A side of FIRE rarely mentioned: Disability

[Christine]

To suddenly be disabled is what I experienced too.

Fortunately I had LTD insurance. And I had started a quite modest FIRE investment account before this happened. I ended up being home alone a lot so boredom and curiosity then had me reading about and listening to podcasts about investing and FIRE.

So a few years later when I got a cash payout from the insurance I knew what I wanted to do and invested some of it in index funds and a larger part in more risky tech stocks like Tesla, Apple, Google etc. Not having kids to care for I opted for more risk than others perhaps would have.

I think this was a case of "Luck is what happens when preparation meets opportunity". And I am fortunate enough that my disability pensions are a small part of my income.

 

[athena53]

Thanks for this reminder. I need to discuss it with DS, who's 39 and the sole financial support of his family. I relied on whatever employer-provided LTD I had but never paid much attention to it. Fortunately I got lucky and never needed it.

DS does actuarial work so it can be done even with some physical limitations but of course bad stuff happens with traumatic brain injury from an accident that can impair your cognitive functions.

One thing to check if you buy LTD: look carefully at their definition of disability. Some say you're disabled if you can't perform ANY occupation; others are mor specific to YOUR occupation, which is what you want. An actuary missing a couple of fingers can go on. Not true of a surgeon.

 

[GenXguy]

Ask yourself the question "How can I live on this?" not "Is this enough." And don't assume you'd get disability payments either. You might not.

I've always had a bare bones budget document that showed exactly what I needed at a minimum to get by, which included variable long term expenses averaged out. So, I didn't need to ask because it was already documented. But a lot of people are just scraping by, especially with the high inflation in recent years, so they can't just magically save a lot more money that they don't have.

I had to retire before I planned also due to IT outsourcing. I've always had disability insurance through work - never used it. I've read about how extremely difficult it can be to get disability payments from the SSA system.

 

[badatmath]

While disability is of course much worse, many of us were laid off at a time where it is hard to find comparable employment. Still others leave earlier than optimal to care for aging parents or spouses, so LBYM and plan ahead is good for everyone.

 

[youbet]

While disability is of course much worse, many of us were laid off at a time where it is hard to find comparable employment. Still others leave earlier than optimal to care for aging parents or spouses, so LBYM and plan ahead is good for everyone.

That's so true! At least for me it was.

Booted by MegaCorp at age 58 (while I had plans to RE at 62), I was able to call it quits and hang up my spurs due to judicious saving and investing for many years prior. I can't imagine what it would have been like if I'd had to find another good paying job at that age.........

 

[Koolau]

In the past two years, we've given each child a total of $1500 if they will take out insurance (life or disability or both.) Two of our kids have kids of their own so opted for Life. The third says she's not going to have kids and opted for disability. I'm very pleased that the kids followed through and are good planners (with our money.)

 

[Dtail]

That's so true! At least for me it was.

Booted by MegaCorp at age 58 (while I had plans to RE at 62), I was able to call it quits and hang up my spurs due to judicious saving and investing for many years prior. I can't imagine what it would have been like if I'd had to find another good paying job at that age.........

Very true. Even though I took a voluntary package at age 55, I could not find comparable or even a lesser paying job for 15 months after.
I did have many industry contacts.
Luckily I discovered this site and retirement calculators and was able to retire at 57.

 

[Andre1969]

My uncle went out on disability, but not in the stereotypical get-hurt-on-the job and never work again type of scenario.

He had kidney issues from the day he was born. Only one kidney was working, and it failed in the 1980s. He got a transplant, but after about 20 years or so, it failed, and from around 2008 onward, he was on dialysis 3 days per week. He was a truck driver for a construction company, and they were willing to work with him. He went down to 3 days per week, M/W/F, with dialysis on Tu/Th/Sat. He tried to get on a waiting list for a kidney transplant, but he'd had two run-ins with cancer. One was bladder, but I forget where the other was. They wanted him to be cancer free for 3 years in one spot and 5 in the other, so that kept him on dialysis.

Then, in late 2013, he was fired suddenly. He was leaving a construction site with an empty dump truck, but had forgotten to roll out the cover for the top of the dump bed. Someone saw it, hollered out to him. It got back to his supervisors, and they fired him. It's the type of stuff that people do all the time, and many do worse, but I'm convinced the company was getting pressure from the health insurance company to drop him.

He was 61. He went to a doctor soon after, and looked into getting on disability, and when they saw the condition he was in, they were like why the hell were you still working? You could have gone on disability YEARS ago!! So, he did.

Not long after, he was declared cancer free, and put on a wait list for a kidney transplant, and in 2014 he got one. Odd thing is, Medicare, and the gap insurance, would not pay for the kidney transplant, but the National Kidney Association did. I think that was about $80K. Then, he had complications from it, had to go in the hospital for about a month in late 2015, and I think that was around a $90K bill. Now that, the insurance DID cover.

