Tuesday, December 23, 2008

Money Makeover for Kinship Care Provider

Second set of children presents second set of challenges: North Hills woman will have difficulty retiring with modest savings and four adopted kids to provide for
Marsh, Ann. LA Times, Dec. 21, 2008.

Patricia Kimball takes the measure of her life once a month when issues of Parenting and AARP magazines drop simultaneously through the front-door mail slot of her North Hills home.

"I never thought I'd end up with four small kids at this age," said the 65-year-old special education teacher and mother of three adult sons.

The disparate magazines mirror the joy she has with four adopted children, ages 3 to 7, and her concern that they'll be stretching her financial resources, including state funds she receives for taking care of the special-needs children.

Kimball had wanted to retire in a few years, even though she has saved only $69,000. But now she'll have to work a decade longer to pay for the children's upbringing and for her retirement, said financial planner Donald Hance, president of Glenmore Financial in Pacific Palisades.

"Having those kids is a fabulous thing. God bless you," Hance told her, while also cautioning that she needs to save more money. "You don't have the cash reserves to carry you through rough times."

Pixie-small, with a dazzling smile, spiky gray hair and an eyebrow ring, Kimball looks like a hippie version of a fairy godmother. But she doesn't have a magic wand to help her do more for her children.

She earns $85,000 a year at the Glendale Unified School District and receives $32,880 from the state for the children's care. She doesn't live extravagantly, and her only debt is $157,000 left on the mortgage on her home.

But fate has left her without a fortune or much of a nest egg. That she has any savings, much less a home, is more a testament to her perseverance since her husband died from a stroke 22 years ago. At the time, their sons were 7, 12 and 16; she was a housewife and wasn't aware of the family's financial situation.

After her husband's death, she found out that their house had gone into foreclosure and that he had allowed an $8,000 federal tax debt to balloon to $50,000 over eight years.

She sold the home before the bank took it over and used the proceeds to pay a negotiated settlement with the Internal Revenue Service. Nevertheless, she went into bankruptcy, which ruined her credit, and spent eight years in a hodgepodge of jobs, including aerobics leader and teacher at a preschool for autistic children.

In the process, Kimball repaired her credit and took classes to improve her job prospects. At 51, she earned her credentials to teach special education.

Without credit cards for years, Kimball used cash for everything, including her 2002 Honda Odyssey van. And she was able to dip into savings last year to give her son Damon, now 30, a $25,000 loan, which he plans to start repaying soon. Only for her North Hills home, which she bought in 1994, did she need to borrow money.

"I understand where my limits are," she said.

Her expertise in special education gave her a window into the minds of children with special needs, and she decided to adopt a baby girl who might otherwise have spent her formative years in institutions. After three sons, she was ready for a daughter.

But in 2001, a foster-care agency offered her a baby boy, one she couldn't resist. A year later, the baby girl came into the home. The girl's mother then had two more children that foster care quickly sent to Kimball.

"I am grateful to God that she didn't have another" child, Kimball said. Damon has developed a bond with the adopted children and has agreed to be their guardian should anything happen to his mother.

With such family matters sorted out, a debt-free Kimball now faces the challenge of staying that way. If she stops working at 71, Hance figures, she would receive a little more than $4,500 a month from her teacher's pension. However, if she waits five more years, that amount increases to nearly $5,400.

To Kimball, a monthly bump of $850 didn't sound like enough to delay retiring. "I'm getting tired," she told Hance. "I feel like taking a vacation."

But five more years, Hance said, would mean not only an increase in her pension income, but also five more years of income at her top salary.

"She might need that for her living expenses," Hance said. "With raises, that's probably half a million [dollars] she'd be forgoing over those five years."

Kimball acquiesced: "Oh, I hadn't thought of that."

Hance suggested several steps she should take.

He asked her to check with the Social Security Administration to see if she was eligible for survivor payments from her husband's benefits now that she is of retirement age. In a quick call, she learned she was entitled to about $1,000 a month.

Not only will that money increase Kimball's own savings, it will help her save more for her children's college educations. That's important, Hance said, because a retirement fund and four tax-free college savings plans she set up several years ago won't bring in the funds that a brokerage salesman had promised.

The salesman, she said, told her that saving $30 a month for each child would give them about $20,000 each by the time they entered college. But Hance said the most each account would be worth was $6,000, assuming a 4% return to reflect current market conditions. To get close to her goal, she would have to put $100 a month into each account, and that would grow to about $17,000 for college expenses.

He also noted that the salesman had put 100% of her children's savings and 70% of her own into stocks, which means the value of her holdings has plunged recently. She should have no more than 40% of her assets in equities at her age, Hance said, and the balance in fixed income.

Hance also suggested that Kimball make sure she was getting the maximum state support for her children. She said she recently applied for an increase in her oldest son's benefit from $450 to $751 a month because he had developed more problems than were known when he was a baby.

For Damon's debt, Hance said Kimball should create a promissory note detailing the terms of the loan, including a reasonable interest rate, and have her son sign it. Damon's eventual inheritance should be decreased by any unpaid balance.

Because Damon agreed to be the legal guardian of her adopted children, Kimball listed him as the sole beneficiary on her $250,000 term-life insurance policy.

