How to Help My Mother NOT go Broke

They paid for college and a relatively lavish wedding and a lifestyle we apparently never could afford. They made a lot of bad money moves along the way–constantly adding on to and updating a house that was already the most expensive on the block, buying worthless art and “collectables” to clutter the house, taking money out of the markets around 2008 and missing out on the potential returns. Oh, and the kicker is that in 2015 and 2016 my father took a ton of money out of his IRA to buy a condo in florida and pay for my wedding without paying nearly enough in taxes to support those withdrawals, not to mention apparently not filing at all those two years, leaving my mother with $60k in tax debt and fines. For a man who made a career out of planning financial risk, he sure did a horrible job of planning for his and my mother’s retirement.

Dealing with his pretty traumatic death (a week after my NICU son was born last year) was hard enough–but not having to help my mother somehow NOT GO BROKE is going to, well, break me.

Now, I realize they paid for my college AND my wedding and I do feel a responsibility to 1. help her not go broke and 2. pay her back a reasonable amount for some of these expenditures. On one hand, had I known how bad the financial situation was, I might have made a different decision on where to go to college (public vs private school, which was an option) and I would have been less reckless with my spending at the time (when I didn’t understand budgeting or the value of money, sad to say.) But I did save on interest on student loans and I feel like I owe it to my mother to pay her back for at least some of my college education.

…The wedding was a beast of an event–but for my father dying of cancer it was as much his party as it was mine and for what it’s worth I saw him enjoy it perhaps more (much more) than I did with his family and friends. I had offered to pay for it up front so he wouldn’t have to withdraw from his IRA and he flat out refused, but I didn’t have a clue that ALL the money was in the IRA and the wedding plus their condo purchase just killed them tax wise those years. I can’t really blame myself for that as he told me “$50k for the wedding” and I went with that budget. He was too proud to admit that really he didn’t have the $50k for my wedding (and supposed $50k for my sister’s wedding that hasn’t happened yet) — maybe he thought he did. Maybe he was in denial. I don’t know. We shouldn’t have spent that money in 2016. I should have eloped.

I guess until tonight I hadn’t come to terms with just how bad the situation is. It doesn’t HAVE to be as there is a decent pension and social security, but my mother refuses to adjust her spending beyond perhaps not buying 4 matching pants to go with the 8 shirts on sale she just has to have. She’ll buy 2.

After interviewing a ton of CFPs (mostly fee only) I just felt like they weren’t going to add enough value to be worth their 1% annual management fees. It’s not that they wouldn’t tell her the right things she needed to hear, it’s that she would hear it and it would go in one ear and out the other. She’s just so far off from OK, I’m not sure WHERE to start. Scratch that, I know we should be selling her tri-state home IMMEDIATELY to start saving along the lines of $30,000+ a year — BUT, even that just scratches the surface of the issue. Even if I paid her back for the wedding and my entire college education, I’m not sure that gets her where she needs to be.

After all the CFP interviews I set up an appointment for her with Vanguard personal advisory services which is “just” .03% of her portfolio (really not that bad since her portfolio is just $400k in IRA at the moment, but also I get the sense that its’ about .03% of a real CFP service. What I like about it is that it’s .03% split out per month and you can get out at any time, so we can get some advice for cheap from a real CFP (or team of people who work with CFPs) and get some sense for what to do before investing in a private CFP. For free, they ran a basic plan for her… which was just depressing… and had me revisiting her spending and income and, well, the picture isn’t pretty. The picture has oozing wounds and horse shit that’s been festering for centuries covered in maggots.

And she’s doing BETTER than most people in America right now. She has $70k in fixed income (taxable, but still), $400k in the IRA and a home probably worth about $250k cash after it’s sold. But that’s nothing. She’s 65 and she’ll be broke by 70 at this rate.

I don’t know what to do. I don’t know how to get her to take this seriously. She is in LALA land. I don’t want to give her $25k or $50k or more UNLESS she can actually learn to budget properly and makes plans to help smooth this all out, somehow. Instead of saying that she CAN’T sell the house next year, she realizes that she HAS to sell it next year (sadly) and really she should sell it THIS YEAR. She CAN’T get a storage unit to keep all her random things and she HAS to sell what she can and move to her condo full time as soon as possible – even if that means not going to her condo this winter and staying in the cold weather to pack (but, as she says, she would have to buy a whole new winter wardrobe, which would cost a lot, so she should not stay there to pack up the house this winter.)

My thought on helping her out financially is that I need to get my ducks in order first (i.e. buy a house, pay off said house, have a stable career for next 10 years, invest my money) and if in 10 years she has been spending smartly then I can help pay for things like buy her a vacation package or even pay the basic bills if needed, up to a certain point, especially to ensure she’s comfortable in old age when she needs to have help.

It just all feels so unsurmountable I’m erring on the side of just being delusional like my mother and letting her run out of money at 70, go into credit card debt, and then… then what? She has an HOA to pay (her condo was “cheap” but it’s not cheap on a fixed income, and who the hell knows what special assessments will come up over time?)

Any advice on what I should do, other than send my mother a check for $50k and run the hell away from this?

 

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6 comments

  1. Mr. A says:

    I would not give her money as it appears it will not change the situation. If she is going to blow through ~$450k after tax net worth in 5 years with her current expenses, then I can’t imagine another $50k making a difference. If anything it enables her to keep delaying and waste that money too.

    It appears the best thing to do is find the best way for her to get her expenses to live within her current income. This would mean having one place to live that costs within that income. Plus a discretionary budget within the remaining income leftover that also pays for food etc. You will want to get her accounts set up that she only gets to use the money that she truly has to spend that month. Then, get the remaining networth money invested in a way that she can’t access it.
    If she isn’t listening to you now, what is going to change that? I’d think another external advisor might be able to get her to listen. If she doesn’t listen, then you don’t owe her anything and it is her own fault that she won’t fix the situation to live within her means.

    I have a similar situation in my family with my parents. They spend 2x + more than they make in income now that they are retired. Yet, the net worth is enough to let this go on for some years but not long enough. They have not adjusted their spending down at all.
    If a crash were to happen, they’d be in a lot of trouble as their networth would crash, the income and expenses would stay the same, and they couldn’t sell the house and condo they own at a huge loss due to the lower price to get rid of the expense.

    1. Joy ( User Karma: 0 ) says:

      I agree with this except I do not have the right to take her money away and not let her access it. I am focused on trying to help her understand what she is spending currently. I figured out that with reasonable expenses if she sells the main house her annual expenses are about $20k-$30k over what she’ll be taking home in after tax income, which isn’t as bad as I initially thought. BUT it’s easy for her to overspend that if she’s not careful and it would be much better if she can get her spending to break even. She REFUSES to change her lifestyle at all, so there’s nothing I can do. I’ll save the money I plan to give her for when she’s truly destitute I guess.

  2. Angie says:

    In my experience, having a professional to tell my mother things was the only way to get something done. In our case, it was hiring a realtor to sell my parents house – she had ignored our please for literally years but sold the house within 2 months of hiring the realtor. It may be worth hiring a financial adviser to go over the numbers with her time and time again until she finally hears it.

  3. Steveark says:

    It was probably just a typo but Vanguard personal advisor fee is 0.30%, not 0.03%. You can’t fix your mom and you shouldn’t break your bank trying. Parents rarely listen to kids giving advice but you can love her and keep her from starving when she had blown through her money. The pension should be a life saver, she can’t spend that all at once.

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