The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.
If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.
Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.
Next in the series is from an FMF reader submitting a profile for his parents as follows:
I’m a long time lurker on FMF and highly value the widely varied topics and reader feedback. Our family has recently gone through a substantial personal finance turnaround, but that is a topic for another day.
My Mom and Dad are the focus for this reader profile. We have been talking quite a bit about their financial situation and they agreed to me posting their profile. I wrote it up for them, they proofed it and agreed that inputs from FMF readers might be helpful.
They are near the other end of the work spectrum from most reader profiles, but could use feedback and insights. Mom and Dad have been married for 17 years and are the epitome of a young couple in love. Mom is 76 and Dad is 88. Both were previously widowed/widower, and knew each other as our families grew up in the same neighborhood. Their marriage brought together a large, loving extended family. They have 14 grandkids and 3 great-grandkids.
Dad has been working in the service industry since he was 15 and knows just about everybody in town. He recently retired at age 84 (yes, your math is right, that's 69 years of work), but only because of vision problems. If he could still see, he would still be working today. To stay in touch with the old crew, he writes articles for industry publications and is authoring a book (Dad dictates and Mom writes for him on the computer). He continues to serve those around him through occasional volunteering, but he is not able to do as much he would like.
Mom works full time and is a leader in her industry. She is highly regarded by her colleagues, who are concerned she may retire in a few years when she turns 65 (if only they knew!). Mom attributes her success to building close personal relationships and focusing on customer needs.
Today, Mom’s income covers all of their monthly needs including money for traveling to see their family who are scattered about the country. But Mom would like to reduce her work hours to spend even more time with Dad and family. Dad and I don’t think she will ever fully retire, she enjoys what she does too much.
Here's their rough financial overview:
Gross Income: $75k/y, bonuses up to $26k/y
- SS, pensions, RMDs - $46k/y
- All RMDs re-invested in after-tax accounts
- Total of ~$12k/mo
Monthly Expenses: Mortgage: $1,200 (balance $213k @3.3%)
- HOA - $315
- Car - $408 (balance $16k @0.9%)
- Transportation - $220 (gas, insurance)
- Donations - $75
- Utilities - $501 (includes water, sewer, gas, electric, cable, internet, phone, cells)
- Medical/Ins - $785 (includes LT Care Ins)
- Home Cleaning - $180Food - $1,000
- Life Insurance for Mom - $35 (not sure on term, $35k policy)
- Savings - $800
- Taxes - $3,000 (high side conservative estimate @25%)
- “Other” - $3,600
- Liquid Assets (mix of retirement/taxable accounts) - $150k
- Home Value - $335k
Net Worth: $250k
They have a fairly large gap in the “other” category that they use for extras, family and travel.
Current financial issues/challenges/concerns/questions:
Mom & Dad have recently paid off all their consumer credit accounts to reduce their monthly expenses.
So the main issue we are working through with them: how to cut back on Mom’s hours, continue to meet monthly obligations, and continue to have the money to travel and treat themselves and the family. Her current employer won’t let her reduce hours and doesn’t pay her what she deserves. She has several offers from other companies, but is worried that changing now would increase her hours rather than decrease them. Their savings would not allow them to continue their current lifestyle without working.
The next issue is the car. Mom would like to pay if off and be done with the expense, but Dad would be more comfortable having the cash on hand in case of unforeseen issues. Right now, they are “making extra payments” into a savings account and will decide how/when to pay off the car when it is fully funded. They both like this approach - any other thoughts on this?
Liquid assets – all of my research and focus has been on savings rates/vehicles, asset allocation and investing with a long time horizon. I have no clue how to set up a plan for this stage of life. Any suggestions, pointers, links, books, wisdom, etc… for Mom & Dad would be greatly appreciated. I'm not sure the professional advice they have received is all that great.
Our family business is growing rapidly, has a great spot for Mom and we could be extremely flexible. Mom really likes the idea of mentoring us and helping us grow. We have worked well together in the past (we’ve not always been so lucky with other family ventures). We could likely cover her current salary at reduced effort in the not-to-distant future, but it may be a struggle to match her salary in the near term. We would have similar entry barriers/ramp up she would experience at other companies, and of course fewer hours means longer ramp up. We are really focused on and sensitive to what’s right for Mom & Dad rather than exploiting Mom’s expertise for our gain, so we are pursuing this as an option, but not pushing real hard.
Other issues/questions that may come up – They are not real interested in trimming down expenses, they want to enjoy the time they have with each other and the family. Mom has a small life policy and a long term care policy to help Dad out if needed. Yes, it sounds like there may be some tough decisions or tradeoffs. We’re looking for the middle ground so they might be able to have their cake and eat it too.
We look forward to constructive criticism, insights and lessons from FMF readers!