I want to retire in two years, my wife and I have saved $ 3 million, but we are worried about our son with special needs. What can we do ?


I am almost 60 years old, my wife 57 years old and I want to retire at 62 years old. Currently, I earn around $ 125,000 to $ 150,000 per year, which supports my family. My wife stopped working at age 43 to raise our child, who is now almost 18 and has moderate to severe autism. I have no debt and own three houses. I live in one, one is empty (inheritance) and one is rented. I pay a mortgage on the house I live in ($ 1,350 a months, with only 20 payments remaining), and the other two are refunded. Cumulatively, they are worth around $ 2.6 million in the market. I plan to rent the empty house but I don’t know when as it’s a bit sentimental for me as my parents lived there until they passed away not so long ago. Once rented, both rentals will earn $ 6,000 per month. Apart from the houses, I have $ 2.2 million in my 401 (k), my wife has $ 600,000, we have $ 150,000 in savings, and $ 100,000 in my brokerage account. I do not intend to apply for social security until retirement age at 66. I will apply for health insurance at 65, as will my wife and we are both healthy.

My main concern is my son, he needs full time care and will never be able to support himself or live on his own. There are resources available to her like a regional center, Medi-Cal, home support services and government funds, all of which contribute to her life away from mom and dad when we retire. I don’t want to worry about my son’s happiness and well-being in a state system, so I intended to contribute his other resources so that he could live in the best possible care and m ‘ensure to the best of my ability that he is taken care of and happy when we are not around. I plan to contribute about $ 100,000 per year in addition to the other resources mentioned above, which is almost $ 100,000 more per year. Is it enough?

I would also like to maintain or elevate my retirement lifestyle. Do you think this is feasible for our retirement and my son’s future?

Thank you,

R

See: How to plan for retirement when you have children with special needs

Dear R,

It is so wonderful to see how much you have saved for your future and that of your wife and how you are planning for your son’s future as well – well done.

You are asking really important questions, and questions that a lot of other families are asking themselves. Retirement planning and special needs planning go hand in hand, especially for parents who are concerned about the well-being of their children during and after their lives. You need to find a delicate balance between taking care of your children, but also not putting yourself at risk of missing retirement.

You and your wife have amassed a really wonderful nest egg – over $ 3 million in non-real estate assets, then the estimated $ 2.6 million between the three houses, as you said. To a lot of people, it may seem like you are ready to go on with your life and take care of your son, too. Although you have the financial means to help, think carefully about how you are going to do it.

For example, based on the assets you provide and assuming you and your spouse live to age 92, the $ 3 million you invested would be more than enough, said Eric Bond, financial advisor at Bond Wealth Management. . But where will this $ 100,000 per year come from? Most likely, this will come from your retirement accounts because your savings and brokerage accounts don’t have enough to support this withdrawal rate. “Make sure you don’t run out of savings and sacrifice your own financial security,” Bond said. You should also have an emergency account reserved for any unforeseen circumstances, especially when maintaining two rental units.

I will offer you some resources for special needs planning in a moment, but first I would like to touch on your retirement plans very quickly. You mention that you want to have a “high” lifestyle in retirement. I’m not quite sure what this means, but make sure you do this before you leave the workforce. Try to estimate what your monthly expenses will be for this new lifestyle, and then figure out where you plan to withdraw the money, Bond said. “Longevity and then the length of your retirement will also be a factor here – if your retirement lasts 20, 30 or even 40 years, do you risk depleting your savings by leading a high lifestyle in the early years of retirement.” ? “

That definitely doesn’t mean you shouldn’t splurge a bit. After you’ve both worked for so long, inside and outside the home, you should both be enjoying your retirement years – just figure out how you plan to pay for it on top of your goals. to help your son with that $ 100,000 a year.

Want more practical advice for your retirement savings journey? Read MarketWatch “Retirement Hacks” column

Be as comprehensive as possible in your budget estimates. For example: Health. Your son may be supported with the various resources you mentioned, but will you pay for private insurance until you are eligible for Medicare? It can get pretty expensive, so budget your health care expenses before you retire.

