The financial planning challenges for parents of special needs children are myriad and complex–and retirement planning presents one of the toughest challenges. The core challenge is balancing the financial needs of retirement with long-term needs of a child with a disability–needs that usually outlive the parents.
“If we aren’t asking the right questions, we’re going to miss an important part of the retirement plan for these families,” says Mary Anne Ehlert, a certified financial planner based in Lincolnshire, Illinois.
When Ehlert left behind a career in corporate finance and launched her own financial planning firm in 1989, she focused on serving families with special needs from the start.
“People thought I was crazy, because they thought people with disabilities have no money,” she recalls. “But in reality, youre working with families–and we made the decision from day one to work with all families–rich or poor.”
But she also had personal reasons for specializing in families with special needs–she has lived through the challenge herself. Ehlert has a sister who was born with cerebral palsy and a son who is blind and has a mental illness. Both of her parents developed disabilities later in life. Today more than half of her clients have a special-needs family member. Ehlert also founded Protected Tomorrows, an organization that provides planning resources to families with special-needs members, and to other financial planners.
The need is growing. One in every five Americans has a disability, and 20 million families have at least one family member who has a disability, according to the National Disability Institute.
The costs can be very high. For example, the lifetime cost of caring for a person with autism ranges from $1.4 million to $2.4 million, according to Autism Speaks, an advocacy and research group. Lifetime costs are similar for people affected by spina bifida, cerebral palsy, and severe mental impairment.
Government benefit programs provide some assistance. The qualification rules vary depending on when a disability is incurred–one set of rules apply for people disabled as children (before age 22), another set of rules for those disabled at older ages.
Ehlert sketches out the following nuts and bolts areas as key topics for consideration and action:
The care plan. This includes the safety of the child, of course, but also aspects of life fulfillment, including work, learning, and play.
Projected cash flow needs. This depends on the type of disability, capability of the individual needing care, and the level of care required. Ehlert finds that the question often is neglected.
Investment allocations. Families with special-needs children also should take a more conservative approach to how they allocate their retirement portfolios, Ehlert says, with a higher level of cash than usual.
“You still want growth and a nice, diversified portfolio, but there needs to be enough cash there that if the market plunges, there are resources to meet immediate needs, and for the portfolio to recover.”
Government benefits. This includes possible Social Security, Medicare and Medicaid benefits that may be available to the child.
Asset and income rules. Families need to understand–and navigate properly–an array of government rules government the limits on assets and income that a person with disabilities may have before jeopardizing government benefits.
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