Understanding the Three Parts of Financial Planning
What happens to a three-legged stool when one leg is wobbly? Well, you sure can’t rely on that stool to hold you up! A solid platform needs three sturdy legs to function well.
Creating a well-constructed financial plan is like that three-legged stool, says Connor Kavanaugh. Kavanaugh is a financial planner who specializes in helping people with disabilities. His firm, Palladio Consulting LLC, designs financial roadmaps for families with special needs. They help navigate government benefit programs, set up the appropriate type of savings accounts, and assist with other legal matters, like special needs trusts.
Financial planning is an important topic for transition students and their families for several reasons. Most of our students have recently turned 18, which means they are now legal adults who have a voice in their own affairs. These young adults are busy figuring out what life will look like after they graduate from the transition program—and financial security is part of that puzzle. At the same time, their parents and families want to know their child’s needs will be supported for decades to come. To make this happen, Kavanaugh goes back to the three-legged stool analogy.
The first leg of the financial planning stool: Defining a vision
Transition programs focus on planning for the future: What kind of job would I like? How will I get around? Should I continue my education? Will I live with my family or in a different kind of housing? The one common theme in these questions is that finances are part of the answer.
“Every family situation is different, and every person has a unique set of goals and needs. The first step is having that conversation to define the goals, then figuring out how to make it happen,” said Kavanaugh. That might mean taking stock of their own resources and reaching out to experts and organizations to assist them.
As they work through this conversation, families can find helpful insights at SpecialNeedsAnswers.com. Information on this site comes from the Academy of Special Needs Planners, a group of legal experts and financial planners, including Palladio Consulting. They offer a Q & A section and downloadable guides.
The second leg: Understanding government benefits
Many children with disabilities receive Supplemental Security Income (SSI) payments, but the process changes when they reach age 18. The Social Security Administration uses a different set of information for setting the benefits that adults with disabilities receive—and the parents’ income and assets are no longer part of the equation. SSI payments are need based, and adjusted according to a person’s income.
Kavanaugh recommends that all transition students apply for SSI at age 18. “At 18, transition students are just starting out, so they don’t have a large income or own a lot of assets. SSI payments make a real difference,” he explained.
SSI has another benefit: enrollment in Medicaid. Even students who receive little to no money from their SSI can receive healthcare coverage. Medicaid pays for more than doctor appointments—many support services and adaptive technologies are covered.
SSI can be confused with SSDI, which stands for Social Security Disability Insurance. SSDI is also a cash benefit program, but the payment amounts are tied to a social security account. Children and teens with disabilities can be eligible if their parents are retired and receiving social security checks. More details on SSDI are available on SSA.gov or through a financial planner.
And finally, the third leg of the financial planning stool: Saving for life enrichment
Government benefits can cover basic needs like rent, food, and doctor visits. But a rich, full life involves more than the basics, and living with a disability often has extra costs for services and equipment beyond what Medicaid covers. How can families help their adult children save money towards their goals, without lowering their SSI payments?
One of the tools that financial planners use is an ABLE account. ABLE stands for Achieving a Better Life, and that is exactly the intent of the program. Like a traditional savings account, the ABLE account is a place to set aside money to save for important purchases that improve the quality of life for a person with a disability. Anyone can contribute, up to a total of $15,000 annually, and the account does not impact SSI eligibility. A financial planner can help with setting up an account, and more details can be found through the ABLE National Resource Center.
Photo courtesy of Ben Weber on Unsplash