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:
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)
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.
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:
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.
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.
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.