Planning For Long-Term Care and Disability

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By Marc S Schliefer, CFP®️RICP®️, Wealth Advisor and CEO


A subject that is not too pleasant to talk about is disability and long-term care illness. It is something that you hope never happens to you or your family, but in real life things happen that can derail your plans for a normal life. Here are some things that you need to think about to protect you and your family from the financial burdens that an illness or injury can cause.

One day you are healthy, working and enjoying life and then in a split second you are dealt a blow of an accident or illness that takes some or all of your abilities away to do the day to day things that we all take for granted. What I will discuss is the planning that you need to consider so you can keep your present lifestyle as much as possible and also keep yourself from being a burden to your loved ones and friends.

The first thing that you need to do as soon as you start working is to get as much disability income insurance as you possibly can. Most employers provide 60% of your salary as a disability benefit. Unfortunately, most of the company benefits are fully paid for by the employer and because of that the benefit becomes fully taxable to you if you wind up being disabled and collect a benefit. This becomes an issue because you are getting 60% of your income and then the tax can be 30% or more so you will be living on less than half of what you were making while you were working and you most likely have more medical and other expenses.

There are a few things that you should do while you are working and still in good health. The first thing to do is to check with your employer and see if they will tax you on the premium of the disability benefit that they are paying for. If you are taxed on the premium, the benefit becomes tax free and your 60% will be close to your after tax income when you were working.  Another thing that you should do is to look at buying more disability insurance either from your employers group plan or by purchasing an individual disability plan through an insurance broker or financial planner that is knowledgeable about disability insurance.

Most group plans cap their benefit at $10,000 to $15,000 per month, if your income is greater than $200,000 you should definitely consider buying up as much disability as you can get to protect your earning power and extra expenses that a long term health condition will cause.

Having done financial planning for many years, I have seen the impact on people that have had the maximum amount of disability insurance and how it saved the day when they had a serious sickness or injury that prevented them from working and having earned income. In one case of an attorney it made the difference to help them recover and not have to worry about finances. It made a huge difference in the quality of life for them and their ability to get well without the stress of dealing with financial pressures also.

The other thing that is an important thing for people that are older and either not working or are near the end of their career is long term care planning. If you are on Medicare there is very limited coverage for long term care. There is almost no coverage for home health care. For a facility there is some care available for the first 100 days following a hospitalization, after that there is no further coverage and all of the expenses for your care would be your responsibility. As long as you have assets, you will be required to pay for your care. One solution is to purchase a long term care policy. The cost for the coverage is not inexpensive. It may be worth considering purchasing a base line of coverage in case something happens to you that requires long term health services. If you do purchase a policy you want to get one that has home health care provisions.

Please feel free to email me and I can help you discuss these issues and we can determine what will be the best option in your case.


This piece is not intended to provide specific legal, tax, or other professional advice. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.

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