Retired but worried for our special-needs kids after us
Throwaway account for privacy.
Looking for constructive feedback on our situation below. What should we be doing to improve our chances of family financial success. What are we not thinking about? Concerned that we don’t know what we don’t know. Pls help us identify our blind spots. 🙏
60 yr old couple. VHCOL area. Retired three years ago. Planning horizon to 95 years.
We have two kids (now adults) who live with us, who have some special needs that will likely curtail their ability to work and earn enough, so need to ensure sufficient savings and some cash flow to help them now and sustain them after we are gone. Have a trust in place, and it has a Special Needs Trust provision for one child (who gets Medicare, etc due to disability) upon our passing. The other child/adult does not want to even try to apply for benefits (it is a sensitive subject, perhaps due to his self-view).
Expected Annual Living Expenses (before taxes) $360K. Includes $120K to help the children.
So assuming taxes for federal and CA state, we would need about 500K per year (assuming passive income, tax paid monies only in hand , including cost basis). .
Financial snapshot
Financial Assets (invested index vs equities vs cash approx 60:30:10)
1) IRA Accounts (pretax): $2.4M
2) ROTH account (no tax): 230K
3) Brokerage (taxable gains): $5M (cost basis is $2M)
4) Bank (aftertax $s): 600K
So, assume invested sum overall is $8M
Real estate assets: Keeping them out of this analysis at this time. Hopefully will not need to liquidate and can leave for the kids.
Income expectations to meet $500K/yr spend:
- Deferred compensation over next 5 years = 200K/year (until 65)
- Rental income $150K per year ongoing
- SS apply at 70: total for us about $80K/yr
My analysis by age stage for 500K/yr spend
- 61-65: Income 350K/ yr. Withdraw 150K/year
- 66-70: income 150K/year. Withdraw 350K/yr
- 70 onwards: income 230k/yr. Withdraw 270K/yr
Assuming invested $8M
Withdrawal rate is
61-65 : 1.875%
66-70: 4.375%
70+ ongoing: 3.375%
While this will substantially draw down the financial assets for my kids after we are gone, but the rental income pipeline and real estate should give them a reasonable base after we are gone.
What should we be doing to improve our chances of family financial success; especially assets left after we are gone and the two kids have another 30-40 years after us? What are we not thinking about?
Concerned that we don’t know what we don’t know.
Thank you for your constructive feedback. 🙏