Unusual Family Situation, Increase in Finances

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Joined: Thu May 03, 2018 1:19 pm

Unusual Family Situation, Increase in Finances

Post by WhatsUpButtercup » Sat May 05, 2018 2:39 pm

Hey everybody! I've been lurking for a little while, but this will be my first post. I'm clever and a quick learner, but haven't been at this long, so feel free to assume I know nothing.

Our family situation is a bit unusual. We have 14 children, 9 of them kids we adopted who have special needs. We spend a lot on medical expenses, and those have pushed our budget to and on a few occasions above our income. My husband is moving into a new job, and we are reevaluating finances as a result. We will be paying for COBRA for a little while, but we also have the option of moving our younger kids onto state insurance, our kids over 18 onto Medicaid, and my husband and myself onto high deductible plan. This will free up at least $20K+ per year between premiums and our annual out-of-pocket max, but we do have some deferred expenses that some of this would be allocated to. Any income above the current amount is going to be deposited into a separate account than the one we use for daily expenses to prevent spending creep.

We have also been informed that our kids with special needs are all eligible for benefits as they turn 18. We adopted with the expectation that we were going to work essentially forever to cover the expenses for the life we have dedicated ourselves to, so we hadn't really looked into this before. Some expenses being covered for our kids could make retirement a more realistic possibility.

Income: just under $100K for wages plus rental income, bonus range from $0-24K at new employer

Possible SS untaxed income for kids with disabilities after 18: $500-750 per child, 9 kids who this applies to, all will be over 18 in 5 years. This money would earmarked for each child only, although can be used for their share of family expenses like utilities and housing.

Emergency funds: Approx 2 months expenses in checking and savings accounts, range of 1-5% interest on all accounts

$17K credit card debt, mostly adoption and medical expenses
$11K with interest from 14-23%
$6K currently no interest balance transfer

$103K mortgage #1, 3.75% interest rate, 25 acre property, previous home, assessed value $150K but market value approx $120K
860 mortgage, tax and insurance
600 rental income

$44K mortgage #2, 4.63% interest rate, current home, assessed value $200K but market value approx $150K

$18K car loan, 5.7% interest rate

$500/month medical bills from kids, large balance ($100K?) no interest so low priority, kids will be able to pay off respective balances with benefit money later to free up family cash flow

Student loan, interest rate unknown, $18 monthly payment

Tax Filing Status: Married Filing Jointly
Note: 14 dependents, 9 under 18 for 2019, those over 18 are permanently disabled and will always be dependents

Tax Rate: 22% Federal by income BUT exempt from withholding due to number of dependents
5% State
State of Residence: Alabama
Age: 32 myself /40 spouse

Desired Asset allocation: myself 95% stocks/5% bonds, spouse 80% stocks / 20% bonds, not firm on those percentages though
Desired International allocation: undecided

Current retirement assets

His 401k

Previous employer 401K run by Great West/Empower, their management fees approx 1%
100% $15K American Funds Target Date 2050 .77% expense ratio
Goal #1: IRA rollover this account

New employer 401K run by Fidelity
No current account, variable small match, for example 1/4 of first 4% but sometimes less and sometimes more, and vesting schedule unknown

His Rollover IRA at Vanguard
Goal #1: $15K rollover to Vanguard Total Stock Market Index Admiral Shares VTSAX .04% expense ratio

Her Spousal Roth IRA at Vanguard
Goal #2: establish and fund, initially with a target fund with an aggressive ratio, later with separate balanced funds

His Roth IRA at Vanguard
Goal #3: establish and fund, initially with a target fund weighted toward bonds to balance rollover account above, later with separate funds and ability to compliment tax advantaging with the rollover.

New annual Contributions:

$0 his 401k in 2018, contributions only if Roth IRAs are maxed, likely <$5000 in 2019 (may change depending on matching information)
$>1000 his planned Roth IRA in 2018, $5500 in 2019
$>1000 her planned Spousal Roth IRA in 2018, $5500 in 2019

Priority #1 - The credit card debt. There should be nothing with interest left by the end of the year, and the emergency fund should be up to 4 months.

Priority #1 (tie) - Rollover from 401K to Vanguard IRA from the job he is leaving. This shouldn't cost anything, and should actually save money on the fees Empower keeps sneaking in, so no reason not to do it ASAP. My thinking is get that money in at the lower Admiral Share expense right now and work toward balancing with the Roth account later.

Priority #2 - A retirement account for me, because I have nothing. I don't even have enough credits toward SS at this point, although I would probably be eligible for a spousal benefit there? (I expect there to be a drastic change sometime in the next 30 years, so SS has never been part of our planning.) With our family owing $0 in federal income tax, a Roth should be the best choice, correct? Hard to have less tax liability than that down the road, I assume? It would need to be a spousal account because I do not have employment. I am comfortable with an aggressive allocation.

Priority #3 - Roth for husband? Between the 401K not having a guaranteed match and our tax situation, Roth is the best way to go? Is there a reason to go with the 401K except as the last account for us to contribute to?

Other considerations #1: Sadly, some of our kids have medical conditions that will probably limit their life expectancy. We need to consider that some of our kids will not likely outlive us, but others easily could. Our family has moved frequently in the past, so we have not set up a special needs trust yet. It is on our to-do list.

Other considerations #2: We also have 5 kids without special needs with a 7 year spread in age. We could easily have 3 or 4 kids in college 13 years from now. We have never had any expectation of being able to fund that for them, but we also don't want to mess things up for them in terms of available need-based aid. Basically assets and taxable accounts = bad, retirement accounts = good for FAFSA?

Thank you all so much for taking the time to look this over! What am I missing? Where do I need to change direction?

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Location: Metro ATL

Re: Unusual Family Situation, Increase in Finances

Post by niceguy7376 » Sat May 05, 2018 8:53 pm

I only can say WOW (in a positive way) for what you two are doing . I cannot think of me handling that many regular kids even on a daily basis.

As for answers to your questions, I need to grasp a lot more.
With new tax law eliminating the exemptions, how does this impact your taxes? I am trying to understand the "no withholding from paycheck" and the year end tax filing on a standard deduction.

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Joined: Tue Apr 12, 2016 9:18 pm

Re: Unusual Family Situation, Increase in Finances

Post by momvesting » Sat May 05, 2018 9:04 pm

I don't see life insurance in there anywhere. If you are not working, and it sounds like the kids' needs are too much for you to work if something happened to your husband, you would be up a creek. You need adequate term life and disability insurance on both you and your husband ASAP.

Topic Author
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Joined: Thu May 03, 2018 1:19 pm

Re: Unusual Family Situation, Increase in Finances

Post by WhatsUpButtercup » Sat May 05, 2018 9:32 pm

Life insurance isn't listed, but we have it! Approx $750K on husband and $500K on me. Term, not whole.

We redid my husband's W4 today and we don't have any tax liability. I think the child tax credit works in our favor also. That might be why we still don't owe tax with the change?

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