Rachel Nagler, 39, has worked part-time since she was 22, but she will never be financially independent, according to her father. She is legally blind with a seizure disorder and mild cognitive impairment, the result of birth trauma.
For her parents, Sam and Debra Nagler, of Concord, Massachusetts, retirement planning required them to focus on Rachel’s future as well as their own.
“She has very limited earning power,” said Sam Nagler, 70. “The concern is whether this is enough for him for the rest of his life?”
His wife, 68, has been their daughter’s primary caregiver since birth.
“No one knows Rachel, and takes care of Rachel, and knows all of Rachel’s needs, and is above anyone but my wife,” Nagler said. “It’s a worry because she’s not going to live forever.”
For parents of children with severe disabilities or special needs, the challenges of increasing and preserving their wealth are magnified exponentially, and the stakes are higher. While trying to plan for their own retirement, these parents must also ensure the stability of a son or daughter who will be dependent on them until — and even after — their death.
“We want to make 100% sure that after we leave there won’t be any problems,” Nagler said.
Caring for an adult child with special needs is physically and emotionally taxing. As these parents grow older, the question of who will house, feed, and drive their son or daughter after they can no longer settle becomes a pressing one.
“Getting them to understand that they have to think differently about retiring in this scheme of things is a key step,” Mary Anne Ehlert said, adding, “and it’s not easy.” She is a Certified Financial Planner and founder of Protected Tomorrows, a financial planning company specializing in families with special needs.
Ehlert said, for example, she needs to consider a multi-generational time horizon for these clients’ portfolios. “Conservatives don’t always give us the growth we need,” she said. Additionally, many families opt for a portion of their portfolio in cash or liquid investments in case their child suddenly needs expensive equipment.
Often, one spouse puts aside a career or leaves the workforce to provide care, which reduces their own ability to save for retirement. These families see their budgets strained by a multitude of incidental expenses: paying for gas to drive their children to therapy appointments and day programs; buying supplies such as adult diapers and waterproof bedding, compression tights to promote circulation, and specialized diets – the list goes on.
Even when the disabled person is entitled to public health assistance, it is particularly difficult to find affordable and adequate housing. Some people need supervised care in a group home, while others need home care in accommodation modified to accommodate physical limitations. In both cases, wait times are measured in years.
As a result, many parents feel they have no choice but to keep their son or daughter at home, said Harry Margolis, an estate-planning attorney near Boston who works with families in need. specials. “A lot of times they still live with their parents even when everyone else is getting older,” he said.
This can be costly in terms of lost opportunity costs. To spare their child this upheaval, parents might forego the option of moving to a cheaper or more accessible home while they are still healthy enough to do so.
Since most public benefits available to people with special needs and people with disabilities are administered at the state level through Medicaid, parents of a child with special needs might not be able to to move to a state with a lower cost of living. This could mean that the adult child would lose access to their benefits and be placed at the bottom of waiting lists for services in a new state.
Some families, however, move to states that offer more generous benefits, even if it means a higher cost of living. “It’s a real struggle for these families, especially as mom and dad get older,” said Debra Taylor, founder of Taylor Financial Group in Franklin Lakes, New Jersey. “Some are looking to move to different states because some states are more hospitable than others.”
High costs and falling revenues
Douglas and Susan Rohrman left the Chicago area five years ago, alarmed by the declining health of their daughter Liz, who suffered a traumatic brain injury just before she was 2 years old. Now 39, Liz has many physical challenges, including paralysis that impairs her mobility and ability to swallow, and cognitive impairment.
“Liz wasn’t getting much care in Illinois, so it was time to sell the house and move everything out,” said Susan Rohrman, 74. “I researched this.”
The Rohrmans moved to the San Diego area because resources such as housing and day programs were more readily available. But when COVID-19 hit, the couple felt the only way to protect their daughter – she had been hospitalized with pneumonia three times in 2019 – was to get her out of the care home they had moved her to. only a few years. earlier, the one for which they had uprooted their lives.
