Create a Disability Backup Plan

For Mark Roberts’ Use: Have you ever considered what might happen if you were no longer able to work due to a sudden disability, such as an extended illness or serious injury? If your retirement planning revolves around the assumption that you’ll be able to work until a certain age, you should probably create a backup plan just in case things don’t go as planned. Without a backup plan, you could end up having to dip into retirement savings in order to pay monthly bills, or you could even wind up unable to pay for medical expenses.

This might not seem like a great possibility, but statistics say a 50 year old person has a 36 percent chance of experiencing at least one long-term disability before age 65*. A long-term disability is defined as a condition which lasts 90 days or more, and 9 out of 10 such disabilities are caused by illness and health conditions rather than injuries.**

How then, would you go about replacing your income in the event of such a disability? Counting on Social Security Disability is not wise for many reasons. It can take months or even years of appeals in order to qualify for payments, and in the meantime you would receive no income. There are also strict rules and guidelines regarding assets which prevent many people from ever qualifying.

A better plan would be to purchase an individual disability income insurance policy. In many cases, if you paid the premiums with after-tax dollars the benefits will be free of income tax. There are a variety of policies available, with benefits replacing a certain percentage of your income in the even you’re unable to work. You will, of course, need to decide when purchasing the policy how much coverage you really need and can afford.

Also, be advised that some policies only pay out if you become unable to work in your current occupation, while others will pay only if you can no longer work any type of job at all. Speak to your financial advisor about the many options available in order to find the plan that is right for you.

*2012 Field Guide, National Underwriter

** CNNMoney, June 26, 2012

About the Author: Mark Roberts

In addition to managing clients’ money and giving investment and diversification advice, Mark offers something that “the other guys” don’t - a unique approach to Retirement Tax Strategies and distribution. Time and time again, Mark meets with new clients who tell him they have a great relationship with their financial advisor but have never been offered information on this kind of approach to securing their financial futures. Mark has taken this feedback to heart and works tirelessly to ensure that his strategies focus on taxes and distribution. Mark started selling insurance for a major insurance company right out of high school to help put himself through college. After graduating with a degree in finance, he dove into estate planning on the financial side to set himself apart from other financial advisors. However, as changes were made to estate tax laws over time, Mark shifted his focus to income tax strategies. Mark’s philosophy is “the blue prints are more important than the wall paper or carpet.” The wall paper and carpet represent products like investments and insurance policies, whereas the blue prints represent the strategies. Once strategies that truly fit the client’s needs are put in place, our focus can shift to providing you with the right products. According to Mark, “It doesn’t matter what carpet we use if the walls are not in the right place.” Our approach to money management is designed to generate the largest alpha (quality) with the lowest standard deviation and beta (risk). By doing this, we help provide clients with the highest return on the lowest risk. Generating income for our retirees is also very important. Because withdrawing money from your portfolio hurts the account rather than helping it, our goal is to design income strategies to harm the portfolio the least making the money last longer.

Create a Disability Backup Plan

Create a Disability Backup Plan

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About the Author: Mark Roberts