I’m young (27) and my parents (60 & 61) have told me that the will “never be able to retire”

[Anonymous]

They have no debt and they have some assets. That's really not bad.

They should figure out what their SS payments will be, and then consider downsizing their house in order to capture some of the value to put in with their savings. For instance, if their house is worth 400k and it's a 3-4 bedroom, they should consider moving to a 2 bedroom condo in the same community, paying maybe 250 or 275. Then they bank the difference. Factor any condo fees into monthly costs and ensure SS will cover it. Condo fees are often worth it for older people because they usually cover building maintenance, garbage, sewer -- things that an older person might not want to manage themselves.

If selling their house doesn't make sense, they should just sit tight and figure out a budget using their SS payments. Without a mortgage this might be easier than you think. I would encourage them to identify what luxuries are important to their mental health (eating out once a week? taking a beach vacation once a year?) and building that into the budget, even it if means pinching pennies elsewhere. That stuff makes life worth living.

I also would recommend talking to a financial manager to figure out how to maximize the savings they have now. They need to be conservative because of age, but there are things they can do with the $400k that will net them better returns than just leaving it in a savings account, without risking losing it. Even just making out I-bonds or investing in a Roth IRA now while they still have income could get them better returns.

Also, with no mortgage, even just working a job 5-10 hours a week, maybe in a retail store or something similarly low stress, can make a huge quality of life difference. There are benefits to going to a job which pushes you into a schedule and ensures you talk to other people. And if you made an extra 600-800 a month, that could be your money for going out to eat, going to the movies, taking a couple extra vacations, etc.

It's honestly not as dire as you think, OP.

[Anonymous]

Hopefully in retirement they will only need one car, which they should try to buy while dad is still working.

[Anonymous]

Especially with higher interest rates now available, they should consider annuitizing the $400k (which should be more like $500k when the time comes).

If they got a guaranteed 6% from that, that's $30k per year. Plus $30k per year from Social Security, now they've got $60k per year income and no mortgage or rent payment.

There's literally no problem there whatsoever.

[Anonymous]

They own their home, they have savings, live in a LCOL, and aren't extravagant people.

They could always sell the house or rent it out and downsize. Why can't they retire at 65 or 68? What are their monthly expenses?

[Anonymous]

Anonymous wrote:At some point they will be able to collect social security. In a low cost of living area with no mortgage payment, they should be able to retire.

+1 My parents live on $2300/month, in CA. Granted, they bought their little condo 20 years ago, so the property tax is low, but if your parents move to a lcol where the property tax is not high, I think they can do it.

[Anonymous]

Anonymous wrote:Especially with higher interest rates now available, they should consider annuitizing the $400k (which should be more like $500k when the time comes).

If they got a guaranteed 6% from that, that's $30k per year. Plus $30k per year from Social Security, now they've got $60k per year income and no mortgage or rent payment.

There's literally no problem there whatsoever.

Do not turn all their savings into an annuity. They will lack money for emergencies, for instance. They could consider devoting part of their nest egg to an annuity if they want to raise the level of their guaranteed income every year, but lots of annuities come with hidden fees and aren't a great deal for the consumer, so buyer beware.

[Anonymous]

My BIL just told me he isn't retiring this year because they've lost $400K in their portfolio over the last year or so.

He seriously said, "A few million dollars doesn't go very far." Not enough eyeroll emojis to do that one justice.

OP, you can google retirement income calculators that may give your parents more confidence financially. But as PPs here have said, they should be just fine.

[Anonymous]

Anonymous wrote:At some point they will be able to collect social security. In a low cost of living area with no mortgage payment, they should be able to retire.

The longer they can put off claiming Social Security, the more they will be able to claim at a later date.

[Anonymous]

Anonymous wrote:Down the road Dad can downsize to a non physical job and still have income coming in though it won't be as much.
This and social security should get them by.

What is your suggestion for a job?

[Anonymous]

Anonymous wrote:There is not much you can do OP. There are a significant number of people between the ages of 50-65 that have been hit by the recession when we graduated and the great recession too.

They need to really start pinching pennies. I'm 55 and drive a 20 year old Toyota to save money for retirement, cook almost all food at home, and limit purchases. They need to plan to reduce lifestyle expenses (like the leased cars) and to work part time doing something less taxing as they get to be 68+.

I would not plan to give them money.

On the plus side they have 400k+, a paid off house and no mortgage. I would assume that is a big part of their retirement plan. If they could get rid of the leased cars and buy smaller fuel efficient cars when prices come down, that might help too. The 400k and paid off mortgage in a LCOL area is more than a vast number of Americans their age.

Agree on getting rid of the leased cars. I *get* why they do it - they sound similar to may parents - but so much better to unload them.

[Anonymous]

Anonymous wrote:Move them to New York or CA, have them set up a Medicaid trust or sign the assets over to your name and get them subsidized housing and other benefits

Are you able to share more here?

[Anonymous]

Did they pay for your college education? Pay them back.

[Anonymous]

Anonymous wrote:My BIL just told me he isn't retiring this year because they've lost $400K in their portfolio over the last year or so.

He seriously said, "A few million dollars doesn't go very far." Not enough eyeroll emojis to do that one justice.

OP, you can google retirement income calculators that may give your parents more confidence financially. But as PPs here have said, they should be just fine.

Fair point, but I would rather have him not retire and try to close that gap, then expect his children or other relatives do so. There are some horror stories on here of parents who retire clearly before they should, then look to their children to cover their expenses.

[Anonymous]

Anonymous wrote:

Anonymous wrote:There is not much you can do OP. There are a significant number of people between the ages of 50-65 that have been hit by the recession when we graduated and the great recession too.

They need to really start pinching pennies. I'm 55 and drive a 20 year old Toyota to save money for retirement, cook almost all food at home, and limit purchases. They need to plan to reduce lifestyle expenses (like the leased cars) and to work part time doing something less taxing as they get to be 68+.

I would not plan to give them money.

On the plus side they have 400k+, a paid off house and no mortgage. I would assume that is a big part of their retirement plan. If they could get rid of the leased cars and buy smaller fuel efficient cars when prices come down, that might help too. The 400k and paid off mortgage in a LCOL area is more than a vast number of Americans their age.

They aren't financially comfortable, perhaps, but thanks to that paid off house and $400,000 in savings, plus Social Security, they certainly are not destitute. Median net worth for people ages 65 to 74 is $266,400 -- so your parents are doing better than well over half the people in that age group in the U.S.

If they spend 4 percent of their $400k savings every year (and invest it well), that's $16,000 per year, plus inflation in future years. In addition, if they retire at 67, they would get about $40,000 a year in Social Security (per the AARP quick SS benefit calculator). If they don't start collecting SS until age 70, their annual take would be nearly $50,000.

So, that's annual income of $56,000 to $66,000 a year, in a low cost of living area, which should be doable. And we haven't even talked about the fact that their $400k in savings should grow over the next few years if they continue to work and if it invested well, or about ways to tap their home equity.

In short, they should have enough money to finance a modest retirement, especially if they keep working for a few more years. What they lack is enough savings to adequately finance long-term care should they need it, but you'll and they will just have to cross that bridge if you come to it.

Agreed with this post on the practicalities.

I think often, "we'll never be able to retire" is an expression of anxiety and uncertainty more than math. I remember my parents saying it in their 40s and maybe early 50s. They're now retired, comfortably for their LCOL area. I know people my age say it too, again out of fear.

[Anonymous]

My dad is 80 and is still working.