Preparing for Disability

Air Date: December 4th, 2020

You hope it never happens, of course. But ignoring the possibility is hardly the answer, especially when you consider 1 in 7 Americans will experience long-term disability. Yet, preparing for disability is not a high priority. Some say it is overwhelming while others say “I won’t be disabled”. Choosing to ignore something with such a high probability is negligent. Listen, today’s show is going to debunk this notion that preparing for disability is overwhelming. And for those of you who believe you are immune to disability we have some stats that just might persuade you to change your mind. You hear us talk about planning on nearly every show, and today’s subject is no exception. Having a plan to give you a clearer understanding of your financial “big picture,” is perhaps most important when comes to your ability to earn a living.

Your largest asset is your ability to earn that paycheck. As your paycheck increases, so to does the risk of unsustainable lifestyle for you and your family. A solid plan will include, at minimum, the following:

  • Your sources of income, post disability?
  • Will you have enough to cover expense?
  • If not, which expenses can be lowered or eliminated?

Action steps

Step 1. Complete the Income/Expense Review if you have not done so already

The first step is getting a clear picture of where your money is coming from and where it’s going. Every client we serve goes through this process. Our tools and technology make it painless and simple.

Step 2. Adjusting your expenses

Many of us live beyond our means. That can be sustainable as long as your ability to earn income is not disrupted. If you lost your ability to earn your current paycheck, would it turn your world “upside-down.” In other words, your expenses would exceed your income. So Step 2 is looking for ways to reduce spending.

  • Where could you cut?
  • Restaurants
  • Entertainment
  • Cable TV
  • Vacations.
  • Club and gym memberships
  • What else?

Step 3. Find Additional Sources of Income

Now that you’ve pruned unnecessary spending, it’s time to look for alternate sources of income. Without your usual paycheck, you’ll need extra money to help you and your loved ones weather the financial storm.

Employer Sick Pay

Does your employer have sick pay programs for employees? Eligibility and payments vary from company to company. It’s important to know in advance what payments might be available to you if you can’t work. Ask your human resources manager for program details.

Disability Insurance Benefits

Disability insurance can be an invaluable lifeline for disabled workers and their families.
If your employer offers disability insurance make sure you fully understand what benefits are available to you and how your company’s disability insurance program works.
If disability insurance is NOT provided by your employer, it can be purchased individually at affordable rates. Contact your insurance agent for more information.

Self-employed individuals can also benefit greatly by having disability insurance. Consult your financial advisor or insurance agent for assistance.

Social Security Disability Insurance (SSDI) and Workers’ Compensation

Social Security If you become disabled, you may qualify for disability benefits through the Social Security Disability Insurance program. Usually a six-month waiting period before SSDI benefits begin.
Workers’ Compensation If you’re injured at work or suffer a work-related illness, you may qualify for workers’ compensation benefits. These benefits can help pay for the medical care and rehabilitation needed to help you return to work.

Step 4. “Last Resort” income sources – for those who failed to plan

If all else fails, you can begin paying expenses with credit cards, get a second mortgage, take out a home equity line of credit, withdraw money from your retirement plan, and ask family and friends for assistance.
Lower your chances of becoming disabled – Stay Healthy

One of the best ways to reduce your chances of becoming disabled – and enriching your overall quality of life – is by maintaining a healthy lifestyle. Taking responsibility for your fitness and well-being can have a direct beneficial impact on your physical, psychological and financial health. Make sure staying healthy should be part of your plan.

Step 5. Take Action

The Income/Expense Review provided an estimate of what your net income would be during a period of disability. Now it’s time to develop your action plan.

Work with your advisor to build a checklist of specific actions including top priorities and timelines.
Include a wellness program, develop healthy eating habits and incorporate exercise into your daily lifestyle.
Update your plan every year your personal and financial circumstances are continually changing.
Whatever your age, it’s never too soon (or too late) to begin. By building a personal financial plan, you and your family will be better prepared to face the future – no matter what it holds.