Reader Case Study: Mrs. Prickly Pear


There comes a time in everyone’s life when our parents start to age.  They begin having trouble completing basic tasks, or perhaps develop more serious health issues that require full-time care.  Either way, they start needing help.  This is going cost you either time or money.

If you happen to live nearby your aging parents, that additional care might be limited to just time — Driving to their home, maybe doing laundry, washing dishes, cleaning, and preparing meals.  It won’t cost a lot of money, but it will cut into your spare time.

If you live a decent distance away from your parents, you might be hiring someone to provide that same care… and it doesn’t come cheap.

When we’re in our 20’s and 30’s (doing the bulk of our retirement savings) we don’t often account for these hidden costs.  Our parents are still healthy and we forget they won’t be with us forever.  But give it a few decades… these challenges become very real.

Today’s post is a case study from someone in this exact situation —  A modest income, and a parent that needs a significant amount of help.  To maintain her anonymity, I’ll be referring to her by the moniker, Mrs. Prickly Pear.

 

The Story So Far…

A few weeks back, Mrs. Prickly Pear sent me an email about her situation.  She describes her story thusly (edited for brevity and clarity):

My elderly father (87 yo) was diagnosed with Parkinson’s disease and, as is always the case, it is robbing him of his independence. He is, thankfully, financially independent so paying for elevated levels of care for the remainder of his life likely will not be a problem for him, although he would like to stay in his own home for as long as possible.

We currently have a part-time service that assists my dad in his home 2x/wk, and he is comfortable with that and has plenty of assets to cover the cost.

I am currently 50 yo and employed full-time.  I would like to either step back to part-time employment or leave the workforce altogether in order to provide more at-home care for my dad. Juggling his many needs with the pressure of a full-time job (and a less-than-understanding boss) is causing me substantial stress.

Plan A would be caring for my dad, Plan B would be going back into the Human Resources field again, should I need to work.  Is this even feasible?  My long-term goal would be to travel more in the US and northern Europe. I’m currently researching my family tree and I’d like to see where we originated, and I’d love to see the Aurora Borealis with my own eyes.

I’m not a first-class traveler…I’m happy road tripping and car camping rather than staying at over-priced hotels.

Wow, that’s a difficult hand to be dealt with your father.  First off, let me say that I’m very sorry to hear about your father’s diagnosis.  Having a parent or family member with a debilitating disease or degenerative condition is absolutely no fun.

It’s going to be a tough rode ahead…

 

The Expense Situation

After taxes, Mrs. Prickly Pear earns about about $48k annually, and saves $1079/month in tax advantaged savings accounts (more on this later).  She provided me the following table of her monthly spending:

Mrs.PP_MonthlyBudget

Honestly there’s not a whole lot to complain about here with her monthly expenses.  She’s use to living on a fairly modest income already, so that’s good.  Yes, her pet care expense is pretty high… but realistically a pet is not something people are willing to get rid of in order to reach financial independence.

That said, I’m a little surprised by how high her food expenses and gasoline expenses are.  Those two expenses are higher than my entire family of 4 regularly spends.  There’s probably some savings to be found by working a little harder in those categories.

 

The Financial Assets

Mrs. Prickly Pear lists the following in assets:

Pension: $153,052 ($420.83 contributed monthly)

457(b): $325,441 ($119 contributed monthly)

401(a): $78,444 (Previous employer’s plan. I can’t contribute to this account, but I can shift investments in the account.)

Regular Savings: $15,765 (My emergency fund)

Checking: $6,000

Total Assets: $578,702

The good news here is that Mrs. Prickly Pear has an asset that she didn’t actually list  — The equity in her home.  One of the reasons that she’s paying so much every month on her mortgage, is that she’s only 20 payments away from having the mortgage paid off.  That’s huge!  Once the mortgage is paid off, her monthly expenses drop to a mere $1611/month.

(Note: It’s unclear what her property-tax situation is, but it probably won’t be zero.  Monthly expenses might be slightly higher than $1611/month.)

