Bottom Line Up Front:
-$7M Net Worth in early 50s with two kids, one with Autism.
-Is my Autistic son likely to qualify as an "insurable interest," allowing him to receive my reduced Federal pension?
-Comments to my below plan to fairly and reasonably distribute our bequest?
Ages: Early Fifties
Total Invested Assets: $6.7M
Tax-Deferred Investments: $2.1M, 40/60 AA
Taxable Investments: $3.9M, 100/0 AA
Roth Investments: $0.7M, 100/00 AA
529 Plans for two children (not counted above): $0.5M total, 100/00 AA. We plan to cover any college expenses not covered by this amount.
Home: Worth about $0.5M, paid off
His Pension: About $60K (before Survivorship reduction) at his Min Retirement Age, in roughly 5 years, with COLA lite adjustment.
Her Pension: About $60K in roughly 5 years, no inflation adjustment.
Current Annual Salaries and Bonuses: $340K
Current Annual Savings: $130K
Current Annual Expenses: $210K Biggest single expense is Federal Income Taxes at ~$60K. Will decrease substantially when our wages go down in retirement, depending on size of planned Roth conversions.
Expected Annual Expenses in Retirement: Who knows? We plan to downsize our house, but move (and likely rent) in a VHCOL area. Income Taxes should go way down. Health care costs will increase. Will travel much more. Commuting expenses will go way down. Hopefully, our household will only have 2 people, but it might stay at 3 given our Special Needs child. More on that below.
Planned Withdrawal Rate in Early Retirement: Ain't got a plan. Obviously, given our investments need to last for many decades, I want to keep it low. I'm sure we can keep it well below 3% without trying. If we're running a tad hot, will course correct.
Medical: Plan to simply stay on Federal Employee Health Benefits.
Social Security: Eligible
Life Insurance: Just about None. We had a decent nest egg before having kids. We also have a supportive family. So, we choose to invest the money that would have gone to premiums. Conventional Wisdom often recommends funding the Special Needs trust with Life Insurance, a path we didn't take. Also considering second-to-die life insurance. Did a small amount of research. Seems like a boutique policy where the premiums were a lot higher than I expected.
Planned Retirement Date: Roughly five years from now, in 2030, after reaching his federal Minimum Retirement Age (MRA) and her immediate pension eligibility. If Agency offers an "early out" prior to his MRA, will assess at that time. We could retire now, but we are at the peaks of our careers (both salary and responsibility.) We (mostly) enjoy our careers, and the full, immediate pensions if we work for 5 more years will be great. Plus, it feels "off" to retire while kids are still in the house and all of my peers are working.
Two Kids, one with Special Needs: They are tweens. My older son is neurodivergent. He has Autism Spectrum Disorder, plus a pragmatic Speech Impairment, plus a Mood Disorder. It's a combustible mix. Despite his disability, he is excelling in mainstream 7th Grade (Straight A's including 3 Honors classes.) He's unique, and some of his teachers appear to be truly amazed by him, but I think they sometimes sell him short. He excels in isolated areas, but struggles mightily in other areas; he is inflexible, has no friends, melts down over small things at school and at home, lacks interpersonal skills, and avoids chaotic environments. I fear finding and keeping employment will be very hard for him. I do not think he will interview well, and he does not enjoy working as part of groups. Some sources list the unemployment rate for Autistic College Graduates at 85%!!!! It's a startling number. I think that number is very suspect and hasn't been properly scrutinized, but I'm sure the unemployment rate is still very, very high. (https://thinkingautismguide.com/2018/02 ... te-so.html)
We are doing everything we can to help with his socialization. Therapy, sleepaway camp for children with autism, hopefully school sports, etc. His future keeps me up at night. Of course, I want to leave a legacy in case he cannot support himself in adulthood.
