Reader Case: Struggling to Get to FI with a Special Needs Child

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One of the best things about reader cases is learning about readers with different backgrounds and challenges, all with the same goal: to achieve FI. Today’s reader case caught my eye because the challenge this family faces isn’t just related to finances. It goes deeper than that. I picked this reader case because I know how important it is to have support when you’re taking care of family. It’s easy to feel lost when you’re the only one with this seemingly never-ending struggle. Hopefully this reader case and the resources that we will be discussing today will help those with the same struggle feel less alone.

Let’s get to it:


Dear FIRECracker and Wanderer,

Not sure if our reader case will be considered because it is a little different than the typical couple/family, but if it gets chosen we would appreciate your insight!

Our family is in a situation where we (38F and 41M) were well on our way to FIRE, but with the arrival of our special needs child (5M), that completely changed the equation. Here are our challenges:

  1. We have to budget for immense therapy costs that may last for our son’s lifetime. Although this number will fluctuate throughout the years, it is more likely to go up than down.
  2. We can not move from our current detached house because he can make a lot of noises, and I’ve heard too many stories of special needs families being forced to move from condos/townhomes due to noise complaints, so downsizing or renting is not an option.
  3. As of right now we are unsure if our son will ever become independent, so not only are we saving to FIRE ourselves, but we also want to make sure he will have a happy and FI life.
  4. Currently we are dual income making similar salaries, but we don’t know if at some point one of us might have to stay home to take care of our son, so we want to FIRE as soon as possible.

What we do have in our favour is that we have squirrelled away a large portion of income in our younger years, and we have bought our house at the right time so housing cost is reasonable (for a suburb), but it is still far from enough to FIRE with our high expenses. Here are the numbers:

Household income (after tax and RRSP deductions): $145,000/yr

Assets:

Chequing/savings: $71,000

Non-registered investments: $218,000

TFSA: $146,000 (adding $9000/yr)
RRSP: $385,000 (adding $25,000/yr)

RESP: $19,180  (adding $2520/yr, receiving $504/yr grant)

RDSP: $32,845  (adding 2400/yr, receiving $1000/yr grant)

House value: $982,000

1 paid off car in good condition (7 y/o)

Debt:

Mortgage: $200,300 (5.04% fixed for 3 year, $812 biweekly, 12 year and 42 weeks left)

Household expenses: It has been around $87000/yr since our son was born but is projected to jump to $103,000/yr starting next year once government funding for his therapy decreases. Basically, we are budgeting around $35,000/yr just for his therapy alone and there is not a lot of room to cut expenses further.

Anything leftover: income minus expenses minus registered accounts goes into non-registered accounts.

Given all of the above (assuming we stay at our house), I’m wondering if the math might show we have any chance of FIREing within a reasonable time frame? Also, we are currently throwing an extra $500 to $750/month at the mortgage on top of the biweekly payments, but should we consider pausing or even selling some investments to pay off the mortgage even faster?

Thanks for your time and keep up the great work!

SpecialFamilyof3


My first instinct after reading this reader case is to research and find out as much about government programs and assistance as I can. If there’s a way to alleviate the financial burdens, that should at least help them breathe easier on the way to FI.

We can see that they’re already using the RDSP.  For those who don’t know what this is, it stands for Registered Disability Savings Plan, which is a government program that helps you save up for the long term financial security of a person with special needs.

There are two ways the Canadian government contributes to the RDSP. The first is the Canada Disability Savings Bond (CDSB). Basically, the government will deposit up to $1000 into your RDSP account as long as your family adjusted income (FAI) is less than $30,000. SpecialFamilyof3’s household income is too high to qualify for this bond. The second is the Canada Disability Savings Grant (CDSG). The Canadian government will pay a matching grant of 300%, 200%, or 100%, depending on the beneficiary’s adjusted family net income and the amount contributed. There is a lifetime maximum of $200,000 and SpecialFamilyof3 qualifies for this grant.

SpecialFamilyof3 also mentioned that additional Canadian government services for their situation ends when the child turns 6 (which is coming up) and they’ve factored in additional costs going forward, so they’re already doing everything they can to sign up for government support. If anyone knows of additional Canadian government support programs that goes beyond the age of 6, please mention it in the comments.

So, the next step is to calculate their numbers. Normally when you have a $100K spending, there’s a lot of areas to cut, but in this special situation, a big chunk of their expense is taken up by therapy for their son, so they’re kind of stuck with this level of spending going forward (unless more government programs get created in the future).

