A few weeks ago, I was asked to write a few paragraphs on a topic relevant to families who have members with disabilities. Surprisingly, I found it more difficult than I expected. Not because I had little to say, or because I believed I wasn’t prepared to be the expert in the room. But because so many topics are relevant to the times we live in and the time of year.
We have recovered from the holidays. Tax season and spring are almost here. With them comes Easter, graduations, then summer jobs, and scrambling to find care while we go to work and count the days until school begins again. Before we know it, we will be planning the holiday seasons again while we feel as though we barely had time to get anything done. We tumble in to bed believing there must be a thousand events, and occasions we missed – drowned out by the thundering by of our very busy days.
Financial advice for families with individuals who have special needs is complicated and attempting to assemble the best strategy for the current economic environment can be a daunting task. Who has time to keep up with changes in tax laws, public benefit options, healthcare costs? And how in the world will you ever have enough money to retire? The good news is that there are solutions to all of these as long as you know the rules and understand the current guidelines. The bad news is there are as many solutions as there are families, disabilities, and locations. Each requires a different set of strategies to achieve goals because each family’s resources and responsibilities are different.
Subjects such as; taxation, estate documents, coordinating income with benefits, re-positioning assets to achieve efficiency and greater flexibility, and creating the ability to care for others long after most families are ever expected to do so seem to fall behind the daily decisions about spending on care, mortgage payments and notices concerning rising property taxes. A few topics are more immediately important than others, but all of them will fall into one of two groups; those we can control, and those we must respond to. We must respond to tax changes, inflation rates, economic conditions and the costs of care.
Changes in Federal Tax Law are beyond our control. I expect taxes will go up in an effort to solve a portion of the growing national debt which now sits well into the trillions. In addition, Texas legislators have recently announced that they will remain unable to meet standard requirements affording students free and appropriate educations for all because of funding shortfalls. While the changes in taxation that went into effect last year may have some discernible effect this year, the loss of a child’s education may have a longer lasting effect.
Inflation is a factor of time and economics and will have one of the greatest effects on your ability to plan successfully. We cannot control it, so we have to respond. Neither is it a steady or uniform figure. Housing prices have tripled since the 1990s – far outpacing wage increases. A very small apartment in most big cities (nationally) averages $3000 per month.
We can control savings rates, accumulation, our ability to continue to provide for our family, and the positioning of assets, with more certainty. A family’s ability to save is driven by two factors; income and expenses. Lifestyle choices, medical expenses, geography and work will all affect the outcome.
Asset accumulation is different for every family. Still, most families ask, ‘How much money will I need to save to care for my disabled child?’ The answer is always, “As much as you can manage, after you’ve provided for yourself.” Since there is no way to care for another if you also need care, this seemingly selfish standpoint is important to adopt.
Your ability to earn a paycheck is the most critical pieces of any strategy because all plans require an income stream to fund them. Take every measure possible to protect the income you have. Invest in your health so that you are able to continue to work. Protect your paycheck with an Individual Disability Income Insurance product – but only if it makes sense to you and your life. Do not be fooled by employer plans. They often fall far short should you become disabled (which is a 1 in 4 possibility). And protect your ability to sustain a disabling accident or illness by being a good saver. Six months of accumulated gross income is the rule.
Finally, only you can decide what to do with the money you earn. It matters far less where you put your money than how you place it. No single account can ever be a strategy on its own. If something happens beyond your control that affects the value of that account, your entire plan is ruined. However, the combination of a brokerage account, a Special Needs Trust, a Life Insurance portfolio, an ABLE account, and an exempted accumulation account, can create a solid strategy to fund a lifetime of support and care.
The simple truth is; there is no rubber stamp-able solution, no green pathway on the ground headed by an arrow that leads (without mis-steps) toward guaranteed wealth. Still, very rarely is there never a solution to the issues a family must prepare for. Sometimes, goals are unachievable. However, vast improvement is still possible. Anxiety is prevalent at the beginning because families don’t know what they don’t know. So here is my best and most relevant advice: Begin where you are. You don’t have to know the solutions to begin. Just begin – where you are.
Families can become better off with small changes in positioning, a bit of education, and the benefit of time. I have seen so many families wait until they are forced to make decisions and it rarely ends well. The more time we have, the more options that will be open to you, and your family will have as solutions which allows less dependence on a single strategy and instead enables multiple strategies to share in the responsibility of supporting your family. This is true for almost every family. But for families of the disabled, it’s absolutely critical. Stop feeling as though you need to have all the answers before you can go talk with an advisor. You don’t. That’s the advisors job and if yours isn’t fulfilling that obligation, find a new one. A truly talented financial advisor will have the answers to the questions that keep you up at night.