Question #1: As a federal employee, I have the option to leave my pension to an "insurable interest." Knowing my son would always have a decent income would really give me peace-of-mind. Of course, there's a large reduction in the pension. My son is roughly 40 years younger than me. "If the person named is 30 or more years younger than the retiree, the reduction is 40 percent." Given our large age difference is larger than the maximum specified, it seems that I can benefit from a bit of arbitrage. In order to be actuarially neutral, the reduction would be even larger. (On the other hand, I'm pretty healthy, so this arbitrage might not be worth much. I could simply invest the difference in my federal pension and leave that to my son.) However, I'm not sure my son will qualify. I am required to submit affidavits specifying "the extent to which the person named is dependent on you" and "the reasons why the person named might reasonably expect to derive financial benefit from your continued life." How stringent is the OPM review of "insurable interest?" Given he is excelling in school, is he likely to qualify, or is this option usually approved for more severe disabilities? I asked the Autism Support Group at my office and heard crickets. Don't know who else to ask.
Question #2: I lose sleep about how to leave a legacy for our children. We have a Family Trust and Special Needs Trust set up, but it's getting long in the tooth and I want to give updated guidance to the Trustee, my sister. I never thought we would accrue this much wealth. I don't want my children to be stereotypical "trust fund" kids. However, given the sickening unemployment rates for Autistic college graduates, I want enough so that my son can live comfortably even if he can't find employment. Ideally, I want the assets to be split up between Charity and my two children, one third each. If my older son is eligible for my federal pension, I would calculate the Net Present Value of that pension and add it to our Net Worth before the trustee divides it up.
What do you think of this plan?:
I also have a mind to create some sort of Trust (perhaps just a multi-generational 529 plan) to provide funds for Education for other relatives (e.g. eventual Grandchildren and their first cousins.)
My older sister will act as trustee. She is an empty nester in her mid-50's. She has a law degree, retired, and is responsible with her finances. I don't have a good plan for a trustee for when she passes. Hopefully, that's a long way off.
Of course, we will discuss a complicated case like this with our attorney, but I like to have a good skeleton or framework in mind.
-$7M Net Worth in early 50s with two kids, one with Autism.
-Is my Autistic son likely to qualify as an "insurable interest," allowing him to receive my reduced Federal pension?
-Comments to my below plan to fairly and reasonably distribute our bequest?
Ages: Early Fifties
Total Invested Assets: $6.7M
Tax-Deferred Investments: $2.1M, 40/60 AA
Taxable Investments: $3.9M, 100/0 AA
Roth Investments: $0.7M, 100/00 AA
529 Plans for two children (not counted above): $0.5M total, 100/00 AA. We plan to cover any college expenses not covered by this amount.
Home: Worth about $0.5M, paid off
His Pension: About $60K (before Survivorship reduction) at his Min Retirement Age, in roughly 5 years, with COLA lite adjustment.
Her Pension: About $60K in roughly 5 years, no inflation adjustment.
Current Annual Salaries and Bonuses: $340K
Current Annual Savings: $130K
Current Annual Expenses: $210K Biggest single expense is Federal Income Taxes at ~$60K. Will decrease substantially when our wages go down in retirement, depending on size of planned Roth conversions.
Expected Annual Expenses in Retirement: Who knows? We plan to downsize our house, but move (and likely rent) in a VHCOL area. Income Taxes should go way down. Health care costs will increase. Will travel much more. Commuting expenses will go way down. Hopefully, our household will only have 2 people, but it might stay at 3 given our Special Needs child. More on that below.
Planned Withdrawal Rate in Early Retirement: Ain't got a plan. Obviously, given our investments need to last for many decades, I want to keep it low. I'm sure we can keep it well below 3% without trying. If we're running a tad hot, will course correct.
Medical: Plan to simply stay on Federal Employee Health Benefits.
Social Security: Eligible
Life Insurance: Just about None. We had a decent nest egg before having kids. We also have a supportive family. So, we choose to invest the money that would have gone to premiums. Conventional Wisdom often recommends funding the Special Needs trust with Life Insurance, a path we didn't take. Also considering second-to-die life insurance. Did a small amount of research. Seems like a boutique policy where the premiums were a lot higher than I expected.
Planned Retirement Date: Roughly five years from now, in 2030, after reaching his federal Minimum Retirement Age (MRA) and her immediate pension eligibility. If Agency offers an "early out" prior to his MRA, will assess at that time. We could retire now, but we are at the peaks of our careers (both salary and responsibility.) We (mostly) enjoy our careers, and the full, immediate pensions if we work for 5 more years will be great. Plus, it feels "off" to retire while kids are still in the house and all of my peers are working.