He was living with Grandmom at the time, and taking care of her kept him occupied. She died in 2015, and I think that left a void in his life. Not just the losing of his mother, but suddenly not having anyone/anything to take care of. He died just this past October, 2023. A lot of his time was spent going to the doctor for various checkups, procedures, etc, and he pretty much lived a simple life otherwise, but seemed pretty content. He caught Covid around Christmas of 2021, and even though it was the relatively mild version, it just seemed to me like he was never the same after that.

I did find out, after he died, that in addition to the kidney issues and everything else, he had a bad heart. So, all things considered, it was probably a miracle he made it to 71. I wonder if that might also be the main reason he tended to usually be in such good spirits? Knowing he had already outlived most expectations, but that each day could be his last, he just learned to cherish the time he had left?

 

[Koolau]

That's so true! At least for me it was.

Booted by MegaCorp at age 58 (while I had plans to RE at 62), I was able to call it quits and hang up my spurs due to judicious saving and investing for many years prior. I can't imagine what it would have been like if I'd had to find another good paying job at that age.........

Very true. Even though I took a voluntary package at age 55, I could not find comparable or even a lesser paying job for 15 months after.
I did have many industry contacts.
Luckily I discovered this site and retirement calculators and was able to retire at 57.

I achieved a senior staff scientist position at Megacorp by 50. It was clear that, after that, Megacorp was more or less finished with me. No more promotions and scant raises. I saw this phenomenon all through Megacorp except for the executive class. So I polished my niche skills and got myself into a place I'd been w*rking toward for years. It wasn't "fire-proof" but I made sure that my management realized that I would leave a hole, not easily filled if I were to leave. Conversely, I had such a pigeon-holed skill set and assignment that I'd have never found a comparable j*b at any other Megacorp - at least not at my salary which had ballooned nicely over the years.

When Megacorp finally realized what a great j*b I had, they decided to take it away from me and spread my responsibilities over several people (who were already saturated with w*rk.) They wanted to put me in a "grunt" position and I left that Friday. I knew enough folks to check up on what had happened in my absence and found that, as I guessed, it all fell apart and - wait for it - they had to hire from the outside!

Fortunately, when I left, I'd found this site and KNEW to a certainty that I was FI. Everything was vested. The rest, as they say, is history. It's funny how things turn out. Megacorp all but showed me the door and I rushed through it gladly. I left too quickly for the screen door to hit me on the way out.

 

[street]

The unexpected can happen. A stroke and car accident and anything that could cause you from getting a job or capable of doing a job.

 

[old medic]

The unexpected can happen. A stroke and car accident and anything that could cause you from getting a job or capable of doing a job.

It sure can... Even if its going around a corner you have been driving over 40 years....
I'm currently waiting on the results of my SSDI claim. At last check was at 72% complete and not been rejected yet. When (and if) approved it will definitely affect our plans. I'm one of those that believed insurance was a money hungry scam and only carried the basic, must have insurance. DW on the other hand carried about everything offered...Hell she might even have a Gerber policy on the grandson. With her cancer diagnosis, she filed a ton of paperwork, and has received some substantial checks from 3 different policies.
So I'm retired with a pension, She's out for 3 months with pay on FMLA, and have received nearly 25% of her annual salary from insurance. Would be nice too do a retired practice run.....We can't do much more than sit around and get on each others nerves and go to doctors/treatment appointments.

 

[marko]

The unexpected can happen. A stroke and car accident and anything that could cause you from getting a job or capable of doing a job.

+1. My brother planned an ER at age 60 along with two months celebrating in the south of France with his GF. Three months before he quit he was hit with a massive stroke. Six months in hospitals and rehabs.

A year later, his GF died. He's never fully recovered.

 

[Koolau]

+1. My brother planned an ER at age 60 along with two months celebrating in the south of France with his GF. Three months before he quit he was hit with a massive stroke. Six months in hospitals and rehabs.

A year later, his GF died. He's never fully recovered.

Wow! Let's hope bad things don't come in THREE's. That's really a tough time for your brother. Hope things get better for him soon.

 

[marko]

Wow! Let's hope bad things don't come in THREE's. That's really a tough time for your brother. Hope things get better for him soon.

Well, he was living with mom. Always did his whole life. Then she died last year....

 

[superdave]

My wife had to retire due to disability at 60 in Canada

My wife had to retire due to disability at 60 in Canada. Fortunately we had a family friend that was aware of Canada Pension Plan and federal tax credits that were available. Took the sting out of things. Would have been a completely different story at say, 40.

 

[LateToFIRE]

Funny, DW just put the bill for my portable LT disability policy on my home office desk. It's about $6K per year premium. I forget the benefit amount (and of course they don't show that on the bill), but think it would be something like [updated: $100K per year] (tax-free) for the next 3-4 years. I'm FI, early 60's, bordering on semi-RE.

Why am I hesitating to cancel? Superstition? Paranoia? Risk aversion? I'm not sure.

What would you do?

[I want to cut back on unnecessary expenditures as I enter RE, but I don't want to be pennywise, pound foolish.]

 

[street]

That is one reason I have LTCI and also carried disability insurance as a working man. We had DI through work, but I carried my own policy also darning those years.

