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'Early' retirement
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February 23, 2000: 10:24 a.m. ET
Planning retirement at a young age when your health is in jeopardy
By Staff Writer Jennifer Karchmer
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NEW YORK (CNNfn) - When 'Pete,' a 30-year-old computer technician in Los Angeles, found out he was HIV positive, he opened a Roth IRA account and maxed out his salary contributions to his 401(k) plan.
That, of course, was after he signed up for an aggressive drug therapy taking 40 pills a day that he hopes will extend his life while battling the virus that causes AIDS.
"It's almost an impossible situation," said Pete, who didn't want his last name to be used. "I just started doing my financial planning. I may only have 10 to 15 years to do it. There's just not a lot of time left."
Building a strategy
Pete's situation is an unthinkable one - a promising life cut short by disease. In a cloud of emotional turmoil, figuring out how to save money on top of massive insurance and health bills is daunting.
Patricia Drivanos, a certified financial planner with Bandfield & Drivanos in New York City, who specializes in advising clients facing life-threatening illness, says Pete is doing the right thing by maximizing his retirement plan options.
These accounts, in addition to what he will receive from Social Security benefits should he become disabled, will be his retirement nest egg.
Stability in the face of uncertainty
Whether it's with a diagnosis of breast cancer, multiple sclerosis or HIV, Drivanos' clients face fear and insecurity even before they walk in her door. But getting a handle on investments can put some stability into their lives.
Once you've started a 401(k) plan, a traditional IRA or a Roth IRA, Drivanos suggests a somewhat conservative investing approach because of the uncertain time period her clients face.
"You don't even know that you have a 10-year horizon," she said. "(You) could come down with an infection tomorrow."
But you'll need to assess your own level of investment risk and decide how you want to spend your later years. In Pete's case, he's most concerned with paying his rent and other bills if he becomes too weak to work. Others may decide now is the time to take that long-awaited trip around the world or visit estranged family or friends.
So Drivanos suggests a breakdown of 60 percent bond funds and 40 percent stock funds, using a combination of international, large cap value, and S&P 500 index funds offered by any of the big mutual fund companies, such as Fidelity Investments, Vanguard Group or Janus.
In addition, financial planners suggest having a cash account equal to three to six months of living expenses kept in a money market or a traditional savings or checking account. This "cash stash" may earn only 2 to 5 percent in some cases, but the money is more readily available and is less affected by market fluctuations, says certified financial planner Dee Lee.
Social Security for the disabled
You're constantly fatigued, having trouble concentrating on the job and focusing on tasks. You're still young, but it may be time to apply for Social Security disability benefits because of your illness.
The benefit is based on your past income and years that you've worked. But applying for it can be a challenge since the rules are complicated and confusing depending on the stage of your disease, says Jimmie Miller, a certified financial planner who advises clients who have life-threatening illnesses.
"You may have to apply two or three times before getting that (disability) letter" from the Social Security Administration, said Miller, who works with American Express Financial Advisors in Salt Lake City. Miller advises you work in conjunction with your doctor going through your medical records and be as detailed as possible on the application.
Click here for more information on applying for Social Security disability.
When you are considered disabled, you can take money out of your retirement accounts without penalty. But until then, if you are younger than 59-½, be aware that you will pay a 10 percent penalty on the amount you withdraw.
There are a few health-related exceptions. For example, if you need to tap into your 401(k) or IRA account before age 59-½ to use the money to fund medical expenses that exceed 7.5 percent of your gross income, then you can withdraw penalty free.
So if you are not disabled, financial planners suggest you have additional savings accounts to pull from should you continue to work but are under age 59-½.
Balancing health and finances
Through a variety of drugs known as a cocktail, Pete, the West Coast computer technician, lives a relatively healthy life now despite uncomfortable side effects like constant nausea and diarrhea. Although he believes his life expectancy to be only 10 more years, Pete has an optimistic eye on the future.
"I just have to take it one day at a time and focus on finances and retirement," he said. "It doesn't give you much time and you get overwhelmed."
But while Pete is still healthy and working, he should take note of a few more issues, experts say:
- Write a will. "If it's done while you're healthy, it's something you don't have to worry about later on," Drivanos said.
- Write a health care proxy. Here, you name someone to make medical decisions for you should you become unable to do so.
- Prepare a durable power of attorney. This gives the person you name the ability to pay your bills using your accounts if you become unable to do so while you are disabled.
One day at a time
Once you have a plan in place, financial experts suggest you review it annually alongside your latest health prognosis. As new advances are made in medicine every day, it's possible you could live longer and healthier than you imagined.
"(Your) situation could change that quickly -- new medications, new therapies," said certified financial planner Tom McFarland in Concord, Mass.
Now is the time to make financial plans since you are relatively healthy. Sure, it's a dreadfully emotional time, but if you plan now, you can assure a more comfortable living situation if you become disabled and can't work.
"It is burdensome, but it is something I have to do to avoid a very bad situation," said Pete. 
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