Hi FP, first time posting. I really appreciate any help I can get. Please excuse the long post.
My parents are in their 60's. My mom has been stay-at-home for several years and not very self sufficient. My father is turning 66 and plans to retire by end of this year. They are not very technology or money savvy, and I am assigned the daunting task of helping them figure out what to do to properly setup their retirement.
Their financial situation:
Income & net worth: • 1 rental house with equity of around $350,000 • Currently receiving rent around $2700/month of income • 1 residential house, equity of around $175,000 • Expected social security income $1400/month • 401k account balance $42,000
Expenses:
• Property taxes $10000/year • House maintenance $7500/year • Household expenses estimated $1200/month
Goals & items I need help to determine the right approach:
• They are rather attached to the house with $350,000 equity and would prefer to move back into it and try to generate additional income by renting out rooms. I believe they need to utilize the equity more wisely than keeping the large house that costs a lot to maintain each year while dealing with airbnb guests or other tenant setup.
• If they were to sell both properties, assuming they will have about $500,000 in cash. What is the best way to ensure a steady stream of income from this in their age? I read about a "fixed payout" account with Vanguard that may guarantee a 4% payout on interest annually without drawing on the principle. Is this true & reliable? Or there better ways to generate income with their nest egg?
• If they were to sell both properties, what is the most economical way for them to settle into a place to live? Should they use half of the $500,000 a year to purchase a smaller house to live in permanently? Which would leave them with a much smaller cash account to generate interest from. I am assuming I should help them find a reasonable small apartment to live in. Need help confirming this assumption.
• If they were to rent a small apartment, how to ensure they are not hassled with annual rent increases or uncertainties of having to move again at the landlord's demand? They would prefer a stable place to live going forward without having to move again.
• I tried to find 55+ senior living communities for them, but almost all of them I've seen requires the residents to purchase a house into the community, rather than rent. Is it likely to find a reasonable senior living community that rents their units? Not referring to assisted living communities. They are both in good health for their age and do not require medical / daily / meals type of assistance onsite.
• If they stay in the current house with the $350,000 equity that they prefer, they are thinking about taking a reverse mortgage against the equity. I heard this is a terrible idea but cannot accurately pinpoint why and what the ramifications might be at the end of the day based on some of the vague articles I have read. What pitfalls should we watch out for with a reverse mortgage?
• Lastly, they will need to get on medicare once my father retires from his current job. I looked at the plans listed on the medicare website, but I am not certain what the correct considerations are for selecting the right plans.
Thanks FP. I really appreciate your help on any of the points above.
Submitted May 31, 2017 at 08:16AM by randomchic123 http://ift.tt/2rEI8Rs