 

The Bad News

OK, let’s get the bad news out of the way first — If Mrs. Prickly Pear takes her $578,792 and puts her monthly spending into a FIRE calculator like cFireSim, the result is not going to look good.

When I punched-in her numbers and put in a fairly comfortable retirement spending of $2,000 per month, the success rate was only 82%.  (This is for a 40 year retirement.)

Using simple rules of thumb (like the 4% rule), we can see she’s right on the edge of making this work.  And honestly, I’m not a fan of the 4% rule to begin with.

That’s not good news.  Here’s why — We happen to be at the top of a very long bull-market right now.  Asset prices are inflated, and if Mrs. Prickly Pear retires right now, sequence of returns risk could be a real issue.

Let’s say a bear market starts in the next six months.  If we assume asset values get cut by 30% in the bear market (not an unreasonable amount), her success rate then drops to a unacceptable 37%  Ouch!

Clearly, I wouldn’t recommend anyone quitting their job with success rates that low.

prickly pear cactus
Just like the fruit of a prickly pear cactus, harvesting the fruit of Mrs. Prickly Pear’s retirement might take some work…

Most people tend to get interested in retiring early during big bull markets.  Their assets are at all-time highs, and they’re feeling quite wealthy.  It’s an illusion of course — people still need to pay the bills during a downturn when asset prices are lowest.

You could argue that $2k per month for Mrs. Prickly Pear is actually too much money. While she could technically live on less — I prefer to believe that most people actually want to have a little fun in retirement.  Expenses typically go up in retirement because most people tend to do more stuff.  An extra $399/month should be a decent amount of “play money”.

 

The Good News

The good news here — Mrs. Prickly Pear has something of an “ace in the hole” with her pension.  She writes:

As a state government employee I am required to contribute 12% of my earnings to the defined benefit pension plan. I am eligible for early retirement now, which would provide a monthly benefit of $1,516. I am also eligible to participate in health insurance, at a monthly cost of $562, so my actual pension would be about $954 before taxes. This monthly benefit would increase the longer I work.

I don’t know the fine details of her pension plan, but if we assume that $954 rises with inflation and lasts for the next 40+ years, she’ll have half her monthly expenses covered (after the mortgage is paid off), as well as necessary health insurance.

The remaining $1046 in her budget could be potentially covered by the other $425k in assets.

It wouldn’t be a gold-plated retirement, but it would meet her goals of caring for her father and reducing work stress.

 

Other Options And Ideas

In additional to paying off her home, Mrs. Prickly Pear and I discussed several creative options:

  • She could rent out her home, and then move in with her father to provide better care.  Potentially this would add a little extra income to supplement her retirement savings while she’s caring for her father.
  • Sell her home and then reinvest the equity into the stock market.  Then, she moves-in with her father to provide better care.  Over the long-term this strategy is likely to provided higher returns than renting the home (in most housing markets).
  • There’s also the possibility of doing part-time work.  Mrs. Prickly Pear used to be a copy editor.  These days that job is mostly done online, and she could earn $15-20 per hour working part-time.

All of those strategies can generate extra income to supplement her retirement savings.  But, by giving up her home she also gives-up something very precious… her own space.

Let’s not mince words here, living with a parent with Parkinson’s disease and providing full-time care until the eventual end isn’t going to be easy.  There’s going to be times when she’ll want to unplug from the situation and just let a care professional take over.

My advice?  I think she should keep her home.  If she moves in with her father, the burden of care squarely falls on her shoulders.  She shouldn’t let the burden of her father’s care be hers alone to bear.  Yes, it might save money, but there probably won’t be any breaks or vacations in a situation like that.

Mrs. Prickly Pear mentioned a couple siblings to me — they should absolutely be helping out with her father if they can.

 

My Advice

While there’s no easy choices in a situation like this, I think Mrs. Prickly Pear’s situation would best be served by leaving full-time work once she’s paid off her mortgage (in slightly less than two years).

She could technically work longer and have a “safer” retirement, but I think she should try to spend as much time with her father as she can.  He probably doesn’t have too many years left.

