I come from an immigrant family, and my parents are nowhere near ready for retirement. BUT my dad is really stressed from work and wants to quit. I'm afraid that it is really affecting his mental and physical health, although he is too proud to admit that he's struggling.
- Dad: turns 68 this year, working (makes about $80k a year)
- Mom: turns 67 this year, not working
- If my dad retires at 68, they should get about $3700 a month from social security
My dad also has a 401k account that is currently about $140k. (I know, it's not enough.)
(My mom also has a Roth IRA, a brokerage account, and some savings. All in all, I think they'll have enough income to get by. I will probably have to start helping them financially at some point.. anyway, that's not the point of this post.)
My dad is thinking about putting this into an annuity because he likes the idea of a consistent amount he will get for life. He saw it on some ad somewhere and my parents met with the agent/broker person (?).
I had not heard of annuities before but I did some research and it seems like a good option for people who are not really good with money and don't want to take the risk of leaving their money in the market. I think my dad is starting to get nervous because his 401k was at about 150k earlier this month and the value went down to 140k. I tried to tell him that these things are volatile and it's best to wait it out. I explained that an annuity does not account for inflation.. and they're looking at the deferred annuity so he would have to work 2 more years! I suggested the immediate annuity and he thinks the amount is too low.
I'm just so confused why he doesn't withdraw the same amount from his 401k every month. It's not even that much.
He also had so much misinformation about 401k's.
- He said once he quits his job, he will have to take out all his money from the 401k and close it. I told him, no.. there won't be any more contributions but he can keep the account open to grow.
- He said that he has to take out all his money from the 401k at age 73. I said, no.. he has to start taking out money (RMD) by age 73.
We both started getting frustrated so we hung up.
I would appreciate any advice/tips from experts. Thank you.
Posted by ech114
1 Comment
What are their monthly expenses? If house is paid off, $3.7k from SS should be more than enough for them to live on. Maybe not in luxury, but certainly comfortably.
They should also consider delaying taking SS until they get to 70, to maximize the benefit, especially if they are in good health. They are so close, so they can probably live off of mom’s savings and dad’s 401k for the intervening years. The SS website should have a calculator that will tell your dad what his benefit will be at 68 vs 70.
Financial conversations can be tough, especially among family. It is good that you are taking on the responsibility to educate your parents. It is important to keep your patience and always approach this from a learning mindset. You can provide information, but let your parents make their own decisions. If there is a choice, you can explain the consequences of both options, but let them make the actual choice instead of telling them what to do (even if one of the options is obviously dumb).