If your kids won’t help, take these financial steps

By Malcolm Berko

Published: October 19, 2008

Dear Mr. Berko: I am a 76-years-young woman and, over the last 15 years, have given nearly $600,000 to my children who needed this money at various times in their lives. Now I too need more money. My current income of $26,000 a year comes from three sources: an independent retirement account and an individual account, both at Dean Witter, that together total $275,000 and pay me $16,000 a year; and Social Security, which pays $10,000 annually. I have a condominium that’s easily worth $270,000 but has a $90,000 mortgage.

I’ve been taking money from my principal for years but I can’t afford to keep drawing it down — especially in this market. I will also need a new car soon. I did come into a bit of good luck in that my ex-son-in-law is paying off an $184,000 loan I made to him 9 years ago. So I need to put that money to work. My broker says the best he can get me is 6.5 percent because he is afraid to take more risks.

Well, I need a minimum of $48,000 a year and 6.5 percent of $184,000 only adds $12,000 to my current $26,000 annual income, leaving me short $10,000. And that’s cutting it close. My three children are in no position to help (I’ve hinted) and I’m very uncomfortable asking them for money.

Please Mr. Berko, do you have any suggestions to help me get more money from my investments? I need your answer as soon as possible.

F.T., Syracuse, N.Y.

Dear F.T.: If your children had the audacity to ask for financial help some years back then you shouldn’t feel uncomfortable seeking financial help from them when you need it today. However, I suspect that they won’t respond with the same sense of obligation and concern with which you did. And if they do offer assistance, it may be given grudgingly. Still, I’d call them and in no uncertain terms demand that they help you and be strong about it.

Many readers are telling me that their children don’t share the values their parents had and are too concerned with today and themselves. However, you seem to have a pretty good ex-son-in-law who if he was still married to your daughter might not have repaid that loan.

But I have a solution for you that will give you a guaranteed income of $63,000 a year and allow you to put $50,000 in a bank account, some of which you can use to buy a car. The following is a brief discussion of how to do it.

Sell your Dean Witter personal account worth $185,000. Purchase a single premium immediate annuity from Metropolitan Life Insurance Co., which will guarantee you a 10.5 percent return on that money for as long as you live.

Take $50,000 from the $184,000 your ex-son-in-law returned to you and put it in a money market fund and invest the remaining $134,000 in that Metropolitan Single Premium Immediate Annuity.

After you’ve liquidated your IRA and given that money to Met Life you will have $409,000 at 10.5 percent, which will pay you a guaranteed $43,000 a year.

Then call Wells Fargo and tell them you want a reverse annuity mortgage. When they refinance your condo, the equity should provide you with at least $10,000 in yearly income.

So $43,000 from the Met Life single premium immediate annuity plus $10,000 from a reverse annuity mortgage gives you $53,000 in annual income. Add the $10,000 you get from Social Security and your spendable income will be $63,000.

There are some good tax benefits also. The income from your reverse annuity mortgage is 100 percent tax-free and less than 25 percent of the income from your Met Life immediate annuity is taxable.

Now, when you pass, die, turn toes-up, start pushing daisies or whatever, you need to know that the kids won’t get a centime from the Met Life annuity. Whatever remains belongs to them. Not the most appealing alternative, but you must be mindful that right now the most important person in the world is you — not the kids.

However, the equity remaining in the condo will revert to your children. If you live a long time, and I hope you do, it won’t be much. Meanwhile, you’ve got 63 big ones to spend and — WOW! — you can live again.

As an aside, I must tell you that I have a different view of parents than most kids. When I became a teenager I realized that the day on which I was born was really my mother’s birthday.

And until the day she died, 28 years later, I always sent her a dozen roses with a birthday card.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at malber@comcast.net.

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