Secure Your Income
/I recently spoke with someone who was concerned about a co-worker that would have no income during an 8-week recovery period from an essential medical procedure. In an attempt to be helpful, this person told her friend to apply for Social Security Disability Insurance (SSDI). Unfortunately, however, it’s not likely that the co-worker will qualify for SSDI benefits because these benefits are only paid out for total disability, not partial or short-term disability situations. So, you might be asking what can be done to prepare for a situation like this?
Start by creating a fully funded emergency fund. Most advisors will recommend having between 3-to-6 months of basic expenses set aside in a readily available cash account. Try adding a small part of each paycheck to build this type of account over time. The money in this type of account can be used to help you cover time away from work if you don’t have paid sick days or a short-term disability insurance policy.
If you don’t already have one, consider a long-term disability insurance policy. This is the most important type of disability insurance. If you have an emergency fund, that should cover your needs in the near term. Long-term disability insurance typically kicks in after a 90- or 180-day waiting period to cover you for a longer period of disability. If your employer doesn’t offer this coverage, then you should consider purchasing a private policy to help replace at least a portion of your income in the event of a longer period of disability.
Emergency funds and disability insurance are each a critical part of sound financial plan for most Americans. If you don’t have either of these in place, start looking into how you can secure your income and be sure to reach out to a trusted advisor if you have questions.
- Margaret Gooley, CFP®, CDFA®, Worley Erhart-Graves Financial Advisors
