably around 3%).
4. She has 40,000 in an E-trade account (currently not invested in anything...just sitting there as cash)
5. She has 32,000 in an IRA account
6. She is getting about $875 per month from Social Security.
7. Her current rent is about 1,000 per month.


I guess the question is, what are her options? I know this is not a lot of money to retire on. Should she just invest whatever money she has into some kind of safe investment option? Only problem with that is that the return on the investment probably won't be enough to sustain her for a very long time.

Another option is for her to chip in with my sister and buy a house with a mother-in-law set up. My sister has agreed to watch over her in retirement. This way my mom won't have any monthly rent to pay and can live off of her Social Security checks and whatever she has left in savings. My sister can also drive her places since my mom doesn't drive.
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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13976 of 19221
Subject: Re: Retirement Advice For Momma Date: 9/17/2008 5:08 PM
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Interesting questions.


How does she feel about working and does she have any physical limitations that make that difficult? She should probably plan to keep working as long as she is physically able to do so.


Interesting idea about living with your sister. Do they have a good history of getting along with each other? I'll be interested in the comments of others about the joint house buying.

If she keeps on working she can probably afford some trips. That might be a useful incentive. But I'd discourage her from taking money out of savings to indulge that kind of luxury. If she lives on what she earns and travels on the rest, that wouldn't be bad.




Seattle Pioneer

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Author: georgez101 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13977 of 19221
Subject: Re: Retirement Advice For Momma Date: 9/17/2008 5:31 PM
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Thanks for your reply Seattle Pioneer...

She loves working and wants to continue to do so but the question is how much longer can she last? A few more years at the most I would say... she works at a fancy beauty salon where image is everything so who knows how long they will want an "old lady" around. It sounds like there are a few younger people that do the same thing she does and it's getting more and more competitive for clients.

Living with my sister would definitely be risky if they don't get along. They have an ok history of getting along but my sister is also married and has a 4 year old daughter so that dynamic might change things.

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Author: DorothyM Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13978 of 19221
Subject: Re: Retirement Advice For Momma Date: 9/17/2008 6:27 PM
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She keeps spending money on trips and other unnecessary things that are adding up. I feel like she needs a financial plan of action for the little bit of money she has saved up or she's just going to blow through all of it.

This is very scary! Your mother doesn't have much money and she can, indeed, blow through it very quickly. I'm wondering, first of all, if she's a wee bit depressed -- she has reason to be. First, of course, your Dad's death. Then, it's difficult to work with a lot of younger people in a job where appearance is such an important aspect of the job. Put on top of that, the simple fact that it's probably more difficult physically for her to be on her feet all day.

I don't know how close you are (and I mean that geographically and emotionally) but if you're "kindred spirits" perhaps you can have a heart to heart. Perhaps you can get her permission to speak with her doctor. Perhaps your sister can participate in a family talk.

If your mother "chips in" with your sister to buy a house, won't she have a share of the mortgage to pay? I'd be wary to have your mother pay part of the cost of the house without being part owner.

Your mother needs to learn something about financial management -- Suze Orman is controvsial around here (not this board, specifically but other boards) but she has certainly popularized the concept of managing your money. She's always on PBS so perhaps you and your mother could watch together -- you could tape the program or buy the DVD.

Let us know how things progress. I wish you all the best...

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13979 of 19221
Subject: Re: Retirement Advice For Momma Date: 9/17/2008 6:40 PM
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Your mother doesn't have much money and she can, indeed, blow through it very quickly. I'm wondering, first of all, if she's a wee bit depressed -- she has reason to be. First, of course, your Dad's death. Then, it's difficult to work with a lot of younger people in a job where appearance is such an important aspect of the job. Put on top of that, the simple fact that it's probably more difficult physically for her to be on her feet all day.


excellent point.

"wee bit depressed" == 'grieving' /'scared' /???

there's a reason the books say, "don't do anything drastic while you're grieving"



=
...... and for anyone who says, "it's been a year, she should get over it", i've got a short 2x4 for them

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Author: MichaelRead Big gold star, 5000 posts Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13981 of 19221
Subject: Re: Retirement Advice For Momma Date: 9/17/2008 7:09 PM
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She loves working and wants to continue to do so but the question is how much longer can she last? A few more years at the most I would say... she works at a fancy beauty salon where image is everything so who knows how long they will want an "old lady" around. It sounds like there are a few younger people that do the same thing she does and it's getting more and more competitive for clients.

Living with my sister would definitely be risky if they don't get along. They have an ok history of getting along but my sister is also married and has a 4 year old daughter so that dynamic might change things.

Georgez


She may work longer than you think: many older women want a style they’ve successfully had and too often the young hairdressing kids don’t understand why. Your Mom probably has many repeat clients who appreciate someone not trying to get them into the latest style.

And, don’t forget, being able to cut and style hair is a portable talent and if your Mom wanted could be an ‘at home’ hairdresser. My daughter paid her way through teaching college by having a salon in her home.

In your first post you listed what you Mom has saved. That’s not a cheesy amount. My advice what to do with it is put it in low-risk bonds or treasuries – that is if these pay a higher interest. If they don’t there’s no real need to touch them. Point is, don’t go into risk.

