Don't Let Disability Derail Your Retirement: How to Take Advantage of Disability Benefits

David Treece, MBA, AIF®, CLTC® |

You’ve worked hard to save and make a plan to ensure you have income for life throughout your retirement. 

However, I’ve learned in my 30+ years of helping clients plan for retirement that an unexpected accident, injury, or medical condition can result in forced early retirement, a reduction in income, and unplanned healthcare costs. 
You need to ask yourself the question: “How would the bills get paid if you couldn't work for several months?” 

While what you expect your life to look like can change in a flash, there are two ways that you can help keep a financial safety net for you and your loved ones.

Types of Disability Insurance 

Number one, have disability insurance during your working years to help bridge the gap to retirement.

Some employers will include it as a part of their employment group benefits. If you are working and not sure if you are covered, contact your HR representative to find out. Take advantage of which type of disabilities insurance are available under the employment package. Know the difference between long term and short term disability insurance: 

  • Short-Term Disability (STD) Insurance: an income replacement benefit that offers part of your earnings in a short period of time. It can range up between 40% to 70% of wage replacement with a monthly benefit maximum based on the circumstances. Usually, this form of disability insurance provides coverage until the individual is deemed fit to return to work, typically not extending beyond two years.

  • Long-Term Disability (LTD) Insurance: an income replacement benefit that is between 50-70% of an individual’s earnings before a non-work related illness impacted their ability to work over a long period of time. Most LTD companies require the person to apply for Social Security Disability (SSDI) benefits. 

If you’re an independent contractor, gig worker, or a small business owner, consider private disability insurance. One misconception about individual disability income insurance is that it just covers catastrophic events. However, cancer, anxiety, multiple sclerosis, and other illnesses or conditions are also covered. 

Just be sure to keep in mind financial underwriting requirements. You have to be eligible for the amount of coverage that is being taken out. For example, if you are earning minimum wage and are interested in a multimillion dollar policy, then that creates the incentive to be disabled. 

The Cost of Long-Term Care Insurance 

Secondly, ensure your retirement income strategy accounts for healthcare costs in retirement that may not be covered by Medicare, such as long-term care services.

Nothing will indeed destroy all of our good work at retirement building faster than having long-term care expenses.

I've seen it time after time, where it's these expenses are so huge $10,000 a month, and it will ruin a retirement. And so you need to plan for this. 

There are different ways to get long term care insurance: the traditional policy way, hybrid ways now that are taking over the market where you simply just reposition an asset or pay into a policy for a certain number of years, or, in some cases you can work with an elder law attorney for Medicaid planning. Whatever avenue you end up selecting, the important thing is to have some type of plan.

While you can’t always control what may lie ahead …

… we’re here to help. Team Treece is here to aid in your retirement planning, particularly for navigating situations like debt, disability, divorce, or the loss of a spouse. Schedule a quick consult to prepare for what may lie ahead for you.



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