Planning for Retirement with a Special Needs Adult Child

Preparing for retirement can be difficult for everyone. It can often be stressful as well. Coming up with a plan that allows you to take care of your own needs when you’re no longer working requires a lot of strategy, thinking, and effort. However, this process can be even more complex if you are the parent of an adult child with special needs. 

Retirement looks very different in this situation. Most people who retire look forward to living their lives on their terms. This often means a slower life or one that’s now entirely focused on what they want. However, when your adult child has special needs, it’s often not possible to think that way. 

Understanding your Situation

The first aspect of retiring when you have a special needs child is that you will probably have more time in retirement than you did when you work working. This can be a strong positive. You’ll have the opportunity to do more with your child and provide hands-on help in a way that may not have been possible when you were working. 

This can be very rewarding and it’s a very strong benefit of retirement. However, it can also be difficult.

It’s important to care for yourself as well. Yes, this can be an excellent way to do more with your child, but don’t feel like now everything has to fall on your shoulders because you’re no longer working. Help exists out there and you should continue to use the help that is available. It’s also important to remember that things will change as you age. When you are no longer to provide the same level of care yourself (such as if you have your own health difficulties and can’t help with tasks, or if you’re no longer able to drive them as needed), how will you handle it? It’s important to plan for this future so that it doesn’t surprise you or stress you out. 

The process can be difficult and mentally and emotionally taxing, but taking the time to think about your needs, the needs of your child, and how these needs may change in the future can help you plan for the best possible care. 

Preparing Financially

These days, saving for retirement is difficult for many people. However, these difficulties are increased when you have a child with special needs. Not only will you likely need to save additional money, but there’s a good chance that your existing budget has already been strained even before you get to retirement.

Increased medical costs, paying for specialized diets, travel expenses, and other costs can certainly add up. There’s also the fact that many people alter or sacrifice part of their career to help care for their children. This may mean not taking a promotion so that you won’t have to work more hours, for example, or not leaving your job and moving to a different state because you’re concerned about changes in benefits. There’s also the fact that many people who have disabled adult children choose jobs that see them work from home (at least part of the time) or, in some cases, one parent in the couple will leave the workforce to provide care.

This makes it harder to save for retirement. However, being realistic about your situation and determining what you’ll need to spend can help you. It’s also important to remember that there are financial resources out there that you may be able to tap into. 

Financial Options

For instance, your adult child may be able to draw auxiliary Social Security benefits when you retire, based on your work record. This is only applicable if they are unmarried and have a qualified disability that began before the age of 22. These benefits are known as Disabled Adult Child benefits (DAC). They can generally receive up to 50% of your full retirement benefit.

You can add your adult child when you apply for your own Social Security benefits. Taking your retirement benefits early (such as at 62) reduces your benefit, but it doesn’t reduce your child’s benefit. 

There are also Achieving a Better Life Experience (ABLE) accounts. These are tax-advantaged accounts that can be used to save for qualifying disability-related expenses. They grow tax free and can be withdrawn tax-free if used for qualifying expenses such as housing, personal support services, education, transportation, or assistive technology. The account owner can either be the individual with the disability or the parent, guardian, or other authorized individual. ABLE accounts are exempt from the Supplemental Security Income (SSI) resource limits. 

There are other federal and state benefits that may apply to you, your child, or you situation. Spending some time investigating these options can help you find the right ones that will help offset some of the costs associated with caring for a child with special needs.

Making Other Preparations

Another aspect to think about is your child’s future beyond you. Yes, it is obviously something that you might not want to consider, but it is also reality. The more you plan for the situation, the better off you will leave your child. 

One of the best ways to do this is through a Special Needs Trust. This allows you to leave money to your children without jeopardizing their ability to collect SSI or Medicaid benefits. 

A special needs trust can help cover their financial needs that aren’t met by other benefits or assistance payments. The person who creates the trust must designate a trustee to manage and control the trust. The trustee doesn’t just hand the money to your child after you die, but they disburse it as needed. The trustee will have total discretion over the trust and be responsible for spending the money on your child’s behalf. Therefore, it’s important to choose someone who trust and who will have your child’s best interests in mind.  

Creating a trust is an excellent way to help cover caretaker expenses, transportation costs, or medical expenses that aren’t covered by other plans. However, because there are many complexities involved with setting one up, it’s a good idea to talk with a financial advisor. This will help you understand the rules, requirements, and regulations around the trust as well as help you determine which type of trust is right for you. 

You will also want to make sure that here are plans in place for legal Guardianship or Power of Attorney, if you wish to make medical and financial decisions for them. If you currently handle these responsibilities yourself, you will need to have a plan in place for what happens after you die. Power of Attorney agreements expire upon your death. Naming a successor guardian is necessary in this case. You can do this through your legal will or though state-specific guardianship forms. The special needs trust will allow for the trustee to handle their finances, as long as it is created with that in mind.

By carefully planning your retirement as well as what happens afterwards, you can help ensure that your adult child is cared for when you retire and beyond.