I’m a widow in my early 40s with 3 children. My IRAs are worth $330K. Will we survive financially?
“Most of my income goes to daily expenses and supporting my kids.” (Photo subject is a model.) – Getty Images
I’m a widow in my early 40s with three children. My youngest is a special-needs child still in school, my second is finishing high school and my oldest is in nursing school. I work full-time and I’m studying to become a medical assistant.
Here’s a rundown on our family’s finances: My late husband’s IRA is worth $270,000. My Roth IRA is $63,000 (it was only started recently). Our paid-off home is valued at $590,000. We have a rental property worth $428,000.
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Most of my income goes to daily expenses and supporting my kids. I feel overwhelmed and would love advice on how to balance retirement planning, paying for education, and staying financially stable long term.
I just want my kids to feel secure while I also build a safe future for myself.
Now is also the time to start thinking about appointing a trustee or co-trustees to manage a trust after you’re gone. – MarketWatch illustration
You’re doing great, especially for someone in their early 40s. That’s the headline. With roughly $1.3 million in assets and your late husband’s IRA combined with your own, you are in a good place. You have a lot to think about and anyone in your shoes would be feeling overwhelmed, but you are standing on solid financial ground.
You can roll over your late husband’s IRA into an IRA in your name or open a new one, allowing you to delay the Required Minimum Distributions (RMDs) until your own Required Beginning Date (RBD), given that he had not yet taken his RMDs. Rolling over an inherited IRA into your own IRA may be a good choice if you don’t have an immediate need to tap into your late spouse’s IRA, Fidelity says. Alternatively, you could take a lump sum (with higher tax consequences) or remain a beneficiary on his IRA.
”If you are under age 59 ½ and you do need to access some or all of the assets you inherit from a traditional IRA, you will be subject to a 10% early withdrawal penalty, if you roll those assets into your own IRA and then take a distribution,” Fidelity adds. “If you choose to roll over the inherited IRA assets to your own IRA, the rules for RMDs will still apply. This means you must withdraw a certain amount of money from your IRA each year starting in the year you turn 73.”
Distributions from a traditional IRA are generally taxed as ordinary income, Fidelity adds. “However, if the original account was a Roth IRA and the assets were in the account for 5 years or more, distributions may be tax-free. In either case, the registration type of both IRAs must match in order to transfer the assets from one account to another (for example, traditional IRA to traditional IRA or Roth IRA to Roth IRA).”
I understand you are concerned about the future of your child who has a disability. The Social Security Administration’s (SSA) Supplemental Security Income (SSI) provides monthly payments for low-income families as long as they meet income/asset criteria, but once your child turns 18, they will be assessed on their own income and assets for Medicaid.
Social Security Insurance provides monthly payments to people with limited income and resources who are 65 or older, or blind, or have a disability, the SSA says. Children younger than 18 are eligible if they have a medical condition or combination of conditions that meets Social Security’s definition of disability.
“Their income and resources must fall within the eligibility limits. The amount of the SSI payment differs from state to state because some states add to the SSI payment,” it adds.
Your child must meet the following disability requirements to be considered medically eligible for SSI: “The child, if not blind, must not be working or earning more than $1,620 a month in 2025. This amount usually changes every year. The child must have a medical condition or a combination of conditions, that results in ‘marked and severe functional limitations.’” You can read more about eligibility here.
I hope this calculation gives you some peace of mind: In 20 years, assuming a 7% annual return and $7,000 a year contributions to your Roth IRA, your inherited IRA would be worth over $1 million in 20 years, while your Roth IRA would be worth $531,000. That’s a combined total of $1.58 million.
Is your rental a good investment? How much rent are you getting from that $428,000 property? Would you be better off keeping it — assuming it will increase in value — or selling it and investing the money in the S&P 500 SPX? With the latter, you would have $820,000 to $1.7 million with 6%-10% annual returns, adjusting for inflation, in 20 years — right around retirement time.
You can plan now for their future care in several ways: continuing to maximize your Roth IRA contributions, exploring a special-needs trust with the help of a financial adviser who specializes in these cases and putting your properties in a trust so they don’t impact your child’s eligibility for federal aid.
Think about appointing a trustee or co-trustees to manage a trust after you’re gone, possibly your other children and/or an impartial third party. Everyone has their own challenges, financial and otherwise, and some are more visible than others.
The Special Needs Alliance, an advocacy group, says trustees must handle disbursements carefully so “they do not jeopardize the beneficiary’s access to critical government assistance like Social Security Insurance and Medicaid. Special-needs trust funds can cover expenses that improve the beneficiary’s quality of life.”
A Medicaid Asset Protection Trust can also protect the assets of a person who wishes to apply for Medicaid. Such a trust can be legally and financially complicated, however, and Medicaid can challenge it. These trusts can include stocks and bonds, bank accounts, and properties. But with a MAPT, you surrender control of those assets.
You will also have the option of Social Security survivorship benefits. “A surviving spouse, at full retirement age or older, generally gets 100% of the worker’s basic benefit amount,” the IRS says. “Surviving spouse, age 60 or older, but under full retirement age, gets between 71% and 99% of the worker’s basic benefit amount.”
You can’t do everything today. You can, however, look at the bigger picture and know that you are still young and, despite losing your husband at such a young age, you have three children with a strong will to succeed in life on their own terms. You can take your financial plans one contribution — one day and one step at a time.