Two Kids, one with Special Needs: They are tweens. My older son is neurodivergent. He has Autism Spectrum Disorder, plus a pragmatic Speech Impairment, plus a Mood Disorder. It's a combustible mix. Despite his disability, he is excelling in mainstream 7th Grade (Straight A's including 3 Honors classes.) He's unique, and some of his teachers appear to be truly amazed by him, but I think they sometimes sell him short. He excels in isolated areas, but struggles mightily in other areas; he is inflexible, has no friends, melts down over small things at school and at home, lacks interpersonal skills, and avoids chaotic environments. I fear finding and keeping employment will be very hard for him. I do not think he will interview well, and he does not enjoy working as part of groups. Some sources list the unemployment rate for Autistic College Graduates at 85%!!!! It's a startling number. I think that number is very suspect and hasn't been properly scrutinized, but I'm sure the unemployment rate is still very, very high. (https://thinkingautismguide.com/2018/02 ... te-so.html)
We are doing everything we can to help with his socialization. Therapy, sleepaway camp for children with autism, hopefully school sports, etc. His future keeps me up at night. Of course, I want to leave a legacy in case he cannot support himself in adulthood.
Question #1: As a federal employee, I have the option to leave my pension to an "insurable interest." Knowing my son would always have a decent income would really give me peace-of-mind. Of course, there's a large reduction in the pension. My son is roughly 40 years younger than me. "If the person named is 30 or more years younger than the retiree, the reduction is 40 percent." Given our large age difference is larger than the maximum specified, it seems that I can benefit from a bit of arbitrage. In order to be actuarially neutral, the reduction would be even larger. (On the other hand, I'm pretty healthy, so this arbitrage might not be worth much. I could simply invest the difference in my federal pension and leave that to my son.) However, I'm not sure my son will qualify. I am required to submit affidavits specifying "the extent to which the person named is dependent on you" and "the reasons why the person named might reasonably expect to derive financial benefit from your continued life." How stringent is the OPM review of "insurable interest?" Given he is excelling in school, is he likely to qualify, or is this option usually approved for more severe disabilities? I asked the Autism Support Group at my office and heard crickets. Don't know who else to ask.
Question #2: I lose sleep about how to leave a legacy for our children. We have a Family Trust and Special Needs Trust set up, but it's getting long in the tooth and I want to give updated guidance to the Trustee, my sister. I never thought we would accrue this much wealth. I don't want my children to be stereotypical "trust fund" kids. However, given the sickening unemployment rates for Autistic college graduates, I want enough so that my son can live comfortably even if he can't find employment. Ideally, I want the assets to be split up between Charity and my two children, one third each. If my older son is eligible for my federal pension, I would calculate the Net Present Value of that pension and add it to our Net Worth before the trustee divides it up.
What do you think of this plan?:
- One Third of Bequest - Goes to Charity
- One Third of Bequest - Goes to younger son, to be distributed in chunks when he reaches 35 years (one third of his portion), 40 years old (one half of remainder of his portion), and 45 years old (full remainder of his portion), with earlier distributions allowed to cover graduate school, home purchase, or expenses associated with raising a family (e.g. private school, day care, nanny, etc.)
- One Third of Bequest - Goes to Older Child with Autism, immediately receiving reduced federal pension upon my passing. The reduced amount should be about $38K per year in 2024 dollars. Assuming he's able to manage it, the rest of his portion of the bequest will be distributed per same guidelines as above: Three chunks at ages 35, 40 and 45 years old.
I also have a mind to create some sort of Trust (perhaps just a multi-generational 529 plan) to provide funds for Education for other relatives (e.g. eventual Grandchildren and their first cousins.)
My older sister will act as trustee. She is an empty nester in her mid-50's. She has a law degree, retired, and is responsible with her finances. I don't have a good plan for a trustee for when she passes. Hopefully, that's a long way off.
Of course, we will discuss a complicated case like this with our attorney, but I like to have a good skeleton or framework in mind.
Statistics: Posted by Pickles_Ice_Cream — Fri Sep 20, 2024 11:25 am — Replies 5 — Views 610