Parent Retirement Triage
Hey everyone! I (24M) had a conversation with my parents about their financial situation this past weekend where they expressed wanting my suggestions for investment and retirement planning. Their financial situation is frankly quite desperate. They are 52 and 49, with both still in good health. They have around 15k in retirement accounts (I know, it’s bad) with 158k left on a 7.99% mortgage. This mortgage is not their primary residence, but is not able to be sold for at least a year for a number of reasons. They have no debt other than this mortgage, but 3 very old (15 yr plus) cars that will eventually need replacing. My dad is active duty military under the legacy retirement system. As far as I understand this means if he retires at 20 years of service he will receive a roughly 50 pct pension for life, and if he makes it to 30 years (which would require an age waiver for him, so no guarantees) he will receive a 75 pct pension. Before taxes, their gross income is $186,450 a year. They have about 60k in cash that can be immediately deployed to various tasks.
Here are my questions:
Is the mortgage high interest debt? They definitely need to at least refinance, but I think they should either consider selling or plan to retire in that home once paid off. How much should they pay extra on the mortgage vs saving? It will not be paid off any time soon (~25 years) with only standard payments.
How much should they be saving? My gut says as much as absolutely possible with their income. I am trying to find a way to encourage this kind of extreme saving without making them too disheartened/scared to even start.
As far as allocation goes, what should their bond to equity ratio be? At their age I’d want to naturally be a little more conservative but they obviously desperately need growth. In my mind my dad’s pension should act like the “bonds” in their portfolio and they should stay mostly in equities. Am I off base here?
There needs to be some sort of sinking fund for a modest used car. How much of a priority is this compared to the mortgage and retirement savings? I don’t think 20/3/8 needs to be an option for them but I could be off here.
My parents have an unrealistic view of retirement relative to their financial situation. How do I break the news to them that this vision of retirement is not reality without making them too discouraged to make the extreme sacrifices they need to make for the next 15+ years?
Thank you all so much for the help!