Mom's retirement plan = investment for me?

[ElaineMonster]

My mom wants to retire soon. She has a few options. One option is to reduce her monthly income by about $500 per month in order to leave a benefit for me and my sister. The benefit would be half her current monthly benefit for the rest of our lives. I'm wondering if it's worthwhile. She's tempted to do it but I'm not sure it's the best idea. What do you think?

[AvivaSimplex]

So she'd lose $500 per month for the rest of her life, and you'd get half her monthly benefit, starting when she dies, for the rest of you and your sister's lives?

How much is her monthly benefit? Can she afford to live on $500 less? Can you afford to pay her $500/month to replace the lost income?

[ElaineMonster]

Yes, yes, my sister and I would share half her benefit.

Yes, she can easily afford to live on $500 less per month and doesn't even want compensation. I think she's being a tad unrealistic and that inflation will catch up with her, particularly since she's pretty darn healthy. But, yes, we could afford to make up the difference if she needed it.

I am mostly worried about a major expense that she won't be able to afford and/or the possibility that the evil government will steal the money for the war, etc. and it simply won't be there for my sister and I. (My mom works for the government, so her retirement plan is already being sucked dry by the Terminator. It shouldn't affect her so long as she cashes in now, but her younger colleagues are screwed.)

[Sniper]

Elaine,

Have you run the EV math?

option you describe vs. her keep getting the $500 and giving it to you to invest

Would the accumulated $500/month (-taxes?) investment over her expected life throw off more income than $500/month?

[ElaineMonster]

Yeah, but I'm not sure I did all the math correctly. Ed is checking it as we speak... er... write.

It certainly seems like the better option is for her to take a smaller benefit now and pass it along to us. I'm just not so sure this is a no-brainer. Otherwise, why would it exist?

[Sniper]

Oops.. Its getting late and Im not paying close enough attention... the scenario is $500 less for 1/2 her monthly benefit later (not $500/month)...

Can you disclose her monthly benefit?

... and roughly how old is your mom? (I assume she's in good health now too)

[Thremp]

I'm almost positive inflation is gonna eat you up. Run it with a rate of inflation at 3% and see what the real puchasing power is gonna become when you actually start to see the money.

I'm almost positive your first payments will be around $150 or less of real puchasing power by the time you get the cash.

Better idea: Have her take the 500 a month and allocate 250 each month to your and your sister's index fund.

[ElaineMonster]

OK OK, numbers...

Option 1 - she gets $4600/month till she dies
Option 2 - she gets $4100/month till she dies; I get $1000/month till I die; my sis gets $1000/mo. till I die

She's 61. She's in pretty good health. She has no major, life-threatening health problems. (She has arthritis and an ulcer or two). Both her parents lived into their 80s even while smoking and drinking.

[ElaineMonster]

[ QUOTE ]
Better idea: Have her take the 500 a month and allocate 250 each month to your and your sister's index fund.

[/ QUOTE ]

Well, that's what I was thinking. But then I ran some numbers and it seems like the other option is better.

[Sniper]

No Brainer.. Go with option 2!


OK.. this was a really stupid response!!! My Bad.