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Helping Dad (MD) Retire

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  • Helping Dad (MD) Retire

    So it has fallen on me, the doctor son, to help my doctor dad retire. He has had a long and wonderfully successful career but unfortunately never had a great exit strategy for retirement. He has put away maximum pension contributions every year (runs his own small practice), but was always inherently distrustful of financial institutions. Therefore, all of his contributions went towards CDs, TBills, Gold & Silver. His earnings have been paltry and have universally lost to inflation. To compound problems, he went through a divorce at 70. He kept all of the home and furnishings, she took the money. Nearing 73 it is now time that he retires (both physically and mentally I think this is what's best for him). He has ~1.2 million in retirement savings, earns full social security, and has a 500k mortgage (refuses to sell the home, ~3500 monthly in P/M/I/T).


    My question to you all is how would you best create a retirement plan at this point? We have been in discussion with a financial advisor who recommends a 750k immediate guaranteed lifetime annuity with cash refund and invest the remaining 500k. I don't know much about annuities except that they're generally poorly regarded but potentially this is the sort of situation for them. Most of my research is oriented towards how a 30something year old should plan for their retirement and so I don't want to do wrong by my father. What do you all think? Bite the bullet and get the annuity?

  • #2
    what do you think his budget is?  it sounds like he has plenty of money and also a rich doctor son.  I don't know that he needs more money, barring medical expenses.  if his monthly nut can be met without the annuity, then he should be okay.  however, if he likes the security of the annuity-guaranteed income, that might be of value to him.  hard to say until you get there.



    • #3
      You'll need to provide much more information to receive helpful advice, but if you post your question in the recommended format over at you'll receive an avalanche of helpful and detailed advice.
      Erstwhile Dance Theatre of Dayton performer cum bellhop. Carried (many) bags for a lovely and gracious 59 yo Cyd Charisse. (RIP) Hosted epic company parties after Friday night rehearsals.


      • #4
        a. You need a real financial planner.  It sounds like you have an insurance person currently.  Basically, unless this planner has provided the 'cost' of certain choices, I would look for someone else.

        b. Is it you or your dad who is setting this up? Are you the financial POA currently?  If your father is still in charge, a. above is extremely important IMO given the investment approach taken throughout his earning years.  It will be very difficult to change you father's mind given his prior investment approach.

        c.  Home- Unless it is a 1 to 2 bedroom condo/home, you'll need to continue to work on getting your father to something more appropriate in size.  Sounds like too much 'home' unless there are circumstances not present that are not articulated here.  Is there equity in the present home sufficient to purchase something more appropriate in size/lifestyle for your father?

        d. Taking a wild guess the annuity recommendation is a direct result of the monthly home payments.  The 'cost' of this choice needs to be clearly articulated by a financial planner along with several alternative scenarios (i.e. sell the home, buy home x).

        e.  Annuity-  I would look at a similar immediate annuity from Vanguard to get an idea of how much 'value'/comparison is being offered by the financial advisor.

        f.  What recommendation/asset allocation is the financial advisor making for the remaining $500k?  Will he need to make periodic withdraws from this for living expenses?

        g.  The home and his prior investment approach will be the largest obstacles to overcome IMO.  Solve both and he can create a plan that will work for the long term.  Solve neither and a minimal lifestyle without anything going wrong (health, markets, home maintenence) appears realistic ($45k per year (4%) on $1.2M, plus $25k/year in SS minus taxes and $42k/year in home payments).


        • #5
          Will he able to work part time to at least pay for the house + maint and let his savings grow and use part of that and the SS# to cover his living expense. Hopefully he can buy a smaller town home or condo in a couple of years time with the equity built up in his current home.


          • #6

            Thank you everyone for your responses. I really should have supplied more information. He reports his monthly spending to be $10.5k/month. I'm not entirely sure how accurate it is as I think he overestimates certain expenses. A large chunk of this is that he has a vacation home that he wants to visit a couple times per year (figure 6k/year in travel and other related vacation expenses) and pays a caretaker ~10k per year on top of that. He wants to maintain his ~5k/year country club fees as well. He has no interest in selling his home and downsizing, as he would construe this as failing his life goal of owning the doctor home.


            I guess what I find frustrating is when confronted with the mathematics of X spending over Y years = running out of money at year Z, he just throws up his hands and is fine with the concept of running out of money in 10 years. Does anyone have any tips for helping a parent successfully downsize their lifestyle? I suppose if he's going to be stubborn about the most expensive elements of the budget there's little I can to do change anything at this point.


            • #7

              The budget needs to fit within the funds available.

              If it doesn't, and if your dad refuses to acknowledge and adjust to this, then he probably intends to continue working or he assumes you are going to provide the difference.

