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Financial Planning for Special Needs Families

October 2, 2019 2:10 pm Published by Leave your thoughts

Ask any parent what their number one priority is and they'll all have the same answer. Our children—their health, happiness and well-being—come before anything else. It makes sense that much of our financial planning is centered on giving them the best life we can.

Raising kids isn't cheap, but many families also face additional costs they perhaps never anticipated. More and more children are being diagnosed with emotional challenges that require a significant amount of time, energy and resources to manage. For many parents, it's a full-time job that has very real financial implications.

Lifetime care for someone with autism affected by an intellectual disability comes in at $2.3 million. Similarly, raising a child with attention-deficit/hyperactivity disorder (ADHD) is five times more expensive than raising a child without the diagnosis.

Numbers like these will likely make you flinch, but we help families continue to grow their wealth in the face of all kinds of challenges. All it takes is a little preparation, forethought and expert guidance. If you're raising children with emotional challenges, you certainly aren't alone. Shoring up your finances begins with understanding the financial reality.

The Cost of Therapy and Medication

Every condition, and child, is different. Some of the most common pediatric mental health disorders include ADHD, anxiety and behavior disorders. Autism spectrum disorders make up another large piece of the pie, affecting one in every 59 children in the U.S.

Interventions vary from child to child. The first step is having your child evaluated, which costs some families anywhere between $700 to $2,000. The kicker is that insurance doesn't always foot the bill. if you aren't sure where to begin, your pediatrician is a great starting point for resources and referrals. From there, check with your insurance company to see what's included in your coverage.

Different types of therapies may be part of your child's routine, from speech and play therapy to occupational and physical therapy. Again, insurance plans are unique in terms of what they'll cover. Some services are provided free of charge within the public school system, but some children benefit from more frequent visits, which parents have to pay for out of pocket.

You may be able to get some financial relief when it comes time to file your taxes. Qualifying medical expenses that exceed 10 percent of your income are tax deductible. This includes insurance premiums, therapeutic swimming and more.

The Potential Loss of Income

Your child's health care costs don't paint the whole picture. For many families, one parent is forced to either scale back at work or leave the workforce altogether in order to care for children with emotional challenges. One study found that mothers who have an autistic child, on average, earn 56 percent less income. This loss of cash flow can change your family's financial dynamic, but that doesn't mean you can't adjust and adapt.

Any trusted advisor can tell you that financial planning changes as we move through different stages of life. The earlier you can sit down together to make a plan, the better. Beyond your monthly cash flow, how will a change in your work life affect your retirement contributions? And, most importantly, how can you tweak your financial strategy to accommodate your new income level?

Planning for Your Child's Future

We all know that parenting doesn't end when your child turns 18. Our love for them lasts a lifetime. Children with special needs often require additional supports well into adulthood. Will your child need long-term care as an adult? Or any other long-lasting supports or resources?  This is a long-term savings goal that isn't unlike preparing for retirement—the earlier you begin, the better. And no matter what, it's never too late to start planning.

While none of us can fully predict what the future holds, we can certainly take life's challenges and use them to shape our financial planning. At JJ Burns & Company, we work side by side with families to understand their unique expenses, then customize a wealth management plan that's designed to help them thrive and grow; no matter what life throws their way.

“There’s Talk of Recession. Why Don’t We Get Out Now and Go to Cash?”

September 16, 2019 10:18 am Published by Leave your thoughts

We hear the noise. All the chatter from the doom and gloom media, predicting a coming recession. And naturally, investors become a little rattled and wonder if they should be making any moves now, ahead of a potential market pullback.

Well, we’re here to clarify a few things about what’s really happening in the economy now, and to offer our advice on how an experienced investor should react accordingly.

Let’s Review the Facts About a Recession

A recession is a macro-economic term that refers to a significant decline in general economic activity in a designated region. It is typically confirmed after two consecutive quarters of economic decline, as reflected by GDP numbers, in conjunction with other monthly indicators like employment.

Recessions are frequently characterized by a rash of business failures and often bank failures, slow or negative growth in production, and elevated unemployment.

NONE of those conditions exist in our present economy!

Currently, the U.S. Leading Economic Indicators Index is still positive. Inflation is low, unemployment is low, and jobless claims are not excessively high or rising rapidly.

In our region, we are amazed at the number of help wanted signs posted in local businesses that most likely are not included in official statistics.

