Good evening, Reddit.
I'm a 32M and I'm married to a wonderful 30F. We are doing OK financially, but I think we will face an inevitable challenge in assisting my Mother in her retirement later in life.
On the matter of supporting parents financially, there's likely differing opinions within the financial planning/personal finance communities. However, I know, that at some point - whatever, however, whenever, that might be - I will likely need to provide some kind of financial support to my Mom to aid her "retirement," and I'm willing to do that to some extent. I'm not interested in debating whether I should, rather, I'm interested in gaining ideas, recommendations, or similar, that my wife and I can begin thinking about to prepare for this type of situation.
For context, my Mom (62F) is employed and single.
Retirement/Savings/Cash:
Assumptions:
My questions to you:
I'm a 32M and I'm married to a wonderful 30F. We are doing OK financially, but I think we will face an inevitable challenge in assisting my Mother in her retirement later in life.
On the matter of supporting parents financially, there's likely differing opinions within the financial planning/personal finance communities. However, I know, that at some point - whatever, however, whenever, that might be - I will likely need to provide some kind of financial support to my Mom to aid her "retirement," and I'm willing to do that to some extent. I'm not interested in debating whether I should, rather, I'm interested in gaining ideas, recommendations, or similar, that my wife and I can begin thinking about to prepare for this type of situation.
For context, my Mom (62F) is employed and single.
Retirement/Savings/Cash:
- 401k: $32,077
- IRA: $46,543
- Taxable: $3,609
- Checking account: $23,901
- Total: $106,130
- Annual Gross Income: 73,500 (started new job in 2018, prior to that, she worked for 16 years at a salary of ~45,000)
- Pre-tax 401k Contributions: 10%, or 7,350.00 for 2023
- Taxes: $17,140
- Net Income: $49,010 (or, 942.50 per week)
- Fixed Expenses: $2,500
- Variable Expenses: $500
- Surplus: ~$900 on average
- Fixed Expenses: $2,345
- Variable Expenses: $1,309
- Total: $3,654
- Surplus: $1,058.50 (extra week in March, paid weekly)
- Based on $3,600 of monthly expenses, emergency fund should be 21,600
- Which means of the $23,901 in her Checking, she can move $2,301 to her taxable brokerage and invest. The 21,600 can either stay in Checking account or, she could move a certain % to a money market account and leave enough in Checking for cash flow purposes.
Assumptions:
- Annual inflation: 3%
- yes, i know the inflation figures of 2021 and 2022, but the baseline of monthly expenses for 2023 takes into account today's prices — so, a big Logan Roy f\** off if you don't like me using Powell's perceived global inflation standard of 3%*
- Annual raise: 3%
- Annual bonus: 5%
- 2023 monthly expenses: $3,600
- Mom invests the cash flow surplus each year towards taxable brokerage
- Mom declares retirement and Social Security so that SS payments begin in January, 2028
- Mom receives 50% of maximum SS because of SS divorce statute – based on today's figure, that's $1,813.50, which in 2028 with 3% inflation, is — *Brad Pitt snaps fingers at Jonah Hill across the Oakland A's scouting table\ —* $2,165.41.
- Mom quits full-time accounting job upon taking social security, and takes a job earning her $40k gross — think, government worker, librarian, administrative work, etc. She works this job starting in 2028, along with receiving her SS payments.
- Mom works part-time job until end of 2032.
- Mom stops working start of 2033.
- Annual yield across investments: 5% after inflation until death do us part
My questions to you:
- How realistic are these assumptions?
- What are the tax implications to my Mom's AGI in years 2028-2032 when she is working part-time and receiving SS benefits?
- How do I contribute financially here-and-there, as opposed to committing to - and thereby creating a dependency - recurring financial support (i.e., subsidizing rent, gifting money, etc.)?
- What suggestions do you have for investment strategy/allocation in her existing investments given her situation?
- What am I not thinking about? For example, healthcare is not built into my model — I don't know how to estimate/project that. It seems really difficult.
- Have you been through/or are going through a similar situation, and how are you approaching it/addressing it?