It was a huge adjustment in responsibilities, but also in finances.
“When we were doing our taxes, I kind of sat down to see where my money was going,” Susan Rohrman said, ticking off the items she has to pay for out of pocket now that her daughter is living at home. “And Liz is a big part of that.”
For example, swallowing difficulties force Liz to add a thickening agent to her water. That alone costs several thousand dollars a year, her mother said, and there are a host of other one-time expenses, like stabilizing shoes that help her daughter walk. “I found about $9,000, not including everything I buy at the grocery store and at Walmart,” she said.
Douglas Rohrman, 80, had put off retiring from a law firm for several years to continue earning an income, but he stopped working when the family moved. The combination of much higher expenses, lower incomes and a sluggish stock market has forced them to re-evaluate their finances.
Challenges for Single Parents
These financial difficulties are amplified for single parents. “Care is inevitably more expensive when you have a single parent,” Taylor said, because they have to rely much more on paid caregivers.
Laura Weinberg, 59, became the sole caregiver for her son Will, who is autistic and non-verbal, when her husband, a Port Authority of New York and New Jersey attorney, was killed in the 9/11 attacks. september.
“I was in the strange situation of being a widow when I was 38, dealing with a 4-year-old child who was a danger to himself,” she said. She was also a caregiver for her sick mother and maintained the family home in northern New Jersey. “I was overwhelmed,” she said.
“Estate planning was confusing and extremely expensive when I first started to dip my toe in,” she said. “I received all kinds of misinformation.”
Weinberg said she would like to have speech aid equipment for her son so he can communicate, but the cost is prohibitive. Instead, she came up with a solution with an iPad and specialized apps. “It’s more modest than it could have been, but some of it is in the thousands of dollars,” she said.
A Byzantine System
For parents of children with special needs, retirement planning and estate planning should go hand in hand. Adapted trusts and life insurance policies in the name of one or both parents are two of the most commonly used tools. Both must be structured according to the complex rules of eligibility for public health benefits, as many are means-tested.
Margolis said even wealthy families must navigate the byzantine landscape of government benefits, as many available services, including housing, are administered entirely through these programs. “In order to qualify for SSI and Medicaid, in most cases you are limited to $2,000 in bookable assets,” he said.
“For someone with a disability, it takes a long time to maintain eligibility,” said Joellen Meckley, executive director of the American College of Financial Services Center for Special Needs. “I can’t tell you how many times family members, with the best of intentions, will name a disabled adult child as a beneficiary, not understanding that getting that money could immediately jeopardize their ability to access public benefits. “, she said, referring to parents’ wills, pension plans or life insurance policies.
It is therefore imperative that the sums intended for a disabled person be held in a specialized financial instrument, such as a disability trust. Money from a trust can be used to improve the quality of life for people with special needs, such as cable TV, a cell phone or computer, better food, caregivers, rent or utilities , without compromising their public benefits, Margolis said.
There are two broad categories of special needs trusts. First party trusts are established with assets that belong to the individual. The downside is that these trusts have a repayment clause: after the person dies, any money left in the trust is used to reimburse the state for the cost of their care over the years.
Third-party special needs trusts are established and funded by someone else for the benefit of the person with a disability.
These trusts are often funded or supplemented by proceeds from the parents’ life insurance. “Often, life insurance can be used to create some sort of funding source when one or both of you pass away,” said Brian Walsh, senior director of financial planning at SoFi.
A “second-to-die” life insurance policy is a frequently used tool. Both members of a couple are covered here and the policy pays out after the death of the second spouse, providing a more affordable option than insuring the parents separately.
Since the funds in these trusts are generally invested conservatively, experts say the final challenge is to ensure that the amount of the trust will provide an adequate stream of income. Finding that right balance can be a struggle.
When Douglas Rohrman quit work, it not only meant reducing household spending, but also rethinking their investment strategy.
“We are financially very careful,” he said. “We know we can’t be like we’re in our 30s or 40s in terms of the mix of investments, expenses, etc. We think about it a lot. We don’t let it dominate us.