Retirement Question - My Widowed, Immigrant Mother

Anonymous
My mother is 65 years old and is a barely-English speaking immigrant and widow. She is in good health and has a full-time art-related job she enjoys (which she can do well without speaking much English) that she will likely keep for another 5 years or so (health permitting) as her long-time employer likes her a lot and she is good at what she does. She currently makes about $60k per year and owns her small house without a mortgage (valued at around $320k). Her only savings/retirement fund is around $75k that she keeps in a regular savings account (I know . . .). When she retires, her social security income will be only around $1,600 a month (she came to this country older and neither her nor my dad made much money so their social security contributions were small; she has no pension nor 401k nor anything else). She has no debt whatsoever.

My question is, how can I advice her or help her deal with retirement when the time comes? At $1,600 a month, she won't be able to make ends meet. One scenario would be for her to move in with my family and rent out her own house for about $2,200 a month -- that would bring her retirement income up to $3,800, which is decent but she would give up living independently, which she enjoys. What can I do for her? Should I tell her to put the $75k in an investment account like a Vanguard account, or is that not worth it at this point? I could also stretch my own budget and purchase a small apartment in my name for her to live in (without paying me rent) and she would then be able to live off her house rental and small SS check.

She really enjoys working and does not see herself retired sitting around the house. I happen to be on good terms with the owner of the company she has worked for for many years and he tells me he could envision her working there at least 5 or more years and then after that she could continue working part-time if she wants.

Any thoughts on this situation? I'm worried about her retirement and want to advise her if possible.
Anonymous
I would look at what her expenses are every month and get a good sense of how much money she will need once she retires. Since she is debt free she may not need a lot. Once you know her needs sit down with a financial advisor (fee only) and work through the different scenarios.
Anonymous
She might be a very good candidate for a reverse mortgage on the house. Way easier than renting it out. She can get a lump sum, line of credit, or monthly payment , etc. -- there are a number of options to draw the money. Especially if she likes living there and it will be suitable as she ages, it could really help the cash flow issue.
Anonymous
She could also get a roommate or rent out a room in her house.
Anonymous
Don't mistake gross rent for net rent. There are costs to renting out a house.

I would sell the house and buy a one bedroom apartment, and invest the savings in a single premium annuity when I had to stop working.
Anonymous
Anonymous wrote:Don't mistake gross rent for net rent. There are costs to renting out a house.

I would sell the house and buy a one bedroom apartment, and invest the savings in a single premium annuity when I had to stop working.


Correct.
Anonymous
Start now understanding what her expenses are -
If she is making 60K without a mortgage, where is she spending her income?

Similarly - $1,600 is not a ton - but if she does not have a mortgage, her SS with a small pull from her savings each month should enable her to make ends meet.

Anonymous
Have you done a budget and are you sure she can't do it on $1600 a month? I know it's not a lot, but the carrying costs on her paid off house can't be that much (taxes, insurance and utilities). And, for one person, food isn't that expensive. My MIL is doing it on less right now.
Anonymous
I agree - what is she spending her current salary on? You need a good sense of her budget. Or rather, not you - she needs a good sense of her budget and her needs. Does she need to cut back now and beef up savings?

If she could save , what, $500 a month now, and work part time while drawing Social security, that's another 5 years without drawing much from her $75K.
Anonymous
$1600 isn't that much actually, when you factor in health care and rx costs, if any. Add utilities, food and other insurance (house, car), and property tax, it will eat away at the $1600 pretty quickly.

You can either have her move in with you, or if you can afford to, give her some money every month to help her out.
Anonymous
Is moving back to home country an option at some juncture? Many countries have good quality and cheap elder care facilities.
Anonymous
Anonymous wrote:Have you done a budget and are you sure she can't do it on $1600 a month? I know it's not a lot, but the carrying costs on her paid off house can't be that much (taxes, insurance and utilities). And, for one person, food isn't that expensive. My MIL is doing it on less right now.


She maybe able to get a property tax break based on age and income. I know Fairfax County has a program, but I do not know the income maximums.
Anonymous
Is she on Medicare?
Anonymous
OP here: Yes, she has Medicar now that she is 65.
Anonymous
I think you should focus on boosting your own earnings and/or savings so when the time comes, you'll have the financial means to help her. You don't say, but your mother may have her own strong ideas about what she wants to do and doesn't want to do after retirement, and they may be contrary to yours. Health issues may also crop up that can throw a monkey wrench into all the plans with housing. You won't necessarily need to have a whole lump sum available immediately at her retirement, but having the financial means to be able to pay for her her groceries every week or paying her utilities for her monthly may go a long way.
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