With her assets being so close to the minimum in order to fund a $24k/year annual retirement budget (using the 4% rule), I think it would be smart if she develops that part-time copy editor income.  This kind of retirement is often called “BaristaFIRE” in the personal finance community.

If Mrs. Prickly Pear is able to develop that online job, by working a mere two days a week she could cover half of her monthly expenses.  The rest of her income (and healthcare) would be covered by taking the pension.

While this won’t provide a “gold-plated first-class” kind of retirement, by doing so she will free-up more time to care for her father.  She should also be able to avoid drawing down retirement accounts in the event of a deep or prolonged recession.

There shouldn’t be any need to dip into her 457(b) or other accounts if she can generate $1,000/month from a part-time job.

In the event that Mrs. Prickly Pear’s father passes-away, she could also decide to start traveling more.  Having an “online” job makes a whole lot of sense here too — she won’t be tied down and can still enjoy the “fruits” of her difficult situation.  She can continue to shield herself from market losses, and pick-up a little work when it’s convenient.

 

Final Thoughts

I chose to write-up Mrs. Prickly Pear’s case study specifically because it wasn’t an easy one.  She’s dealing with a parent that needs significant care, and it’s not going to get better as time goes on.  It’s going to be a difficult road to walk.

Most people don’t plan their retirement imagining they’ll be caring for an elderly or sick parent.  They often imagine a life of travel, hobbies, time with friends, eating delicious meals.

Mrs. Prickly Pear’s case provides something of a wake-up call to those fancy dreams– We absolutely should be planning for such eventualities with our parents.  Life happens, and they aren’t going to get any younger.  Eventually health will fail them.

Just about the time most adults get ready to retire, their parents are going to be near the end of their healthy years.  Medical problems are going to be more frequent, and they’ll probably start to need help with everyday tasks.

Remember to spend as much time with them as you can.  As they approach the end it won’t be money on their minds.  It’ll be the time you spent together.

 

[Image Credit: Flickr1, Flickr2]

17 thoughts on “Reader Case Study: Mrs. Prickly Pear

  • May 1, 2019 at 5:20 AM
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    If she moves in with the father to provide full-time care, since the father is financially well off, he can afford to pay her some reasonable amount for the services she is providing since he would be paying for those to a stranger if she were not there. That alone should go a long way to resolving the dilemma.

    Reply
    • May 1, 2019 at 8:37 PM
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      That sounds reasonable, but we don’t know enough about her father’s financial situation. Supposedly it’s enough to cover at least part-time care and his living/medical costs.

      Reply
  • May 1, 2019 at 8:58 AM
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    I am in a similar circumstance except my parents are in a care home. I am still responsible for finances, health decisions and lots of ongoing work and errands. I also have siblings who are choosing not to help out and I stated very plainly that I would be recovering costs for days off work and would be pleased not to do that if they would share some of the load (neither of them have stepped up). I am about MPP age, and almost able to access a smaller share of a government pension versus working another 9 years. I would also talk to siblings and my father about taking some expense money, I agree with Fred above, even if not living in the home with the father. I also wonder if she is aware of the will provisions? This is not certain but knowing there likely will be something left over could be a comfort.

    Reply
    • May 1, 2019 at 8:40 PM
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      That’s an interesting point. Some parents might be amenable to making will provisions, but others may not.

      Thanks for the idea Tigermom. I’ll make sure she sees it.

      Reply
  • May 1, 2019 at 9:01 AM
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    Great case study – and thank you for choosing a complex one. Little is served by writing ones with “layup” solutions; ones like these help us think. The advice seems sound and highlights that there isn’t an easy solution for Ms. PP.

    I know all responsible PF writers would counsel against playing the lottery. I do find it ironic, though, that the U.S. has chosen to embed a number of lotteries in our society (have you avoided catastrophic medical issues while un- or under-insured, have you avoided having major expenses related to a parent’s medical issues or unfunded longevity, etc.). Thankfully Ms. PP seems to have won a lottery with her father’s financial independence and means of paying for added care, but not everyone is so lucky. End of socialist rant.

    Good luck Ms. PP and let us know how the Aurora Borealis looks (it’s on my list too!).

