Disability 101

Rob StewartFinancial Planning, Retirement

Recently, many new clients have been asking lots of questions because they are confused about the best path forward, coming out of such a dramatic time living in an unstable economy. Some have suffered record-breaking job losses, and others due to the economy have seen their retirement plans slashed by over half in some cases.

Many of our clients are starting to shift from reactive to the proactive.

If the recession has had any pluses at all, it’s that people now seem to be more mindful of how uncertain the market—and their future—really is. Most have been so shell-shocked that they have not been forward thinking about their finances. Mentally, I am seeing a shift in thinking recently. Many of our clients are starting to shift from reactive to the proactive. I was hearing questions like, “How am we going to make ends meet?” and even, “Will we make it?” Recently, people seem to be considering more positive, proactive, goal-driven planning again.

It seems that more and more people are starting to think debt-free, or at least get their debt to a more manageable level. Once again many are becoming more focused on the long-term, about retirement goals again. Even if we were not greatly affected by the last few years, we still need to have a strategy and a plan for our future success. We need to take a moment to sit and decide what things we can change to help ourselves from any crisis that could loom in the future to protect what we have worked so hard to earn.

It seems that more and more people are starting to think debt-free, or at least get their debt to a more manageable level. Once again many are becoming more focused on the long-term, about retirement goals again. Even if we were not greatly affected by the last few years, we still need to have a strategy and a plan for our future success. We need to take a moment to sit and decide what things we can change to help ourselves from any crisis that could loom in the future to protect what we have worked so hard to earn.

One of the things that we need to be prepared for is the unseen event of us becoming disabled. I have seen so many retirement plans and lives changed from not being prepared and hedging our risk from becoming disabled whether it is short, or long term.

3 in 10 workers entering the workforce will become disabled before retiring.

According to the Social Security Administration, 3 in 10 workers entering the workforce will become disabled before retiring. This will greatly impact their ability to earn an income in the near-term and significantly affect their retirement income. A Northwestern Mutual study found that although 80% of Americans recognize the impact a disability will have on their earnings ability and ability to save for retirement, only 10% over the age of 21 said they have purchased a disability insurance policy.

An analysis indicated that investors who experience a disability and have individual disability income insurance, lose substantially less of their retirement nest egg than those who have no insurance at all. Disability insurance protects an individual’s most valuable asset – the ability to earn an income. It is important for us to understand that we are not immune from the risk of disability, but you do have the power to soften the impact.

A scenario described in “Will Your Retirement Program Work As Intended?” shows that a person with a two-year disability at the age of 50 may reduce his or her total investment accumulation by 30% at 65, a loss of approximately $1 million in value. For someone with similar income and investment assumptions who has a disability insurance policy, the investment portfolio is reduced by only about $230,000, or 8%. As we can see from this scenario, even a near-perfect investment approach can be thrown completely off-track by a disability event. That is why disability insurance is such a critical tool in your financial toolbox.

Even a near-perfect investment approach can be thrown completely off-track by a disability event

Retirement planning and disability income planning are interdependent, and together each process helps replace a portion of lost income, meet monthly living expenses and achieve a certain retirement lifestyle. There are many different products available that can take care of your disability needs so it is a good idea to use a financial professional to help you decide how much and what type of policy would be right for your personal needs.

Integrity Financial Solutions can help you in the planning of a great financial future. Contact us here for a FREE ANALYSIS, or call 770-830-2721.