Mom Actually Gets to Retire!

It’s been a little over two and a half years since my parent’s house caught fire and my father passed away. In that time my mom has slowly gotten over the loss. I can’t remember if I ever mentioned when she was able to return to the house but it took a little over 8 months to finally get her back in. The good news is that her house is in outstanding shape and will be very marketable once she decides to sell it.

Now that my mom is about to turn 65 she is thinking more and more about retirement. For a long time my mother used to always say, “my retirement plan is that I’m going to work until I drop!” I’m happy to report that she is not going to have to do that after all. If you recall, my family owned a small independent auto parts store when I was a kid. The business was never wildly successful so saving for retirement was never at the top of the priority list. There just wasn’t ever enough money to cover the basic bills (and believe me, we lived a pretty frugal existence) and also fund their retirement accounts. (In fact I don’t think they even had a retirement account until they were nearly 50). Once they closed the family business and found other jobs, they were able to start putting a little money away but it just wasn’t possible to max out their accounts or anything like that. If they were able to put away $4000 away a year, they considered it a success. For those of you that are good at math, I’m sure you quickly realize that putting $4000 a year away, with modest returns doesn’t equate to a comfortable retirement when you hit 65. Couple that with the crappy economy and stock market as of late and it’s easy to see that my mother won’t be dining in a lot of 5 star restaurants. The fact of the matter is, my mother doesn’t have a lot of investments to generate interest income for her in her old age.

There is a bright spot for my mother. My parents were fortunate to use a bit of inheritance money and a lot of their excess income over the last 8 years to buy a small piece of property and build a small house out at the lake that I’ve blogged about. By paying cash as they went along, and completing a lot of the work themselves, they ended up with a nice 3 bedroom 2 bathroom house that was entirely paid for, on top of their main house that they still carried a mortgage on. This has given my mother a huge bump in her net worth and has always given her the option of selling her main house, paying off the mortgage and moving out to the lake full time. The only problem with that option is that she really didn’t want to live 70 miles away from the rest of her family. Complicating the situation further is the fact that she really didn’t want to sell the lake house because my father always envisioned us kids having it. That isn’t going to be a problem after all. My wife and I would have probably purchased the lake house from her except that we built our own lake house across the street a couple years ago so it would be pretty ridiculous to try to buy hers as well. (And the reality is that we can’t afford to). While we were sitting around the table talking about options a few weeks ago, I asked my mother point blank, “Mom, be honest. Do you really want to live out here when you retire?” My mother thought about it for a minute and said, “No, but it’s really the only option I have if I want to quit working, because the lake house is paid for.” It was at that point that I floated the idea of selling the lake house to my younger sister. “Why don’t you sell the lake house to “J” at a cost that equals what you have left on your main house’s mortgage and consider the difference in sale price and actual value an early inheritance for “J”?” My mom instantly liked that idea but she wasn’t sure if my younger sister would be interested. It turns out that she was interested and the sale will close on the 25th of this month.

This solves both of the problems that my mother has been facing. She didn’t want to sell the lake house because of the sentimental value of it and she really didn’t want to live out there. By selling it to my sister, she now will still have access to it, she’ll feel good about the fact that it is staying in the family and she’ll also own her main house with no mortgage. This gives her the ability to retire and live modestly but comfortably. The next step will be to work with her to generate interest income off of her current investments that she has been amassing since her early 50’s. With a little work, I think we’ll be able to nearly double her social security amount to give her plenty of wiggle room in her retirement budget. Before she retires she’ll also start investing more heavily with her excess income to try to further build up her nest egg. The important thing is that regardless of what she does from here on out, she should be able to enjoy a fairly comfortable retirement.