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Started By
Message
Tell me if you think this person can retire within a couple of years based on some facts
Posted on 4/6/25 at 4:45 pm
Posted on 4/6/25 at 4:45 pm
I’m trying to help my wife’s grandmother with some finances. She’s been dealt a bad hand, divorced a scummy husband when the kids were younger after spending a good deal of time out of the work force. She’s was able to get a decent piece of his 401k after divorce via QDRO. Here’s a snapshot of her finances:
About $300k or so in 401k. About $20k in liquid savings accounts. Collects social security at about $1,700 a month. She has no mortgage and her expenses aren’t too bad, I’d estimate necessary expenses at about $3,000 a month give or take.
She is 68 and in good health. I told her stick it out another year or two until the market goes up but in the meantime to contribute anything extra at all to 401k to effectively buy the current dip. Then reevaluate every 6 months or so. Honestly if push came to shove and she simply couldn’t work any longer then she could make it work, but anything extra now could really help her. She lives modestly and we help her routinely with budgeting and making decisions. Her house is probably worth about $330k or so. I told her stick it out there until she can’t take care of herself in her old age and then sell the house and invest the proceeds. That will be great until assisted living or moving in with one of us becomes the reality. Is there anything I am forgetting here? We are thinking the tried and true 4% rule will be fine here but want to play devils advocate.
About $300k or so in 401k. About $20k in liquid savings accounts. Collects social security at about $1,700 a month. She has no mortgage and her expenses aren’t too bad, I’d estimate necessary expenses at about $3,000 a month give or take.
She is 68 and in good health. I told her stick it out another year or two until the market goes up but in the meantime to contribute anything extra at all to 401k to effectively buy the current dip. Then reevaluate every 6 months or so. Honestly if push came to shove and she simply couldn’t work any longer then she could make it work, but anything extra now could really help her. She lives modestly and we help her routinely with budgeting and making decisions. Her house is probably worth about $330k or so. I told her stick it out there until she can’t take care of herself in her old age and then sell the house and invest the proceeds. That will be great until assisted living or moving in with one of us becomes the reality. Is there anything I am forgetting here? We are thinking the tried and true 4% rule will be fine here but want to play devils advocate.
This post was edited on 4/6/25 at 4:47 pm
4
Posted on 4/6/25 at 5:03 pm to JumpingTheShark
She can withdraw about 2k a month from the 401k and even with a 4% return she gets 20 years, gets her almost to 90. Some take out a heloc on home when they still can and have that available for living expenses and this is better than a reverse mortgage in the long run. But even without that she can make it to late 80s before having to sell the house.
Posted on 4/6/25 at 5:13 pm to lctiger
Appreciate the feedback, I had the same mindset.
Posted on 4/6/25 at 5:22 pm to JumpingTheShark
Drawing SS while still working usually isnt ideal. How long has she been drawing SS? If less than 12 months she could reset or if longer she could suspend. That could yield a higher SS payment when she retires and needs it.
Kiplingers: how to stop and restart SS
If using 4% rule she is a bit short but more recently Bill Bengen adjusted his rule of thumb to 4.7%. That said, it only works if you have right asset allocation not if too conservative. I would be cautious since retiring in a declining market could be recipe for failure due to sequence of returns risk.
Kiplingers: how to stop and restart SS
If using 4% rule she is a bit short but more recently Bill Bengen adjusted his rule of thumb to 4.7%. That said, it only works if you have right asset allocation not if too conservative. I would be cautious since retiring in a declining market could be recipe for failure due to sequence of returns risk.
Posted on 4/7/25 at 6:34 am to TorchtheFlyingTiger
She did her time. 68 and still in the game is respectable. It is time
Posted on 4/7/25 at 6:46 am to lctiger
quote:
Some take out a heloc on home when they still can and have that available for living expenses and this is better than a reverse mortgage in the long run.
Interesting. Please explain why.
Posted on 4/7/25 at 6:57 am to lctiger
quote:
Some take out a heloc on home when they still can
At her age, by the time she needs money that badly she would be better off just selling the house (depending on value) and moving into a facility.
Posted on 4/7/25 at 7:06 am to Bard
quote:
At her age, by the time she needs money that badly she would be better off just selling the house (depending on value) and moving into a facility.
