Planning for Retirement When Your Kids Have Special Needs

Planning for retirement is a must for any age group — whether you’re 20 or 50. From retirement income planning to long-term care insurance, there is no shortage of topics to consider as you look ahead to your future. Of course, if you are a parent, you also must juggle planning for retirement with saving for your children’s future. This becomes even more true when you have a child with special needs, since your child may be financially dependent on you for far longer. If your child has special needs, planning sooner rather than later will help provide you with financial confidence and hopefully reduce some stress.

Because kids with special needs often require long-term financial support, establishing a retirement strategy early on is paramount in order to fulfill both your needs and theirs. While parents with special needs children assume heightened responsibility when it comes to securing their children’s future and overall well-being, there are ways to reduce the burden and effectively plan ahead without losing your sanity in the process.

The Numbers Behind Intellectual Disabilities

As parents of special needs children know, the costs of raising and supporting a special needs child are far from minimal. For instance, according to Autism Speaks, a U.S. autism advocacy organization that sponsors autism research and conducts awareness and outreach activities, there is almost a $1 million dollar difference in financially supporting someone with autism versus supporting those who do not have an intellectual disability.¹

Most people would assume medical costs triumph other fees associated with caring for a person with special needs, but that is surprisingly not the case — “non-medical costs account for the greatest proportion of expenses;” these costs include education, daycare and residential living.¹ While childhood brings a lot of costs, the study found that you’ll be spending most of your money during their adult years — paying for residential care, as well as their daily essentials if they’re unable to secure a job.¹

Step #1: Early Intervention

If you’re a parent with a special needs child, then chances are, you’ve heard about early childhood intervention (ECI). Simply put, these programs provide families with the support and resources necessary to maximize their children’s first three to six years of life. ECI programs are a great opportunity to get ahead of your child’s special needs and obtain education along the way on how to best handle their physical and/or intellectual disabilities. No matter what, you’ll have a support system there to guide you as you navigate their childhood challenges.

ECI services include therapy and parental training. In regards to costs, ECI program fees vary depending on which state you live in and the scope of services your child needs. Some states, like Texas, use a sliding scale system,² making ECI programs more accessible to those who have multiple children to support. You may be referred to an ECI program by your doctor, or you may simply want to explore your options on your own. Even if you’re on a budget, ECI programs are an invaluable resource when caring for a special needs child. Considering the value ECI programs can bring, it’s worth at least seeing what options are available to you. 

Step #2: Federal Benefits

Especially for low- and middle-income families, there are many federal and state benefits out there that can help alleviate the stress and financial burden of caring for a special needs child. One option worth exploring is Supplemental Security Income (SSI). For those who qualify as low-income and meet the SSI disability standard, you could be eligible to receive a monthly payment, in addition to supplemental financial support. 

If your child qualifies for SSI, they may very well qualify for Medicaid as well. From healthcare costs to in-home medical equipment, Medicaid can help pay for a variety of expenses, as well as provide access to a range of community-based services. 

For children who are younger than 19-years-old, there is The Children’s Health Insurance Program (CHIP). This is a great option for people who can’t afford private medical services, but who may earn too much to qualify for Medicaid. When researching CHIP, it’s important to note that the name of the program varies depending on which state you reside in. 

Step #3: Special Needs Trusts

Lastly, there are first-party and third-party special needs trusts (SNTs). These trusts differ from normal trusts in that they are funded by the beneficiary’s assets. This is because you do not want your child to disqualify from federal and state benefits caused by receiving more than the maximum monthly limit. By distributing these funds into an SNT, they will be able to continue to receive these benefits and payments.

The biggest difference between the two types of first-party SNTs is who establishes and manages the trust. Established by a parent, grandparent or the court, first-party stand-alone trusts involve hiring an attorney who then must get the trust approved by the court. If you choose a pooled SNT, your child can manage it themselves (along with other parties) as long as they are capable enough. These types of trusts are created and managed by nonprofit organizations. 

As a final option, there are third-party SNTs. According to the Special Needs Alliance, the most important distinction between third-party SNTs and first-party SNTs revolves around the property once the beneficiary of the trust passes.³ In regards to third-party SNTs, once the beneficiary dies, this trust does not have to use the leftover assets to pay back the state(s) for the beneficiary’s Medicaid benefits.³ This can make third-party SNTs appealing to people who desire full control of the remaining assets after their offspring passes.

Take It One Step at a Time

As the parent of a special needs child, it can be overwhelming to think about your retirement and the implications related to your special needs child’s future. However, by taking it step-by-step, you can lessen the weight by focusing on just a couple of items at a time instead of worrying about everything from start to finish.

If you’re someone who recently welcomed a special needs child into this world — or even if your special needs child is no longer a child — there are plenty of resources available to you. Online research, as well as forums, can help guide you as you navigate the retirement planning process. And if you’re overwhelmed by options and aren’t quite sure where to start, professionals are ready to help you as you determine the best next steps for you and your child.

If you have any questions, please don't hesitate to reach out!

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