I now know of many families which are coping with retirement planning needs for their differentially able children. It is a huge challenge for sure.

Imagine a 65 year old man with a 64 year old wife and a 38 year old child who is unable to earn a living, unable to do his own banking, and obviously cannot run his house. How does a parent provide for his RETIREMENT? The financial planning challenges for parents of special-needs children are very difficult and  complex. One of the challenges for these parents is planning for their own retirement, and balancing that with the long-term needs of a disabled child, who IS VERY LIKELY to outlive them.

It is a big challenge. Talk to the parents and they cannot go beyond school, college, some vocational courses – but nothing prepares them for a real long innings on their own. In the above case there is a chance that the child can live for say 20 years after the death of his parents.

Key challenges, include creating a plan for the family member’s care, projecting cash flow needs well into the future, appointing friends as caretakers, enrolling the siblings – and hope that the siblings outlive the challenged person, and making decisions about investment allocations for assets dedicated to the family member. And of course create a huge, huge corpus that will provide for food, shelter and care till the person dies – and that could be at 90!

What are the main problems:

1. Parents – for whatever reason – refuse to push a challenged child! In this case the son is capable of doing banking, investing, etc. but he has grown to be pampered and that means he does NOTHING.
2. Sympathy in the young age leads to more pity and parents REFUSING to teach these kids anything.
3. Even if they are taught, they are rarely pushed.
4. Parents live in denial – and are not willing to come up with a written plan. I have given a written plan to a friend, and he refuses to ask his wife and son to participate in filling up the form.
5. Parents fool themselves into believing that one day with rehab their kid will turn out to be fine…
6. Parents are fooling themselves into believing that somebody will take responsibility…just like that..!!

Families with special-needs children also should take a more conservative approach to asset allocation, with a higher level of cash than usual. You want growth and a nice, diversified portfolio, but there needs to be enough cash there that if the market falls and stays down for an inordinately long time, you need resources to meet immediate needs, and time for the portfolio to recover.

Buy adequate term insurance for the caretaker, and for the parent themselves – and leave clear instructions about how the money should be used to fund an annuity. An annuity without ROP may not be the greatest product, but in a situation where the child/adult cannot take financial decisions, an annuity is an awesome product.

Once you have made the plan share it with your other children, your siblings, and other extended family. Make sure that the CA, lawyer are also involved and do consider creating a trust and appointing trustees.

I can tell you one thing – it is not easy – but postponing it can only make it harder.