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Pricey Penny: My Dad Says I Owe Him $400/Month When He Retires. Is This Truthful?


Pricey Penny,

Inside the final 12 months as I’ve discovered extra about funds, I’ve realized that I grew up in a financially illiterate household, and so did my husband. Each of us grew up with poor however frugal mother and father, and our frugality has helped us handle up to now. 

Now we have a bank card, however we pay it off each month. We have paid off our two used automobiles, and we pinched pennies to repay our college loans earlier than our two children had been born. We purchased our first home in June 2020 and have a month-to-month cost of about $1,600, so the one debt we now have is that mortgage. I’m a stay-at-home dad or mum and my husband’s wage is $70,000 earlier than taxes, insurance coverage, and so forth., is taken out. We presently have about $13,600 between our checking and financial savings accounts, and my husband has a 401(ok) via his employer with a 50% match, which we use.

However here is the rub: After I was in school, a few of my monetary support fell via. I needed to face the truth that I could not afford to return after that summer time. I used to be distraught as a result of I used to be younger and dumb and will solely take into consideration lacking my mates and boyfriend (now husband). 

I do not keep in mind the way it acquired smoothed over, however it did. I used to be allowed to return. Once more, I used to be younger and dumb and did not give it one other thought.

A lot later, I discovered my father took loans in his title to pay for what my monetary support did not cowl. He paid off these loans along with his and my mother’s retirement financial savings. I did not understand this till it was already finished. 

Now they’re speaking about retiring within the subsequent few years. (The date retains shifting, however presently they’re speaking about 2025 on the ages of 69 and 68.) They’re missionaries dwelling abroad and plan to maneuver to the U.S. to the identical state my brother and I stay in.

As a result of they presently have about $6,000 complete to their title (no debt, however no different financial savings), my brother — who’s financially higher off than I — purchased a condominium this 12 months and is renting it out till my mother and father retire. My understanding is that he and his spouse needed to juggle issues to make this work. However they determined this actual property funding would assist fund their very own retirement sometime, not simply present a spot for our mother and father to stay.

My father now needs me to assist pay for his and my mother’s retirement since he helped pay for my school. The loans totaled $39,769, however he needed to pay curiosity. At first he wished us to pay again $45,000 break up into month-to-month funds of $400 from the month they retire till the $45,000 is paid again after about 10 years or they each move away, whichever comes first. 

Now he is saying due to inflation, he needs us to cowl “about three days a month of our retirement dwelling prices — no matter inflated greenback determine that occurs to be — for the primary 15 years of our retirement, or till dying. Whichever comes first.” That’s a quote from his e mail to me. He acquired that determine by taking their present month-to-month earnings, averaging 21 work days a month, and dividing it by the $400 a month, which is 3.3 days of their present earnings.

We’ve plateaued at our present financial savings stage since shopping for our home final 12 months. I understand we now have a couple of years to organize for paying $400 or no matter it is going to be a month, however I am at a loss for what to do or the place to begin. I am additionally nervous that we aren’t saving sufficient for our personal retirement. What if we find yourself with no choices like my mother and father and harm our personal kids’s funds sooner or later? 

I have been making an attempt to find out about bonds, Roth IRAs, and so forth. I am so overwhelmed by how little I perceive. 

This is not authorized debt, however I nonetheless owe my mother and father. They will not be capable of stay in retirement with out my paying them again. My brother has already finished a lot by making ready housing and a used automobile for them. I am unable to ask him for extra. Plus, it is my fault my mother and father do not have retirement financial savings, not my brother’s.

Are you able to please assist me determine what our subsequent steps needs to be? Will we rent a monetary planner to offer us customized steerage? Do I must learn books and take lessons to grasp the best way to handle all of this since Google outcomes are going over my head? 

I’m contemplating taking a part-time job so its complete earnings can go towards paying again my mother and father, however I do not know if that is the fitting transfer both. I am unable to work full time proper now as a result of our youngsters are elementary-age, and paying for childcare would eat up almost the entire wage.

And do not get me began on my in-laws, who stay in a special state. My father-in-law is incarcerated. My mother-in-law resides on solely Social Safety in my sister-in-law’s condo. My sister-in-law is single with two elementary-aged children and is working full time whereas making an attempt to earn a instructing diploma. We’re rich in comparison with that aspect of the household. We need to assist them too, however we really feel caught!


Pricey Overwhelmed,

It’s not your fault that your mother and father can’t afford to retire. Accountability for that rests in your mother and father’ shoulders.

The cash your dad paid for these loans will surely be useful to your mother and father. But it surely’s unlikely that $45,000 would have been sufficient to purchase a snug retirement, even when your mother and father had left it invested.

In case your dad supposed so that you can pay again the loans in your school, he ought to have mentioned that with you on the time. However I’m undecided that this was truly his intention again then. It appears like your mother and father are panicked as their retirement is approaching. Now they’re going again and making an attempt to stay you with a part of the tab, plus a nonsense inflation adjustment.

Your drawback isn’t monetary illiteracy. You and your husband are doing a nice job of managing your cash. The issue is {that a} $70,000 paycheck solely goes up to now. Your husband makes sufficient to cowl your loved ones of 4. However that’s not sufficient to pay in your mother and father’ retirement or your in-laws’ wants.

I don’t assume it is best to agree to assist out your mother and father simply but. That doesn’t imply you’re vowing to by no means assist them out. However you could focus by yourself financial savings first. Since you have got two younger kids and also you’re dependent solely in your husband’s earnings, increase a six-month emergency fund on high of retirement financial savings needs to be the first aim.

You will be trustworthy right here: Inform your mother and father that you simply’re not presently able to pay $400 a month, and also you don’t know if you’ll be in 2025. Say that you simply’re grateful for his or her sacrifices. However make it clear that you simply didn’t know they had been raiding retirement accounts to pay in your schooling.

What it is best to keep away from is giving your mother and father a full accounting of your funds. Anticipate every bit of information you present about your earnings and obligations for use to make the case that they want your cash greater than you do. Don’t give them that leverage. “I’m not able to offer you $400 a month and I’m undecided if I will likely be 4 years from now” is ample.

Realizing that their daughter isn’t a assured supply of retirement earnings will help information their monetary choices over the subsequent few years. No matter whether or not you select to assist out afterward, don’t base this choice on the extent of assist your brother is offering. That is about what you and your loved ones are prepared and in a position to give.

Robin Hartill is a licensed monetary planner and a senior author at The Penny Hoarder. Ship your tough cash inquiries to [email protected] or chat along with her in The Penny Hoarder Community.