39-year-old Rachel Nagler has been working part-time since she was 22, but her father says she will never be financially independent. She is legally blind with her seizure disorder and mild cognitive impairment as a result of her birth trauma.
For her parents, Sam and Debra Nagler of Concord, Massachusetts, retirement plans had to focus not just on Rachel’s future, but on their own.
“Her ability to earn is very limited,” Nagler, 70, said. “The concern is, will this be enough for her for the rest of her life?”
His wife, who is 68 years old, has been her primary caregiver since her birth.
“Nobody knows Rachel. She cares for her, knows her every need, and manages everything but my wife,” Nagler said. can’t live forever, so that’s a concern.”
For parents of children with severe disabilities or special needs, the challenges of growing and maintaining wealth grow exponentially and the stakes are much higher. These parents must at the same time ensure the stability of their dependent sons and daughters until and after their death.
“I want to be 100% sure everything will be fine after we leave,” Nagler said.
Under the best of circumstances, caring for an adult child with special needs can be physically and emotionally taxing. , the question of who will live in the house, eat and drive will become an urgent issue.
However, not all parents in this situation are aware of the myriad challenges they face. “Getting them to understand that under these circumstances, they need to think differently about retirement is an important step. It’s not simple,” says a certified financial planner and special needs said Mary Anne Ehlert, founder of Protected Tomorrows, a financial planning firm that specializes in families with children.
For example, Ehlert said the portfolios of these customers need to consider multi-generational time horizons. “We may be a little more conservative, but we still need growth. We need longer growth,” she said. However, a conservative asset mix also has its drawbacks. “Being conservative doesn’t always give you the growth you need,” she said. In addition, many families choose to keep a portion of their portfolio in cash or cash-like liquid investments in case a child suddenly needs expensive equipment such as a voice assistive device. increase.
In many cases, one spouse will set aside a career or leave work altogether to provide caregiving, reducing the ability to save for retirement. These families find their budgets squeezed by many ancillary expenses. Buy supplies like adult diapers and waterproof bedding, compression tights to help with circulation, special diets, and the list goes on.
Even when individuals with disabilities are eligible for public health assistance, finding affordable and suitable housing is particularly difficult. Some need supervised care in group homes, while others need home care in housing that has been adapted to accommodate physical limitations. In both cases, waitlist time is measured in years.
As a result, many parents feel forced to keep their sons and daughters at home, said Harry Margolis, a real estate planning attorney who works with families with special needs near Boston. rice field. “Often, when everyone is older, they still live with their parents,” he said.
This can be expensive in terms of lost opportunities. To protect their children from upheaval, parents may give up the opportunity to downsize to a cheaper or more accessible home while their children are still healthy.
Most public benefits available to people with special needs and disabilities are administered at the state level through Medicaid, so parents of children with special needs may find it difficult to move to a lower cost of living state. there is. Doing so could mean that your adult child is no longer eligible for benefits and placed at the bottom of the waiting list for service in your new state.
However, some families move to states that offer more generous benefits, even if the cost of living is higher. “It’s been a real struggle for these families, especially as their parents get older,” said Debra Taylor, founder of Taylor Financial Group in Franklin Lakes, New Jersey.
high costs and low income
Douglas Rohrman and Susan Rohrman left the Chicago area five years ago, concerned about the declining health of their daughter, Liz, who suffered a traumatic brain injury shortly before she turned two. Physical challenges such as partial paralysis, cognitive deficits that impair her mobility and swallowing ability.
“Liz was not well cared for in Illinois, so it was time to sell the house and move everything,” said Ms. Rollman, 74. “I looked this up on Wazuo.”
The Rohrmans moved to the San Diego area because resources such as housing and day programs were more readily available. But when Covid struck, the couple felt the only way to keep her daughter safe was that she was hospitalized three times in 2019 with pneumonia, one that uprooted their lives.
It was a big adjustment, not only in terms of responsibility, but financially as well.
