My Parents Have a $100K Mortgage and Are Struggling to Live on $2,400 a Month. What Can They Do?

There’s a reason I always tell people to save for retirement, and then save some more. After working hard for a lifetime, it’s a lousy thing to end up cash-strapped when you’re older.

But it’s especially important to avoid a situation where you’re retiring on Social Security alone. If you do, you risk winding up miserable once you stop working.

In this Reddit post, a user writes in that they’re worried about their parents. They’re limited to a monthly income of $2,400 from Social Security, and they still owe $100,000 on their mortgage.

The poster’s father is disabled and therefore cannot work. The mother brings in a small amount of cash with babysitting, but it’s not much.

Their mortgage costs them $1,500 a month, which eats up the bulk of their income. It’s not sustainable to stay in their home, but the poster’s parents don’t know where to go.

Clearly, this is not a great situation. But it may not be quite as dire as the poster thinks.

It’s a matter of cashing out home equity

Many seniors enter retirement having little or no savings. But the one thing that often saves people in that boat is the equity they have in their homes.

Here, the poster is estimating the value of the parents’ home at $500,000. When we subtract the $100,000 they owe on their mortgage, they’re looking at $400,000 in equity.

This doesn’t mean selling the home will yield them $400,000. There are real estate agent fees to think about, plus other expenses associated with selling.

But all told, it may be possible for them to walk away with a nice sum of money after selling the home. From there, they could look to buy a less expensive home or rent a place to live.

Renting isn’t such a terrible choice because the parents are already paying a mortgage each month. If they can find a rental that’s affordable, they’ll have the rest of their home sale proceeds to tap as income.

It may also be possible for the poster’s parents to move to a different part of the country that’s cheaper on a whole. That could help them stretch their Social Security income further.

Don’t end up in a similar situation

It’s unfortunate that the parents in this post are in the position they’re in. But if you want your retirement to look very different, the key is to save consistently.

Let’s imagine you’re entitled to $2,400 a month in Social Security, too, only you have a $900,000 nest egg you’ve accumulated. At a 4% withdrawal rate, which experts tend to recommend, you’re looking at a $3,000 monthly income from savings on top of your Social Security. That paints a much brighter picture.

It’s also important to be careful with refinancing your home, as it could lead to a situation where your mortgage isn’t paid off in time for retirement. That’s not always a terrible thing. But it definitely helps to have one less expense to worry about once you’re no longer working.

If you want help saving and investing for retirement, and making smart money-related choices along the way, it’s a good idea to consult a financial advisor. They can give you customized guidance so you’re more likely to end up comfortable in retirement instead of barely getting by like the parents in the post above.

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