Retirement and Disability Information for your Future

Retirement is a time of choices and a time to do what we have looked forward to for years.

And many of us are taking the right steps - gauging our risk tolerance, investing early, dollar cost averaging, diversifying and rebalancing assets and focusing on the long term.

Retirement income planning is necessary for two reasons - our earned income stops when we retire and many of our preretirement expenses continue.
 
When retirement finally arrives, the hope is we'll have sufficient income from our savings and investments to meet our expenses and realize our desired lifestyle.

Many people spend a lot of time preparing to achieve that goal, and the time spent preparing for a disability shouldn't be any different.
 

Disability: The other type of income preparation
Retirement income planning and disability income planning are interdependent. Each process helps to replace a portion of lost earned income, to meet monthly living expenses and to achieve a certain lifestyle.

You may think the two scenarios are much different, but from a cash flow standpoint, they are almost the same. If you become disabled, two things will happen. Your earned income will stop, but many of your pre-disability expenses will continue - just like in retirement.

Your monthly household expenses - rent/mortgage, property taxes, car and house maintenance expenses, utilities, food, clothing, loans, insurance and health care - during retirement are almost identical to what your monthly household expenses would be during a disability.

So if sufficient income during retirement is a primary goal, then sufficient income during a disability is equally as important.

Savings probably not enough

If you had to draw from your savings and retirement assets during a disability, how long would those assets last? To determine when they would run out, calculate your monthly household expenses during a disability. Then total your savings and retirement account balances and divide that number by your monthly household expenses. Like many, this number may surprise you.

Based on national averages, most people would probably exhaust their savings and retirement assets within 24 months.  Think about the impact that would have on your retirement goals.

Here's another way to look at it - one year of total disability can devastate 10 years of retirement savings if you've been saving 10% of your annual income.

The solution
Make sure you have adequate disability income insurance in place to protect your ability to earn an income if you become disabled.

Since a disability can have a permanent impact on your home, business, education and retirement, can help you preserve your long-term investments for education and retirement.