Planning for retirement is complicated, no matter what your situation. But if you have a severely disabled child for whom adulthood wont necessarily mean financial independence, its even more complex.
If your child will never be completely independent, you need to plan for not only your own retirement, but for your child during your retirement years and after. Your best bet is to consult with an experienced financial planner who can give you advice specific to your situation. But here are a few general tips for preparing for retirement when you have a disabled child.
1. Understand disability benefits. Perhaps the most important piece of this puzzle to understand is Social Security disability benefits. If your child is found to be legally disabled by the Social Security Administration, he or she may qualify for some benefits, which could last for the remainder of your childs life. As an adult, your disabled child can still receive benefits while working, so long as his or her income doesnt exceed that years substantial earnings limit. For 2015, that limit is $1,090 per month. This allows adult disabled children to contribute to society, while also receiving the financial stability that disability benefits can help provide.
Sometimes disabled children will qualify for additional Social Security retirement benefits based on your work record or your spouses. Qualified children in your family can receive up to half of your full retirement benefit amount, though there is a limit to the amount that can be paid to the family as a whole. If you have multiple children with disabilities, you will need to pay close attention to the family limit. Also consider how your retirement age will affect your childs potential income from your retirement benefits. This is something to talk over with a qualified financial planner.
2. Consider additional costs. Many online retirement savings calculators assume that you will live on a fraction of your current income in retirement. For example, they might estimate that you could live on 80 percent of your current salary in retirement, adjusted for inflation. For many retirees, its possible to restrict expenses after you leave your job, especially if youll have all your major debts paid off by the time you retire. But when you have a disabled child at home, your retirement costs might not decline. Be sure to take into account any additional expenses you will incur during retirement.
3. Consider life insurance options. Many parents choose affordableterm life insurance policies to provide benefits for family members in the event of their death. However, when you have a disabled child, permanent life insurance may be a better option. You can maintain permanent life insurance throughout your career and into your retirement years without fear of premiums rising exponentially as you age. Whole life insurance can be one way to ensure that your child is provided for after you and your spouse pass away. However, you need to be absolutely sure that your retirement income is enough to cover the insurance premiums. Missing premium payments can result in the cancellation of your policy and the loss of benefits.
4. Look into trusts. You can often put your property into a trust, even while youre still working and using the property. This can help protect your disabled child from legal issues if you should pass away unexpectedly. Leaving your home, car and other property in a trust for your child can give you assurance that your child will be amply provided for upon your death. A trust doesnt affect your retirement planning directly, but knowing that your child will have access to all of your assets upon your death can ease the burden of saving more cash for your childs benefit.
5. Dont neglect your will. As you work through the retirement planning process, make sure your will stays up to date. Its easy to neglect updating your will when you change caregivers. But always be sure that you have an appropriate caregiver and trustee in place for your child at all times.
When planning for retirement with a disabled child, you will have to consider some additional issues. Its particularly important to figure out how your retirement age will affect your childs potential draw from Social Security. Understanding these issues and talking them over with a financial planner can help you to enjoy a comfortable retirement while still providing for your child.
Rob Berger is the founder of the personal finance blog the Dough Roller.