Protect Your Future with a Back-up Plan

One of the first stages of your retirement planning should be deciding when you hope to retire – or in other words, how long you plan to keep working. If you've worked out a solid plan to set aside money for a comfortable retirement, congratulations! You're well on your way to a successful retirement plan.

Of course, even the best plans can be derailed by unexpected events. You may intend to work a certain number of years before retiring, but what if that plan becomes impossible due to circumstances beyond your control? You could be forced to retire before you've saved your target amount of money, and you may have to begin taking distributions from your retirement plan years before you had intended.

Think it couldn't happen to you? Think again. A 50-year-old person stands a 36 percent chance of experiencing at least one long-term disability before age 65. That's slightly more than 1 in 3 soon-to-be retirees who will endure a major hiccup in their retirement plans. A “long-term” disability is defined as a major illness or injury which lasts 90 days or more, so it's easy to see how such a situation would affect your career.

If you're one of the unfortunate 36 percent, how would you pay for your medical and living expenses? Social Security may offer some relief but will it be enough? It’s important to ask these questions and then structure a plan that would enable you to meet your financial needs during a prolonged time of unexpected hardship.

All of these facts underscore the importance of including a disability insurance policy in your retirement plan. In the event that you're unable to work, a disability insurance policy will pay out a certain percentage of your income. If you paid your premiums with after-tax dollars, you may not be required to pay taxes on your benefits.

Since disability insurance policies vary greatly, talk to your insurance agent about your options. Carefully consider the income you might need if you become unable to work, so that you can keep your retirement fund intact and protect your future.

2012 Field Guide, National Underwriter
CNNMoney, June 26, 2012
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This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional.  The statements and opinions expressed are those of the author and are subject to change at any time.  All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only.  It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.