    Reply
  • May 1, 2019 at 9:41 AM
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    That’s really tough. Parkinson’s is a tough disease. Her dad will require full-time care at some point. It will get pretty expensive then. She probably should work until her dad needs more help. For now, a part-time caretaker seems to work pretty well. Well, if her dad can afford it, I guess a full-time caretaker would work too. Mrs. Prickly Pear can drop by and spend more time with her dad whenever she can.
    I think a patient with Parkinson’s can actually live quite long. It sounds like he’s just at the beginning stage.

    Reply
    • May 1, 2019 at 8:44 PM
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      I’m not sure about what stage he’s at with the disease. Hopefully she’s got a couple years before he requires full-time care.

      Since I started talking to her and writing the case though, I think he may have taken a turn for the worse. She mentioned he’d taken a fall and had been in the hospital recently.

      Falls are never good at that age. 🙁

      Reply
  • May 1, 2019 at 10:05 AM
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    Great case study and I agree it is incredibly challenging when you throw in something like parent’s health and cost of care into the mix (a lot of people don’t factor this in at all and get surprised by it).

    The pension is indeed a nice fall back to have, it is a shame that the corporate world shifted the responsibility to the workers but I can see why they did it as it is a huge business savings for them.

    You advice is spot on and what I would have done myself.

    Reply
    • May 1, 2019 at 8:45 PM
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      Thanks Xrayvsn! Always glad to see your comments here! 🙂

      Reply
  • May 1, 2019 at 10:22 AM
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    I agree: caution. Consider dad spending down a bit and gifting kids annually, to decrease inheritance tax. He’ll have time. Ms.P hasn’t specified her own Health goals and her budget lacks a fitness entry even to make traveling easier. Early partial retirement are better years to recover fitness before even more aches and pains show up. Ms.P may be emphasizing short term rosy picture, may disappoint while increasing monthly $$ worry. Hard to travel with $ worry.

    Reply
  • May 1, 2019 at 12:51 PM
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    You are right on that it would be extremely mentally taxing for her to move in with the parent. Sometimes the parent doesn’t want to move because they just don’t want to go into a nursing home or assistive living facility yet. I have seen several families where the parent sells their home and uses some of the money to build a mother-in-law type quarters in the back yard of the child (if zoning allows for it). Think tiny home but not on wheels, 250-400 sq ft with its own bathroom and kitchenette. There is some space, but neither parent or child has to go far. This has the added benefit that the parent is able to invest the remainder of the profits from the sale of the home to use to increase quality of life; the child gets an increase in the value of their home for dealing with the parent more than the other siblings; and the parent is able to see grandchildren more often if there are any. Some families will both sell, and find a new home that already has such a set up. I have also seen families sell both houses and buy houses next to each other or across the street or even two condos in the same complex. This may not work for everyone, but I can definitely see the positives.

    Reply
    • May 1, 2019 at 8:46 PM
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      Lots of great ideas here Robbie. I’ll be sure to pass them on!

      Reply
  • May 1, 2019 at 6:02 PM
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    Did you factor her social security at FRA of 67 into cfiresim? Even if she claims early at 62 for the reduced benefit that should definitely help with her percentages if you’re planning on a 40 year timeline (from 50 to 90 years old).

    Reply
    • May 1, 2019 at 8:53 PM
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      I generally don’t include social security in such calculations. Even if the program continues for the next 12-15 years, the payouts have generally not kept up with inflation.

      Meanwhile, the cost of healthcare continues to rise. Thus, I conclude that SS is really just a *healthcare safety-net* now… since our elder years is when we need the most healthcare and that’s when SS kicks in.

      Reply
  • May 2, 2019 at 7:24 AM
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    Hopefully there are more family members in the surrounding area to help share the financial loan and time commitment. Thanks for the share Mr. Tako, it got me thinking about my own parents.

    Reply
  • July 16, 2019 at 8:56 AM
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    awesome work Mr. Tako!
    do you have a similar cSim exercise for an Indian FIRE enthusiast too? My back of the envelope calculation is assuring but extra help is always useful 🙂

    Reply

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