MichaelR

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13983 of 19221
Subject: Re: Retirement Advice For Momma Date: 9/17/2008 8:45 PM
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<<Living with my sister would definitely be risky if they don't get along. They have an ok history of getting along but my sister is also married and has a 4 year old daughter so that dynamic might change things.>>



Sounds like it would be better for Mom to pay sister for room and board. Making a large investment that might or might not work out sounds speculative.



Seattle Pioneer

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Author: tilnow One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14001 of 19221
Subject: Re: Retirement Advice For Momma Date: 9/21/2008 3:31 PM
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I don't use one myself, but this sounds like a situation where an independent certified financial planner (not one who sells insurance or securities) might help set up a plan for your mother's monies.

Then you could come back to the board and bounce the suggested plan off the experience of other retirees to get their opinions. There's a lot of expertise on this board, and people are especially willing to help beginners get started managing their money.

As for shared housing with your sister, I strongly advise against it. Your mother could be very close by, but not under the same roof ideally.

Last spring, after serious orthopedic surgery, I spent two weeks recovering with our daughter's family. They were wonderful and completely wanted me there, but I went home as soon as possible so they could have their privacy back.

You've come to the right board. I wish your family the best as you work through this transition in your lives. DH and I have found ourselves in your shoes twice in the past.

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Author: ChurchyLaFemme Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14002 of 19221
Subject: Re: Retirement Advice For Momma Date: 9/21/2008 4:52 PM
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1. She is 67
2. She is currently still working at a beauty salon making about $500 per week.
3. She has 80,000 in an interest bearing savings account (making probably around 3%).
4. She has 40,000 in an E-trade account (currently not invested in anything...just sitting there as cash)
5. She has 32,000 in an IRA account
6. She is getting about $875 per month from Social Security.
7. Her current rent is about 1,000 per month.


Lessee.

She has $152,000 in liquid assets.

She gets $10,500/year in SS (and I assume she's also on Medicare).

She's also making roughly $26,000/year from her job. This gives her a gross income of $36,500/year give or take. As long as she can keep that job, she probably doesn't need to dip into savings with the caveat below.

In 3 years, she's going to have to start withdrawing from the IRA. The first year's minimum required distribution works out to 3.65% of IRA assets ( $1168 for the first year) and goes up from there.

I ran the $120K (money outside the IRA) through Berkshire-Hathaway's SPIA (Single Premium Immediate Annuity ) calculator ( http://www.brkdirect.com/SPIA/EZQUOTE.asp ). It's enough to provide her with $709/month gross for the rest of her life (I assumed California residency without more info)if she bought now. Berkshire is currently paying 3.9% (down from about 5.25% a couple of years ago).

Without a job (and ignoring the $32K in the IRA), she would be grossing
$1584/month before provision for income taxes or a bit more than 1/2 her current income. 'Course, the SS will increase with COLA, but the SPIA won't AFAIK. Then there's the fact that most of it would be eaten up by the $1,000/month rent.

How would she chip in with your sister to buy a house with mother-in-law's quarters? Would she supply the down payment and let your sister make the mortgage payments? Where's your sister located and could your mother maintain her job if she moved in with your sister? What are real estate prices like where your sister lives?

There are a lot of questions that need answering before any decisions are made. HOWEVER, one thing that needs to be made clear to your mom is that she needs to hold onto her savings as long as possible to preserve her capital so that she does have something left that could provide her some income.

Churchy

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Author: georgez101 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14009 of 19221
Subject: Re: Retirement Advice For Momma Date: 9/24/2008 11:26 AM
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Thanks to everybody for all of the great advice. The more I think about it i realize that the moving in with my sister thing is probably a bad idea, or at least she should just chip in rent to help pay the mortgage instead of putting up a bunch of money for the down payment (which wouldn't leave her with much). That way, if things don't work out my mom can leave and my sister can rent out the space. My sister lives in Florida (in the Boca Raton area) and my mother currently lives in Brooklyn, NYC.

The main upside of my mom living with or near my sister is that she won't be completely alone in her old age. I live in Chicago with my wife. Since my dad died, my mom has no family in NYC so I'm worried about that.

I think my mother could get a job in any salon in the united states that would hire her (she has 25 years of experience, so i think someone would hire her) and she says she can work for as long as she can walk (she loves working) so that is definitely one thing she has going for her.

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14010 of 19221
Subject: Re: Retirement Advice For Momma Date: 9/24/2008 11:44 AM
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think my mother could get a job in any salon in the united states that would hire her (she has 25 years of experience, so i think someone would hire her)

Sounds like a safe bet. From Brooklyn to Boca? Knowing how to coiff NYC LOL's? She'll be fending them off with a stick.

Phil

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Author: nvtashak One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14017 of 19221
Subject: Re: Retirement Advice For Momma Date: 9/26/2008 9:44 PM
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Does the proposed location of buy-a-house-with-your-sister have adequate bus service or other public transit, or would your mom be dependent either on your sister's driving her, or walking (difficult in some winter climates), or a senior van to the senior center or senior van (usually $5 RT) for monthly supermarket shopping, doctor appts.?
How would this affect her job?

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