How to Plan For Retirement When You Have Kids With Special Needs

Angela Colley — It’s Complicated

Dear It’s Complicated: My life has changed a lot in the last few years. I’ve gotten a few promotions at work. I’m making decent money now, and I’ve started to save for my retirement through the 401(k)- plan offered at my company. I also got married and we had a daughter. I have many working years ahead of me, but I want to start seriously planning for the future.

I’d like to know I’m working toward a financially secure future for my whole family, but my daughter has special needs. Although she’s already capable and amazing at such a young age, she’ll likely have to live with us for the rest of her life. I want to make sure she’s taken care of financially after I’m gone, but I’m not sure where to start.


First of all, you’re a fantastic parent to plan so far ahead. I know you’re going to do a great job ensuring you provide for your daughter for years to come.

Planning for retirement when you have kids with special needs is definitely more complicated. You’re really planning for two retirements: one for you (and your partner) to cover medical costs and living expenses after you’ve quit working, and one to cover the needs of your child’s lifetime after you’re gone. That’s the bad news. The good news: You can do this, you’re already making headway, and there are resources you can rely on to help with your daughter’s costs.

Keep doing what you’re doing

You’re already saving for retirement through a 401(k). That’s awesome. If you can, you should continue to contribute up to your company’s match or more. Individuals can sock away up to $19,000 in a 401(k) for 2019 with a max of $56,000 total employer plus employee contributions. Because your 401(k) is taken out of your paycheck pretax, it is a great way to beef up your savings while lowering your tax burden.

Speaking of savings, keep plugging away on that emergency fund, too. Many experts recommend having six months saved in the emergency fund, but you may need to save more with your circumstances.

Both of these savings options are worthwhile starting points for your own retirement, but they likely won’t cover everything your child may need as an adult.

Federal programs

As you know, medical costs for your daughter are exponentially more expensive than what most parents have to deal with. For example, in a study published in 2008, the Centers for Disease Control found medical costs were 12 to 13 times higher for children 0 to 4 years old with Down syndrome than their neurotypical peers.

Your daughter may qualify for federal programs such as Supplemental Security Income (SSI) or Medicaid to help with both medical and living costs into adulthood but take care in managing those programs. To remain eligible, your daughter will need to keep her earned income and assets low.

“Unfortunately, SSI and Medicaid require people to be impoverished,” says Rob Wrubel, a certified financial planner with Cascade Investment Group, Inc., author of “Financial Freedom for Special Needs Families,” and a father to a daughter with Down syndrome. “People cannot receive benefits if they have countable resources of more than $2,000 [typically]—money in investment, retirement accounts, savings accounts, or other assets held for investment.”

State programs vary, and there may be programs that allow your daughter to have a higher income, but in general, to stay eligible, she’ll have keep her earned income fairly low. Though there are exceptions, “parents need to make sure they don’t allow money to accumulate,” says Wrubel. “If an adult child works, they need to monitor bank accounts to keep the account level below $2,000.”

Special needs trusts

Special needs trusts can help set your daughter up financially long after you’re gone. Wrubel recommends a special needs trust as an integral part of financial planning.

You can allocate a wide range of assets to this trust, like investment accounts, term insurance, real estate holdings, and business interests, Wrubel says. When a parent passes away, the designated assets are used to fund the trust.

You can start saving for this trust now. “We do have families saving to fund a trust in the future. One way to do this is to set up a new investment account in the parents’ names,” Wrubel says. “The family knows where this money will go and they might even use a TOD (transfer of death) on the account, but the person with a disability has no legal right in the account.” The money is paid out by a trustee and thus is not counted among the person’s assets because the beneficiary isn’t in control of it.

This trust continues to evolve as you gain financial assets, so it’s wise not to go at it alone. Wrubel recommends working with professionals to help you set up and manage it.

ABLE accounts

Relatively new to the scene, ABLE accounts are a financial vehicle for families that have members with special needs. “For the first time, families can save for the future in a tax-free vehicle, similar to a 529 plan or Roth individual retirement account. For some people, it is a major step toward learning financial independence, as the person with a disability can control the account and access more than $2,000,” says Wrubel.

These accounts can help bolster your child’s future financial security, but there are some drawbacks. ABLE accounts more than $100,000 can cause your child to lose SSI benefits, Wrubel says, though she will retain Medicaid. To retain those benefits, many parents opt to use ABLE as part of their overall financial plan but not as their only savings vehicle.

Because your daughter can control the account, this might put her at higher risk in other ways as well. “Some people with developmental disabilities are at risk of people taking advantage of them, and funds in the ABLE account could be lost in that case,” says Wrubel.

Getting help

Navigating these programs and setting up a complete financial plan for your whole family is tough. Working with a qualified financial professional can help ensure you’re funding both your and your daughter’s future, while allowing her to still take advantage of programs like SSI and Medicaid. Wrubel recommends looking for a fee-based adviser, preferably one with a certified financial planner (CFP) designation, who has experience serving families with special needs.

“Families with special-needs members live with additional time constraints, stress and costs. They have to advocate in schools, in employment environments and for social time,” Wrubel says. “They often have higher medical, therapeutic and living costs than typical families, which makes it harder to save for the future.” Having someone in your corner who understands and helps manage all those stressors can be a game changer.

Finally, don’t forget to cut yourself some slack, relax, and spend time enjoying your family. As a father of a daughter with special needs herself, Wrubel says he understands the struggle you’re facing and has learned the importance of stepping back to enjoy the ride.

“There are different stages, and I’ve learned to grow and adapt as these stages unfold. My life is better, fuller and far more interesting with my daughter in my life than I ever could have imagined. Every so often, I have to remember to take a break from just being busy and appreciate where the journey has taken me and to look forward to where it is headed,” he says.