“When we were paying taxes, I sat there to see where my money was going. And Liz is a big part of that,” Ms. Rollman said. . Her daughter lives in the house, so tick the items she has to pay for out of pocket.
For example, difficulty swallowing means young Rohrman has to add thickeners to his water. According to her mother, this alone costs thousands of dollars a year, along with a variety of other expenses, such as stabilizing shoes that help her daughter walk. “I could come up with something like $9,000 without counting everything I buy at the grocery store or Walmart,” she said.
Mr. Rohrman, 80, had put off retiring from his law firm for several years to make ends meet, but quit when his family moved. A combination of massive increases in spending, declining incomes, and a sluggish stock market forced them to reassess their finances.
A unique challenge for single parents
These economic struggles are even more acute for single parents. “When you’re a single parent, care costs are inevitably higher,” says Taylor.
Laura Weinberg, 59, became sole caregiver for her autistic and mute son Will when her husband, a New York and New Jersey Port Authority attorney, was killed in the September 11 attacks. I was.
“I was in the strange situation of being a widow at 38 and dealing with a four-year-old who was putting herself at risk,” she said. and maintained the family home in northern New Jersey. “I was overwhelmed,” she said.
“When I started toeing in the water, the real estate plan was a mess and very expensive,” she said. “I got all kinds of misinformation.”
Weinberg said he would like to have a language aid so his son can communicate, but the cost is too high. Instead, she combined her iPad with a dedicated app to put together a solution. “It’s more modest than it used to be, but some are thousands of dollars,” she said.
Navigating the “Byzantine” system
For parents of children with special needs, retirement planning and wealth planning must go hand in hand. A special needs trust and life insurance in the name of a single parent or parents are her two of the most commonly used tools. Because many are means-tested, both must be configured to comply with complex eligibility rules for public health benefits.
Margolis said even wealthy families will have to navigate a complex landscape of government benefits, as many of the services available, including housing, are fully managed through these programs. rice field. “For SSI and Medicaid eligibility, countable assets are limited to $2,000 in most cases,” he said.
“It’s very important for individuals with disabilities to maintain their eligibility for a lot of time,” said Joellen Meckley, executive director of the Center for Special Needs at the American University of Financial Services. “I can’t tell you how many times families will nominate well-intentioned adult children with disabilities as beneficiaries. Getting that money can quickly jeopardize their ability to access the public good. “I don’t understand things,” she said, “in my parents’ wills, retirement plans, or life insurance policies.”
For this reason, it is imperative that money for persons with disabilities be held in specialized financial instruments such as special needs trusts.
Trust money can help improve the quality of life for individuals with special needs, such as cable TV, cell phones and computers, better meals, care providers, and rent and utilities. Margolis said they would not jeopardize their public interest.
There are two main categories of special needs trusts. A first party trust is set up with assets belonging to an individual. The downside is that these trusts have repayment clauses. After an individual dies, the money left in the trust reimburses the state for the cost of their care over the years.
A third-party special needs trust is set up and funded by someone else for the benefit of individuals with disabilities. said Brian Walsh, senior manager of financial planning at SoFi.
These trusts are often funded or supplemented with the parents’ life insurance income. “In many cases, life insurance can be used to create a sort of source of funding when one or both of you die,” Walsh said.
“Afterlife” life insurance is a frequently used tool. Both spouses are insured and the insurance pays out after the second spouse dies, providing a more affordable option than insuring the parents separately.
“The purpose of this policy is to pay a death benefit to meet the remaining needs of the child whenever the parents die,” Walsh said.
Funds in these trusts are generally conservatively invested, so experts say the ultimate challenge is to ensure that the trust amount provides an adequate source of income.
Getting that balance right is something California’s Rohrmans struggles with.
When Rohrman quit his job, it meant not only cutting back on household spending, but rethinking his investment strategy.
“Financially we are very conservative. We know we can’t be like we were in our 30s and 40s in terms of investment mix, spending and so on,” says Rohrman. “We think about it a lot. We don’t allow it to rule us.”