Here’s a summary

Note that in the original email, our reader reported their income as $145k “after taxes and RRSP deductions.” In our analysis, we like to include paycheque deductions like RRSPs or 401(k) contributions as part of income since that money is going back into one of your own accounts and not to the government. So in calculating their after-tax income, we have to add the amount that they’re contributing to their RRSP back in.

SummaryAmount
Income$145,000 + $25,000 (RRSP contributions) = $170,000
Expenses$103,000
Investable Assets$872,025
Debt$200,300 (mortgage)

Given expenses of $103,000, we need an FI portfolio of $103,000 x 25 = $2,575,000. Their starting portfolio is $872,025, and they’re able to save $170,000 – $103,000 = $67,000 per year.

Here’s how long it would take them to reach FI:

YearBalanceROISavingsTotal
1$872,025.00$52,321.50$67,000.00$991,346.50
2$991,346.50$59,480.79$67,000.00$1,117,827.29
3$1,117,827.29$67,069.64$67,000.00$1,251,896.93
4$1,251,896.93$75,113.82$67,000.00$1,394,010.74
5$1,394,010.74$83,640.64$67,000.00$1,544,651.39
6$1,544,651.39$92,679.08$67,000.00$1,704,330.47
7$1,704,330.47$102,259.83$67,000.00$1,873,590.30
8$1,873,590.30$112,415.42$67,000.00$2,053,005.72
9$2,053,005.72$123,180.34$67,000.00$2,243,186.06
10$2,243,186.06$134,591.16$67,000.00$2,444,777.22
11$2,444,777.22$146,686.63$67,000.00$2,658,463.86

…11 years!

But what if they paid off their mortgage? How would that change the numbers?

Our reader has enough money just in their checking account/non-registered trading account to completely kill the mortgage now. So let’s pretend they did exactly that and see how it changes things.

If our reader were to pay off their mortgage, their starting portfolio would drop to $872,025 – $200,300 (mortgage balance) = $671,725. But the biweekly mortgage payment of $812 would disappear from their expenses, bring that number down to $103,000 – $812 x 26 = $81,888. This would increase their savings rate to $170,000 – $81,888 = $88,112.

It would also change their FI target to $88,112 x 25 = $2,202,800.

How long will it take for our reader to get there?

YearBalanceROISavingsTotal
1$671,725.00$40,303.50$88,112.00$800,140.50
2$800,140.50$48,008.43$88,112.00$936,260.93
3$936,260.93$56,175.66$88,112.00$1,080,548.59
4$1,080,548.59$64,832.92$88,112.00$1,233,493.50
5$1,233,493.50$74,009.61$88,112.00$1,395,615.11
6$1,395,615.11$83,736.91$88,112.00$1,567,464.02
7$1,567,464.02$94,047.84$88,112.00$1,749,623.86
8$1,749,623.86$104,977.43$88,112.00$1,942,713.29
9$1,942,713.29$116,562.80$88,112.00$2,147,388.09
10$2,147,388.09$128,843.29$88,112.00$2,364,343.37

A little over 9 years. So killing the mortgage would help in shaving about 1.5 years off their FI journey.

And finally, given that I’m not an expert in this subject, I reached out to my friend Dan from the FIRE community, who grew up with a brother with special needs, and he shared with me a resource he created that helps families navigate the Canadian system to get support: https://challengethechallenge.com/. He went from not having a plan and the fear of his brother becoming homeless to setting up multiple sources of government funding, a retirement account for his brother, and having more control over the future. He is one the most empathetic people I’ve ever known so if you need support or help on this journey, please reach out to him. He also wrote a very detailed breakdown of how the RDSP works here. You are not alone in your struggle.

What do you think? Do you have any ideas how this family can get to FI faster? Any suggestions for additional support?


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18 thoughts on “Reader Case: Struggling to Get to FI with a Special Needs Child”

  1. One thing to consider is that once they are FI, and no longer need to work, they could sell their house and move to a cheaper community where you can potentially get a detached house for cheaper – this might bump down the total portfolio needed, and reduce the timeline. The other day I looked at a 3 bed/2 bath/finished basement condo townhouse in South Keys, Ottawa that shared no walls with neighbours (checkerboard pattern, blacks are yards, whites are townhouses) that was $425k turn key. There would be no issues with sound in that kind of configuration. But they will need to consider the availability of medical systems in place for their son in whatever community is chosen (Ottawa is great, for the record). Additionally, 100% recommend involving a lawyer and accountant to get trusts established for his future.

    1. Good tips, JasonL. Thanks for sharing. And yes, you are right that they will need to considering availability of medical system in the new community.

