Helping Dad (MD) Retire

[q-school]

The White Coat Investor wrote:

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. 

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the house only sounded like the biggest problem until we heard about the vacation home. 

everyone here will agree that the spending is bigger than the budget.  and we probably don't know about all the spending either.  I thought he might make it with just the mortgage on the house.  no way to feel comfortable that he can make it financially with the vacation home thrown in.  unless he is in very poor health. 

we have all struggled with how to manage becoming the parent to our elderly parents-whether it is financial, behavioral, medical, emotional. 

if he is healthy and still working, I would say it sounds like he needs to keep working--as he doesn't have interest in curtailing his lifestyle and basically sounds like he is telling you that when he gets evicted you can either let him go homeless or taking him into your own home.   unfortunately he's not going to change for you--he needs to decide which options under his control he wants to pursue--and you have to support him because he's your dad.  I get that at age 70 if I just got divorced I would not want to lose my wife, my money, and now my house and vacation home.  I'm sure he is reeling from all the change that is thrust upon him.  it may be better to reopen the discussion at some point in the future.

good luck.

[Kamban]

Maybe he needs to sell his home and move into the vacation home. Which I assume is paid off.

[DC Doc]

In a perfect world he would continue working but due to certain circumstances he will be retiring at the end of the year with no chance to cut back to part time. As far as your family strategy MPMD, I am not too far off your base. I feel that it is my responsibility to come up with a sensible plan that allows for maximum independence and minimal irresponsibility. Beyond that I feel no guilt. Family dynamics are sort of near an all time low so the concept of providing for or housing him would be...impossible.

I think most of this post was to 1) vent my frustrations and 2) to figure out whether a SPIA is a good strategy for him since it otherwise scares me. I have other siblings, one of whom has a much larger house than me where he would likely live when he runs out of money. I don't really feel bad on that account since that is also the sibling who has gotten free vacations out of him for ~10 years for their entire family and has little interest to help formulate a sensible plan now. I think one thing that is more frustrating than the dynamic of the child parenting the parent is the child who refuses to acknowledge the necessity of the role inversion.

 

The vacation home has been in the family for >50 years and is split among extended family, so he couldn't sell it even if he wanted (to be fair, he would die first). He splits the maintenance between himself and his sibling. None of the next generation has much of an interest in keeping the property once they die.

[jfoxcpacfp]

DC Doc wrote:

In a perfect world he would continue working but due to certain circumstances he will be retiring at the end of the year with no chance to cut back to part time. As far as your family strategy MPMD, I am not too far off your base. I feel that it is my responsibility to come up with a sensible plan that allows for maximum independence and minimal irresponsibility. Beyond that I feel no guilt. Family dynamics are sort of near an all time low so the concept of providing for or housing him would be…impossible.

I think most of this post was to 1) vent my frustrations and 2) to figure out whether a SPIA is a good strategy for him since it otherwise scares me. I have other siblings, one of whom has a much larger house than me where he would likely live when he runs out of money. I don’t really feel bad on that account since that is also the sibling who has gotten free vacations out of him for ~10 years for their entire family and has little interest to help formulate a sensible plan now. I think one thing that is more frustrating than the dynamic of the child parenting the parent is the child who refuses to acknowledge the necessity of the role inversion.

The vacation home has been in the family for >50 years and is split among extended family, so he couldn’t sell it even if he wanted (to be fair, he would die first). He splits the maintenance between himself and his sibling. None of the next generation has much of an interest in keeping the property once they die.

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At least the vacation home makes a little more sense now! Honestly, I don't think you can figure out the answer regarding a SPIA without a "real" plan in place from a fee-only planner who doesn't have a dog in the fight re: a portfolio or an annuity. You need to make the math work and you need alternate scenarios to be able to think clearly. You can lead a horse to water, though...

At least you have a sibling waiting in the wings. Things are looking up!

[Kamban]

DC Doc wrote:

I think one thing that is more frustrating than the dynamic of the child parenting the parent is the child who refuses to acknowledge the necessity of the role inversion.

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All physician parents turn into terrible children with huge egos and stubbornness that would make a mule proud ( my daughter tells me that I am on track to becoming a grouchy grinch )    

[q-school]

 

I think we can all agree that we keep the country club membership.  a retired man has to have something to do.

 

[DC Doc]

q-school wrote:

 

I think we can all agree that we keep the country club membership.  a retired man has to have something to do.

 

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All he uses it for is the pool. 5k a year for a swim membership...Sigh.

[q-school]

DC Doc wrote:

q-school wrote:

 

I think we can all agree that we keep the country club membership.  a retired man has to have something to do.

 

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All he uses it for is the pool. 5k a year for a swim membership…Sigh.

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and friends to hang out with.

 

[MPMD]

DC Doc wrote:

q-school wrote:

 

I think we can all agree that we keep the country club membership.  a retired man has to have something to do.

 

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All he uses it for is the pool. 5k a year for a swim membership…Sigh.

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There is an Arrested Development joke in here but I worry it won't land....

[The White Coat Investor]

DC Doc wrote:

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.

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Oh, I missed that post. Might want to add that to the OP. Vacation home? country club? He might not know it, but he already failed the MD financial game. 30 years of physician paychecks and he still has a mortgage in his 70s. It's going to be pretty tough doing $10K a month, much less whatever the real number is.  He may be fine running out of money in 10 years. That is pretty typical life expectancy. But what if he lives to 95?

At any rate, you should ask what you should do, not what he should do. Doesn't sound like you have any control over him and he's not asking for advice.

[MPMD]

another good Dave Ramsey saying: "it's called Powdered Butt Syndrome: once someone has powdered your butt they don't want you advice on money or sex."

pretty spot on in my limited experience.

[toothcarpenter]

MPMD wrote:

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.

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Dang - harsh but reality.  I think tone and compassion will smooth this conversation.  This is the conversation I don't ever want to have with my parent - I'm pretty sure they have saved enough and mom has her teacher pension thank goodness. 

[The White Coat Investor]

toothcarpenter wrote:

MPMD wrote:

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.

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Dang – harsh but reality.  I think tone and compassion will smooth this conversation.  This is the conversation I don’t ever want to have with my parent – I’m pretty sure they have saved enough and mom has her teacher pension thank goodness. 

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Yea, I'm super happy my parents make better financial decisions. They don't have any more assets, but they spend a lot less.

Funny how that's the difference between a physician parent and a non-physician parent huh?

[DC Doc]

He paid off the mortgage 20 years ago. This new one is a second mortgage that he took out to help my sibling buy their large house, which would have been paid back quickly were it not for the divorce that immediately followed. He chose to keep the house and mortgage to buy my mom out rather than sell and downsize. The sad thing is he really doesn't spend all that much, but a perfect storm of financial donts have left him in a bad spot. I mean it honestly shouldn't be seen as that criminal for a doctor with a 40 year career retiring in his 70s to want to spend 120k per year. No one would bat an eye were it not for what's left in savings.

As an aside, its a bad idea to look up what his 180k invested in gold and silver in 1980 would have been worth if invested in TSM...

[StarTrekDoc]

Less is more sometimes.

The clear path is to show him the timeline that his current asset/burn rates are and options to best manage that timeline (aka be a financial planner of sorts).

Then offer up a financial planner's name (say one here in this forum) for another opinion.   T

That maybe the best you can do and see as the fellow sibling appears to be the bailout position-- so share the timeline with the sibling on this to set expectations on timing for dad to crash the sibling's party.