              In any event, he is in far better shape than the average US retiree. 

              Erstwhile Dance Theatre of Dayton performer cum bellhop. Carried (many) bags for a lovely and gracious 59 yo Cyd Charisse. (RIP) Hosted epic company parties after Friday night rehearsals.


              • #8

                If he is still competent, then there is really nothing you can do.  If his spending is 126K/year, how much does SS cover and how much would be covered by that SPIA?  If he likes the idea of a SPIA, this is an instance where it could be to his long term benefit since he has little interest in investing for himself.  Is there equity that will build in the house where he could tap into a reverse mortgage in the future if needed?  The reverse mortgage is not as bad as it used to be.  It is hard starting to parent your parents.  My husband says my parents are like the bad teenagers we never had. Helping them find activities they enjoy besides arguing with me has been helpful for all of us.  Good luck.


                • #9

                  Unless he wants to make a change, there is very little you can do, unfortunately. You might ask what his plan is when his money has run out - this sounds like simple math to me, at least for the next few years. It's not like he has short-term stock market exposure or anything. What does he plan to do with the gold and silver? Running 2 households with a $500k mortgage and only $1.2M in savings and $10,500/mo in living expenses would be a little nerve-wracking to me, too. But it sounds as if he has dug in his heels.

                  Thoughts that come to mind: Are you the only child? Will he move in with you when he runs out? Do he and your spouse get along? Is he in good health? Does he have life insurance?

                  Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


                  • #10

                    As much as you want to you can't simply tell your parents what to do.  You can make suggestions only.  He would be better off with a smaller house and no vacation home but it really has to be his idea.  I was lucky in that my father was in favor of moving into an assisted living when it was time.  I think a SPIA would be better than gold or silver.  


                    • #11

                      I think a SPIA could be part of the plan and agree with others that the house is the big issue. That's way too big of a mortgage for his retirement income. But if he paid it off and put half of what's left in a SPIA, it wouldn't leave him much of a nest egg. 

                      Really hard to do much without knowing what he is/hopes to be spending. If it's less than $80K or so including that mortgage, he's probably good to go. If it's $150K, he's probably hosed, but maybe you can get close between a SPIA, SS, a reverse mortgage, and an aggressive portfolio withdrawal rate. 

                      The relationship issue is going to be the trickiest part to manage. Everything needs to be his idea. Like the 90 year old I saw yesterday who is now willing to go into assisted living but refused two years ago despite all of her family wanting her to. It's now her idea because she can't manage the house any more. 

                      Helping those who wear the white coat get a fair shake on Wall Street since 2011


                      • #12
                        Sounds like my md father to the "t"

                        I gave up. Nothing I can say will change the situation so I'm prepping myself to help out once he runs out of money which will be 1-2 years after when he can't work


                        • #13

                          Annuity question - how long does he plan on living?  If there's no end in sight, an annuity might be a great option.  But definitely shop it around and make sure he's happy with it before he commits a substantial portion of his worth to one.

                          And yeah - does he actually plan on retiring soon?  Does he want to retire?  If he's happy working, why start the clock before you have to.  Also, he could continue on working fewer hours, one or two days a week, downsize the practice, which could cover a lot of his expenses.  

                          Is the home or vacation home included in that 1.2M?  Does he own the vacation home outright?  At some point he could sell the second home.  And at some point he could reverse mortgage his primary home and/or downsize if he has to.

                          A lot of clubs have a senior/retiree reduced rate at some point.  Might be worth looking into.

                          As he ages a lot of things he spends money on will become less important, or not important at all.  

                          Full social security benefit is something like $30k+.  If that $10,500/mo is really everything, you're not looking at coming up with $126k a year, but more like $90k a year after social security.  That stretches the timeline a bit further.  




                          • #14
                            I would agree with finding a real financial planner. What could help is a model showing him what he can realistically spend in retirement if he (i) retires now, (ii) begins part-time work now, or (iii) delays (i) and (ii) by a few years and continues to save.


                            • #15

                              This will come across as more harsh than I mean it given that I'm typing on the Intarwebs but here goes:

                              I think a critical part of a scenario like this where a family member is in effect telling you that you might be on the hook for them is to have a pretty explicit conversation about what that means. For me in a scenario like this that convo would look something like this:

                              When you run out of money and come to me for help:

                              • house is being sold

                              • you will need to live in my location in a 1br apartment max

                              • small, cheap used car (downsize to if needed)

                              • no vacations

                              • extremely limited non negotiable monthly budget to cover essentials only (food, water)

                              It's not that I would be trying to rule their life, but I believe in clear communication about planning.