Furthermore, recessions are notoriously difficult to predict. So-called pundits in the media often rely on indicators that have long lead times; some up to a TWO YEAR lead.

If nervous investors decide to leave the market based on those kinds of nebulous indicators and predictions, that’s a long time to be out of what could be a potentially profitable market. Especially based on something that might not even occur! Plus, missing out on positive days in the market can have a serious effect on long-term capital growth. Take a close look at the graph below:

To sum up, we are not currently in a recession and there are no leading economic indicators that suggest that one is lurking around the corner.

“The Headlines Say Things are Bad. Why Am I Still in the Market?”

Markets are ALWAYS turbulent. Markets often have daily volatility but it is generally manageable. The market has a reaction, digests the information and moves on.

There is never a perfect time to invest.  Many investors believe they can flawlessly time their deployment of capital at the very bottom of a severe bear market. Two issues pertaining to that strategy are:

  1. Nobody—NOBODY—knows when the bottom of a bear market occurs.
  2. Investors let the fear instinct take over during a decline, preferring to sell stocks rather than buy them. Remember, the adage is “Buy low, sell high,” not the other way around.

Negative headlines play to EMOTIONS. We often make reference to the “Four Horsemen of the Investing Apocalypse,” which are:

  • FEAR
  • GREED
  • HOPE
  • IGNORANCE

None of these emotional or mental states involve any kind of rational assessment of prevailing market or economic conditions. Investors who fall prey to The Horsemen are allowing other market participants to make decisions for them about their own finances and portfolios.

The financial media is not an advisor, and is not interested in helping investors. The media is interested in promoting fear and confusion—unleashing The Four Horsemen—and having folks tune in to watch commercials for financial products that claim to help.

There is NO one-size-fits-all portfolio or plan. We customize every plan and portfolio, and we thoroughly know our clients, so that we can effectively make changes to either as necessary.

A talking head on TV doesn’t and can’t.

“If a Recession Occurs, How Will My Portfolio Be Handled?”

Good question. We get asked this all the time. But let’s note a few things before we specifically answer the question.

First, timing the market is almost impossible. But for those who try, there are costs attached. And attempting to time the market could hurt you more than you think.

During what are perceived to be volatile times in the market, investors always focus on the fear instinct to sell, but never focus on the greed instinct of when to re-enter the market. As a result, investors can be their own worst enemy—selling at times of greatest panic, and then potentially missing out on subsequent gains.

The capacity to stay the course, to remain in the market over the long haul, and to take advantage of buying opportunities during a down cycle, is an essential KEY to capital accumulation and meeting long-term plans and goals.

It’s impractical to try to maneuver through market turbulence, trying to guess about short-term events and still maintain a long-term perspective. Portfolios and asset allocations can always be changed to reflect life’s circumstances.

However, constantly trying to time the market makes setting an allocation and sticking with it much more difficult, due to the many factors that influence a plan and a portfolio.

So how will we handle your portfolio? First, here’s what we won’t do. We won’t time your portfolio out of stocks into cash, and then put it back into stocks. This is impossible to do successfully, and many of our clients have long-term goals and financial plans that will not be met with market-guessing trading.

Here’s what we will do. In conjunction with your goals and financial plan, we will establish a long-term investment portfolio and set your asset allocation accordingly.

From time to time, we may adjust the allocation based on your individual circumstances, but it will be a strategic change to your mix of bonds, stocks and cash. We will not try to time trades among asset classes.

Regardless of your ultimate allocation, we will periodically rebalance your portfolio to make sure your asset mix is aligned with your goals. For example, this may entail selling bonds to buy equities, if the stock market suffers a decline during a protracted period such as 2008-09, or like the tech stock sell-off during the early 2000s.

If cash is a requirement for you in the near-term future, we recommend assessing the amount of cash you’ll need and then setting aside the funds from your current allocation. Raising cash during a pullback is not the best solution to meet cash needs.

Let’s Have a Sunny Day Discussion

At JJ Burns & Company, we always recommend to our clients to have a “Sunny Day” discussion with us about economic issues, well before the markets get bumpy and fear kicks in.

It’s the optimal time to examine your personal, long-range goals and plans, and to discuss how your portfolio is designed to achieve them. It’s much better to have a calm and sensible discussion then, as opposed to when the market appears to be in turmoil.

We are long-term optimists about capitalism and markets. We think if an investor is too, then there’s never a truly bad time to be in the market.