When it comes to your Social Security benefits, think carefully about when you claim them as well. You mentioned starting at your full retirement age, which is certainly better than claiming early when you can afford it, but you might even want to delay longer. The longer you wait to claim your benefits after your FRA and until age 70, the more you will receive those paychecks when the time comes. Run scenarios using your age and that of your wife, who will receive her benefits based on yours if you die before her.

One strategy is to ask your wife to start collecting her benefits from her FRA, this way your son can receive half of her amount. Then, when you’re 70, they’ll start collecting your benefit, said Alexandria Dunn, Certified Financial Planner and Wealth Advisor at Affinia Financial Group. (Children can claim up to half of a parent’s full retirement pension after age 18 if they have a disability that began before age 22, and for survivor benefits they can get up to 75% of the basic social security benefit of the deceased parent, depending on the Social security administration).

I often suggest people go to a financial planner, who can take a close look at the smallest details and financial statements and develop a plan of action based on their needs and goals. I will also offer it to you! Bringing in a professional could really pay off, as they can best determine how you can tap into your retirement savings in a meaningful, efficient and tax-efficient way.

If you go this route, look for an advisor who specializes in special needs planning, as they will be familiar with many of the rules and options available. Here are two additional resources you can check out: The Academy of Special Needs Planners and the Special Needs Alliance, said Cynthia Haddad, Certified Financial Planner, Partner and Wealth Advisor at Affinia Financial Group. These organizations can help you find counselors and lawyers. Haddad and his colleague John Nadworny recently wrote the second edition of their book “The Special Needs Planning Guide: How to Prepare for Every Stage of Your Child’s Life,” published by Brookes Publishing and due out next month.

Bond also recommends working with a family law attorney, who can help you set up a special needs trust, if that’s right for you. “A lot of people have made the mistake of designating disabled family members as beneficiaries in their wills and by leaving them with assets altogether, the disabled person may lose their eligibility for government assistance programs,” said Jump. “A special needs trust may be a good option, as it will allow you to fund expenses that may improve your son’s quality of life without compromising monthly government income or other services that may be needed. their main source of ongoing support.

This notion is crucial. You probably want to protect your son’s ability to receive benefits while also contributing for him.

Also see: The pandemic has made everything more difficult: financial strategies for people with disabilities and special needs

There are two main types of special needs trusts: one is a senior trust, which would be in your son’s name, and the second – and the most common option – is a third party trust, where n ‘ anyone can pay money for the beneficiary and when that person dies, the other beneficiaries appointed by the settlor receive the remainder. Either way, make sure that if your son is a beneficiary of one of your accounts, it’s his trust that is really designated as the beneficiary, so that he remains eligible for various benefits, Dunn said. .

Also, keep in mind what you want in terms of a goalie, now and in the future. States have different rules on this, but some allow one parent to be a guardian and the other to act as a caregiver and receive a Medicaid allowance. Check with your state if this is an option. As morbid as it sounds, think very carefully about who you want to be there for your son when you and your wife are not. Who are the key people in your life? And what roles and responsibilities can or would they assume? Talk to them about this before formalizing it, of course.

Guardianship can be quite restrictive and has had a bad reputation, especially in recent times due to Britney Spears’ 14-year-old guardianship. But in situations where the person is unable to make their own decisions, it may be the only way, Dunn said. There are limited guardianship, such as only for health care or only for financial matters, but a lawyer can help you determine what is the best solution for you, your son and your family.

It is better to make these decisions now than to let someone else make them after your success. You may even want to appoint a co-guardian, who could step in if the current guardian dies.

“Guardianship is appointed by the court,” Dunn said. “If the guardian dies, a new person must go through the entire process that the parents went through. ”

As the saying goes, and as flight attendants remind us every time we are on a plane, you have to put on your own air mask before helping someone else. This is true even in your situation. Determine how much money you’ll need in retirement, estimate your expenses in this next chapter, and get your spending under control. Then you will know where you are and how you can help your son.

“We always start with: Take care of mom and dad first,” Haddad said.

Readers: Do you have any suggestions for D? Add them in the comments below.

Do you have a question about your own retirement savings? Write to us at [email protected]

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