Registered Investment Advisor specializing in Model Portfolios

SApr 10, 1995

Dealing with Disability

Scott Burns
Q. I am a 59 year old disabled lady who draws $404 a month from Social Security Disability.   My son matches that amount each month for my living expenses.   I can manage $50 a month for investments without any great deal of trouble.   Is there any kind of investment I can get into with such a small amount of money?   I know I need something but I am at a loss as to what to do.   And, I am afraid I won't be able to live on what I get later as things cost more.

Also, sometime I would like not to take my sons money as he needs to finish college in order to help get a better job and have a family.   He is 30 years old and has been helping me for 11 years.   I really would like to help him for a change.

---P.C., Belleville, IL


A. You have a wonderful son. There are things you can do immediately to reduce the financial impact of your disability on your son and his future. Anyone who is retired or disabled whose income falls below a certain level is covered by two important government programs: Supplemental Security Income and food stamps. Supplemental Security Income, best known as SSI, is a federal program. Some states add to the program so the amount of the income supplement varies from state to state.

At a minimum, you would probably be eligible for an additional $75 a month. In addition, many states will pay your Medicare premium which is probably taken out of the SSDI money you receive. The food stamp program will probably declare you eligible for an additional $70 to $80 a month in food stamps. That's about $150 of the cash your son provides, almost $200 if the $404 figure you provided was before the Medicare deduction. Let your son save the $50 instead of you and his commitment to you could be reduced to as little as $150 a month.

What's the catch?

None, except care in how your situation is presented. The SSI money can only be used for shelter, food, and clothing. You cannot receive other support, IN CASH, from your son. Your son, however, can pay bills that you have for anything that is not food, clothing, or shelter. He could, for instance, pay your telephone bill, cable TV bill, uncovered medical expenses, household goods, personal care, etc.

Many people who provide help for parents or children do this as a matter of course. Non cash, in-kind help is a necessity for those who have parents with Alzheimers or adult children who are mentally ill. You don't have such needs but you can work it out with your son so it is not an inconvenience to him and doesn't feel like being controlled to you.

The best broad reference on this subject that I have found is called "Golden Opportunities" by Amy and Armond Budish, a $27.50 hardbound published by Henry Hold and Company in New York in 1992. The book tells the ins and outs of Social Security retirement and survivor benefits, disability benefits, medicare, and Supplemental Security Income. Check the local library.

As to investments: don't. You could become ineligible for Supplemental Security Income for having too much in assets if you build them. Your son, however, is free to build HIS assets or to invest his money in further education.


Q. In 1993 my son purchased a house with a VHDA-FHA fixed rate loan.   Now he is considering moving back home with us. He is single, we have plenty of room, and life is so much easier living with Mom and Dad. Please advise on renting this house. He could probably get enough rent to make the monthly payment.   But can he rent a house with this kind of loan?

---N.K., Richmond, VA


A. Have him check his loan documents for restrictions. Renting a single family house is seldom a good economic proposition. The rent is usually less than the required monthly payment for principal, interest, taxes, and insurance unless the house has been owned for a long time. In addition, covering the payment doesn't mean you have a good investment: you need to generate cash to cover the cost of replacements, maintenance, repairs, vacancies, regular paint and carpet expenses, and leasing costs.

Where DOES holding a house to rent work?

ONLY in areas with very high price appreciation--- the appreciation will offset all those extra out-of-pocket costs.


Q. My husband and I got into these funds just before the market turned.   We have Phoenix Income & Growth Fund, Franklin Income Fund, and Franklin Utilities.   I have been following the quotes on my home pc and am watching our retirement funds lose their value almost daily. What's your opinion?

---V.E., Westbrook, ME


A. Last year was a rough year for fixed income funds and funds that hold interest rate sensitive assets such as preferred stocks and utility stocks. But interest rates have been declining since late last year, allowing stock and bond prices to rise. The result has been a broad improvement in mutual fund performance figures. In the first quarter of this year, for instance, Phoenix Income provided a total return of 5.9 percent; Franklin Income, 4.1 percent; and Franklin Utilities 4.3 percent.

Phoenix Income and Franklin Income are both above average funds that have consistently performed well against their competitive peers, long term. Franklin Utilities has a more uneven track record, performing in the top AND bottom half of funds like it over different time periods. There is nothing in the records of any of these funds suggesting they should be sold: all three ARE vulnerable to rising interest rates.

To get above average income you need to accept above average sensitivity to interest rates.

Filed Under: Home Ownership & Mortgages, Income Investing, Q&A (from print), Retirement