You don't need to take out a HELOC to do that and that doesn't answer why a HELOC is better in the long run? The OP's mother in law does need to add debt to her situation.
Posted on 4/7/25 at 7:53 am to TorchtheFlyingTiger
Like you, my first thought was to suspend SS until age 70 if she can afford it. As for Bengen, I think that's a starting place, but there are a lot of variables. Bengen accounted for the worst possible case, and a 30 year retirement. At 68 or 70, I would cut that down. That would be $1k per month. Ictiger (or something like that) mentioned a 20 year time frame and $2K. I might split the difference somewhere and go for 23 years, reducing the $2K a little. Part time work would make a big difference.
I had dinner last night with a close friend who retired 5 months ago from a lucrative and specific profession. He's ready for part-time work in something entirely unrelated as he is accustomed to seeing people all day.
I had dinner last night with a close friend who retired 5 months ago from a lucrative and specific profession. He's ready for part-time work in something entirely unrelated as he is accustomed to seeing people all day.
Posted on 4/15/25 at 8:12 pm to La Place Mike
Heloc has more flexibility for heirs at time of death, the heloc continues on for the heirs. The reverse mortgage ends at the death of the borrower.
Posted on 4/15/25 at 10:15 pm to lctiger
quote:
Heloc has more flexibility for heirs at time of death, the heloc continues on for the heirs.
What? A Home Equity Line of Credit (HELOC) becomes a debt owed by the estate. To settle this debt, the estate must either sell the home or refinance the outstanding balance. In contrast, a HECM (Home Equity Conversion Mortgage), which is the current form of reverse mortgages, provides heirs with a year to either sell the property or refinance the loan. A significant advantage of a HECM is that it's a non-recourse loan. This means if the home sells for less than the total amount owed, the heirs are not held responsible for the remaining debt, and the lender cannot pursue other assets of the estate. Overall, the HECM offers greater flexibility and the substantial benefit of no required mortgage or interest payments while the borrower lives in the home. Furthermore, a HECM can also be used to purchase a home without the obligation of making mortgage payments during the borrower's residency. Finally, credit scores are generally not a primary concern for HECM eligibility.
Posted on 4/15/25 at 10:17 pm to JumpingTheShark
Is her house paid for? If so couldn't she sell it and move into something smaller ?
Posted on 4/15/25 at 10:23 pm to Double Oh
quote:
Is her house paid for? If so couldn't she sell it and move into something smaller ?
If they take this option they need to do it quick because the older the person gets the harder it is to pry them out of the home and I meant pry literally.
Posted on 4/15/25 at 10:29 pm to La Place Mike
quote:
quote:
Is her house paid for? If so couldn't she sell it and move into something smaller ?
If they take this option they need to do it quick because the older the person gets the harder it is to pry them out of the home and I meant pry literally.
Agree i was just looking for her to stash some more cash away if she wanted to.
Posted on 4/16/25 at 3:14 am to Double Oh
she needs to spend it now, while still being able to enjoy it
what you guys are doing is setting up the estate settlement for your own benefit
what you guys are doing is setting up the estate settlement for your own benefit
Posted on 4/16/25 at 5:47 am to JumpingTheShark
quote:
necessary expenses at about $3,000 a month give or take
This will only increase in the coming years. She needs to reduce the monthly spend to $2,500 for a few years to retire now imo.
Posted on 4/16/25 at 9:09 am to Trevaylin
quote:
what you guys are doing is setting up the estate settlement for your own benefit
Or trying to ensure she doesn't run out of money while still alive.
Posted on 4/16/25 at 6:41 pm to La Place Mike
Heirs of home with heloc can do both things you say a hecm heir can do but typically they just assume the home with the heloc as is in place. Yes the loan is a debt to the estate but the terms can remain as is without any refinancing.
Posted on 4/16/25 at 10:38 pm to lctiger
quote:
but typically they just assume the home with the heloc as is in place.
No they don't.
With a Heloc the borrower has to make payments. With HECM the borrower never has to make a payment unless they want to that is a huge advantage in retirement.
Think about what you are doing. You are advising some one on a fixed income to in to debt. It's irresponsible and if you were an FP you would open yourself up to a law suit.
Posted on 4/17/25 at 7:44 am to La Place Mike
retirement will be tight. If I was her I would work as long as possible
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