However, Hance said each of her seven children should be beneficiaries, sharing equally. That's the only way, he said, to ensure funds actually go to each child. Otherwise, there is no legal mechanism to ensure one child uses the money for the others.

"It's funny, when people get money, what they do," the planner said.

Given Kimball's discipline with money, Hance suggested she apply for a credit card to accumulate points she can use for airplane tickets and other travel expenses. Kimball brightened at the idea. Recently, another son announced that he was getting married in Virginia, and she wondered how she was going to pay for airfare for the younger children.

"The idea of getting airline miles is critical," she said. "Now we're actually thinking about traveling because everyone is toilet trained."

Do you need a money makeover? Each month, the Sunday Business section gives readers a chance to have their financial situations sized up by professional advisors at no charge. To be considered, send an e-mail to makeover@ latimes.com. Include a brief description of your financial goals and a daytime phone number. Information you send us will be shared with others.


Blogger mmjiaxin said...

swarovski jewelry
lululemon pants
ugg outlet
louis vuitton,borse louis vuitton,louis vuitton sito ufficiale,louis vuitton outlet
hermes belt for sale
polo ralph lauren
hermes outlet
juicy couture tracksuit
michael kors factory online
cheap nba jerseys
fitflops clearance
chanel outlet store
camisetas futbol baratas
chanel handbags outlet
pandora outlet
giuseppe zanotti outlet
discount ugg boots
michael kors handbags
michael kors outlet
tory burch outlet

4:39 PM  
Blogger Unknown said...

ninest123 16.01
louis vuitton, replica watches, louis vuitton outlet, cheap oakley sunglasses, ugg boots, michael kors outlet, tiffany jewelry, prada handbags, burberry, oakley sunglasses, louboutin, ray ban sunglasses, michael kors outlet, louis vuitton outlet, ray ban sunglasses, louis vuitton, polo ralph lauren outlet, ugg boots, nike air max, louboutin shoes, louis vuitton, uggs on sale, michael kors outlet, ugg boots, longchamp outlet, oakley sunglasses, michael kors, burberry outlet online, nike outlet, tory burch outlet, michael kors outlet, jordan shoes, michael kors outlet, chanel handbags, ugg boots, ray ban sunglasses, gucci outlet, christian louboutin outlet, nike free, nike air max, longchamp, oakley sunglasses, oakley sunglasses, polo ralph lauren outlet, louboutin outlet, replica watches, longchamp outlet, tiffany and co, prada outlet

5:08 PM  
Blogger Unknown said...

nike free run uk, timberland, nike trainers, abercrombie and fitch, true religion jeans, michael kors, ralph lauren pas cher, longchamp pas cher, lululemon, lacoste pas cher, new balance pas cher, hollister pas cher, hogan, nike air max, ralph lauren uk, replica handbags, sac guess, nike roshe run, oakley pas cher, north face, vanessa bruno, ray ban uk, ray ban pas cher, nike roshe, nike air max, nike blazer, nike free, true religion jeans, true religion jeans, air jordan pas cher, true religion outlet, hermes, nike air max, coach purses, mulberry, sac longchamp, air force, nike huarache, michael kors, michael kors, north face, michael kors, coach outlet, burberry, longchamp, vans pas cher, converse pas cher, hollister, louboutin pas cher, air max, tn pas cher

5:10 PM  
Blogger Unknown said...

vans shoes, soccer shoes, hollister, north face outlet, nike roshe, north face outlet, chi flat iron, bottega veneta, instyler, mont blanc, giuseppe zanotti, babyliss, nfl jerseys, abercrombie and fitch, ray ban, ralph lauren, asics running shoes, p90x workout, timberland boots, herve leger, nike air max, valentino shoes, gucci, hollister, beats by dre, iphone 6 cases, louboutin, wedding dresses, iphone 6s cases, mac cosmetics, mcm handbags, nike air max, reebok shoes, iphone 6s plus cases, converse, lululemon, oakley, birkin bag, baseball bats, ipad cases, ferragamo shoes, iphone 6 plus cases, insanity workout, iphone 5s cases, soccer jerseys, ghd, s5 cases, new balance, vans, iphone cases, jimmy choo shoes, celine handbags

5:12 PM  
Blogger Unknown said...

coach outlet, hollister, canada goose, louis vuitton, louis vuitton, moncler, doudoune canada goose, links of london, canada goose, montre pas cher, sac louis vuitton pas cher, doke gabbana outlet, moncler outlet, louis vuitton, toms shoes, barbour, canada goose uk, wedding dresses, marc jacobs, ugg,ugg australia,ugg italia, pandora charms, moncler, barbour jackets, karen millen, swarovski crystal, juicy couture outlet, canada goose, thomas sabo, ugg,uggs,uggs canada, canada goose outlet, swarovski, pandora jewelry, juicy couture outlet, moncler, bottes ugg, replica watches, converse outlet, lancel, canada goose, ugg pas cher, pandora charms, moncler, moncler, moncler, canada goose outlet, pandora jewelry, ugg boots uk, moncler, supra shoes, louis vuitton
ninest123 16.01

5:14 PM  

Post a Comment

<< Home