Concerned about aging parent's finances, need help!
My parents have been retired for a few years and I thought things were going just fine. My father retired from a high paying job, they have a beautiful paid off home, and in general live a comfortable life. On a recent visit they started expressing concern about finances, we looked at them together and...I'm concerned.
They have about $600k cash+investments, but have a burn rate of ~140k/yr. To me that says they've got 5year runway without changes. My mom will be able to start to pull social security soon, which is good, and I think they can cut that down to 100-120. A lot of this is keeping up a high maintenance house + healthcare.
They would love to stay in their existing house, so they are finally trying to rent it out for the summer tourist season next year which could net them a huge $50-$75k annual(quote from local property management company). I'm not sure a reverse mortgage/HELOC is a good move or should they just downsize(how much).
Details:
- 75(M) 63(F) in OK health, active through out the day with no red flag health concerns, however my father's age is showing with some mental decline.
- $2.1-2.4MM paid off house
- $125k Cash
- $240k IRA (not sure what its invested in yet, but almost certainly low low risk)
- $250k Annuity (not being distributed yet)
I'm super concerned about future medical & care costs. What would you advise to put them into a stable financial situation? Would you liquidate the annuity? How about putting some cash & IRA items into S&P500 to cover my Mom on a longer time horizon?
Thanks in advanced!
*EDIT* Folks were looking for more details of burn rate. After removing some capital expenditures in previous years to acquire and repair a small inherited property in their home country it looks like more stable burn rate is ~85k, but there is definitely room to reduce.
- $30k Fixed costs (health care, property taxes, etc)
- $10k Maintenance/upkeep (lots of yard work, car maintenance, and some other stuff I need to dig into)
- $20k on things I think they can trim down on(ridiculous cable/internet/phone subscription(smh), downsize to one car, overspend on groceries)
- $26k on extended vacation in home country, this one needs a talking to. Its not an expensive place and should overall bring down their costs, no idea how they manage this one.