  2. This family should look into Provincial supports for their special needs child. I know in Alberta there is the FSCD program (Family Supports for Children with Disabilities). As long as the child qualifies for the Disability Tax Credit (federal) then many provincial supports become available (therapies, respite care, etc.). The family should definitely investigate the Disability Tax Credit as this will save them $ on taxes, and possibly allow them to access other supports for their child.

  3. The math on the first scenario is not correct. Their savings rate is right, but their FIRE target number is not. Right around that 11 year mark, their mortgage will be paid off. Meaning they do not need $2.5M as their goal, instead their annual post-FIRE spend will be without a mortgage aka $88k/year or a $2.2M goal. They will be there in 9 years and then there will be a small balance remaining on the mortgage which can be paid off in year 10.

    I wish you all the luck with your kiddo. As for additional benefits, not sure what province you’re in, but in AB there is something called AISH

    https://www.alberta.ca/aish.aspx

    1. They stated that their mortgage has “12 year and 42 weeks left,” so almost 13 years left. It won’t have been paid off by the time they hit FIRE, so we have to consider that a continuous expense.

      1. Right, I get that it won’t be fully paid off once they reach their FIRE number but they also do not need to account for this monthly mortgage payment forever in their post-FIRE world.

        Like I mentioned above, they likely will reach their non-mortgage-included FIRE number in year 9 with a small mortgage balance remaining. Then instead of quitting right then, they work another year and their ~$88k savings rate for the additional year goes to pay off their mortgage rather than their investment portfolio. So now 10 years in, they have reached their FIRE number and have a paid off house.

        This of course could also be accomplished in other ways such as lump sum payments and/or accelerated bi-weekly payments etc. point being, in 10 years they should be good in either scenario.

        I know you’re against home ownership and that’s totally fine, just speaking as someone who FIREd as a homeowner. This is what the math looks like. You will not forever have a mortgage that you need to account for every single year in a post fire world even if the mortgage is not 100% paid off by then. For most people, their FIRE dates align pretty closely with their mortgage payoff date.

  4. It would be nice to retire around 50 yrs.

    Honest, FIRE is a bit of misnomer, when folks have side paid gigs. So the most important thing are jobs that allow them to work at home more often.

    For sure, they will have to revise their will. This is a situation one can’t say no inheritance for child for “tough” love / learning to become self-sufficient.

  5. I have a 20yo with severe autism who will never live independently. We are lower case financially independent (my husband is still working and I work part time because we feel like we need a bigger cushion for him). He was a big motivation to get our finances in order. We tried to never compromise his therapies and care, but as we connected with others in the community, we were able to save substantially. Some things we did that may or may not work for you (we live in the US):

    – got his therapies through a local university instead of through private providers
    – make the time to connect with special needs groups in your area (will help emotionally and financially)
    – my husband and I worked opposite schedules for many years to save on childcare costs for our two kids (the special needs day cares were insanely expensive)
    – we eventually moved to a state with better services and benefits for him as he entered adulthood
    – we took the pressure off ourselves to FIRE at a certain age and just tried to optimize our finances. We were lucky that the last ten years of market returns helped us reach most of our goals despite our son’s expenses, but when we had big expenses, we tried to roll with it. FIRE + special needs can be a lot of pressure.

    Wishing your family the best. We’ve had great times with him and really tough times as well. It’s not easy and so lonely and no one understands unless they’ve been through it.
    Ultimately we love him and regret nothing.

  6. Hello Millennial Revolution Community! While we all strive for financial independence and learning to live meaningfully, I would like to share a resource that will make it easier for you to spend on your children – all4kids This is an online store offering a wide range of children’s products from toys to furniture at reasonable prices.

  7. Informative to know about the taxes and budgets. However, If you’re worried about your accounting assignment and need especial guidance or help, I am an experienced in Accounting Assignment Help. I know how difficult it can be to find a reliable and affordable accounting assignment helper, especially if you’re not sure what to look for? You can always contact me.

  8. “If anyone knows of additional Canadian government support programs that goes beyond the age of 6, please mention it in the comments.”

    We have a friend who considered moving out of BC for a cheaper cost of living but both of his daughters are autistic and after he looked into it he decided not to leave BC because according to him BC is the only province that offers funding for the support his kids need.

    Both of his kids are older than 6.

    That’s all I know about it as I received he info 2nd hand from my spouse.

    I didn’t see this family’s location or what kind of special needs the child has in their letter but if they aren’t from BC it might be worth looking into. The benefits my spouse’s friend receives seemed to be worth staying there despite the higher cost of living.

    Of course there would be many factors at play to consider if it was worth it for this family to move.

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