Sometimes the extra money spent can be a life changer.

 

[Lewis Clark]

I'm FI, early 60's, bordering on semi-RE.

Why am I hesitating to cancel? Superstition? Paranoia? Risk aversion? I'm not sure.

What would you do?

[I want to cut back on unnecessary expenditures as I enter RE, but I don't want to be pennywise, pound foolish.]

For me, the primary purpose of insurance is to cover losses that I could not - or would prefer not to - pay for myself.

Disability policies will pay if you cannot work and lose your paycheck. If you are already FI, you do not need the paycheck. If you do not need the paycheck, why pay to insure that paycheck?

I would cancel that policy.

 

[LateToFIRE]

For me, the primary purpose of insurance is to cover losses that I could not - or would prefer not to - pay for myself.

Disability policies will pay if you cannot work and lose your paycheck. If you are already FI, you do not need the paycheck. If you do not need the paycheck, why pay to insure that paycheck?

I would cancel that policy.

Thanks for your response. I was thinking that a disability might also somehow increase our expenses. For example, for someone with mobility issues, modifications to home might be necessary, special equipment, etc. No way to know. I guess the question is would an extra ~$300K after-tax make a big difference in our financial picture? Rationally, I think not - if I'm ill or disabled enough to get the $$$ there's probably a lot of other expenses I would not be incurring such as travel.

 

[Lewis Clark]

Thanks for your response. I was thinking that a disability might also somehow increase our expenses. For example, for someone with mobility issues, modifications to home might be necessary, special equipment, etc. No way to know. I guess the question is would an extra ~$300K after-tax make a big difference in our financial picture? Rationally, I think not - if I'm ill or disabled enough to get the $$$ there's probably a lot of other expenses I would not be incurring such as travel.

You are welcome. : )

This is one reason to make an allowance in projected expenses for the unexpected. Life happens. And some of the special equipment you mentioned might be covered by your medical insurance.

I used the same thought process when I considered long term care insurance. Every policy I have seen would pay a maximum daily dollar amount for a limited number of days, and would therefore pay out a maximum amount to me ... IF I needed it and IF the insurance company would actually cough up the cash. I looked at the premiums against the maximum payout amount to see if I thought the insurance was worth it. For us, the answer was no and we are self insuring for long term care.

 

[LateToFIRE]

You are welcome. : )

This is one reason to make an allowance in projected expenses for the unexpected. Life happens. And some of the special equipment you mentioned might be covered by your medical insurance.

I used the same thought process when I considered long term care insurance. Every policy I have seen would pay a maximum daily dollar amount for a limited number of days, and would therefore pay out a maximum amount to me ... IF I needed it and IF the insurance company would actually cough up the cash. I looked at the premiums against the maximum payout amount to see if I thought the insurance was worth it. For us, the answer was no and we are self insuring for long term care.

It's interesting that you put it in the same frame of reference as LTC insurance, which I (and many others) have had very bad experiences with. So, I'm asking myself what makes me think D insurance would be any easier to collect benefits on if I had a legit claim. Also, I only have a few more years left on the policy so the most I could collect would be ~$200K-$300K if it started paying out next 12 months. I think something very serious in terms of accident or illness would have to happen for me to be able to collect, and if that were the case I'd probably have much bigger problems than whether I had that extra cash. I think where I'm landing is to cancel shortly.

 

[marko]

For us, the answer was no and we are self insuring for long term care.

I'm curious. When people say they're 'self insuring' does that mean that you intend to just pay when/if the time comes or are people setting money aside exclusively for that purpose? Or something else?

 

[Lewis Clark]

I'm curious. When people say they're 'self insuring' does that mean that you intend to just pay when/if the time comes or are people setting money aside exclusively for that purpose? Or something else?

For me, self-insuring for long term care means we will pay out of pocket from the funds in our portfolio. We are not creating a separate account to pay for long term care if it becomes necessary.

 

[Lewis Clark]

It's interesting that you put it in the same frame of reference as LTC insurance, which I (and many others) have had very bad experiences with. So, I'm asking myself what makes me think D insurance would be any easier to collect benefits on if I had a legit claim. Also, I only have a few more years left on the policy so the most I could collect would be ~$200K-$300K if it started paying out next 12 months. I think something very serious in terms of accident or illness would have to happen for me to be able to collect, and if that were the case I'd probably have much bigger problems than whether I had that extra cash. I think where I'm landing is to cancel shortly.

My parents both had/have long term care insurance. Mom has not yet needed it. Dad's policy paid promptly when he was in a nursing home. My one personal experience with long term care insurance was a very good experience with that insurance company.

This is the same frame of reference I use to evaluate any insurance product.

Using your numbers, you are paying for ~ $300,000 worth of coverage if you collect the maximum amount. Should you become disabled, would you really need that $300,000? Or is your stash large enough to get by comfortably without it? If you think the $300,000 would make a difference for you, then you need to decide if the premiums are worth it.

Keep in mind that you may never need it at all. And if you do need it, you may collect something less than the maximum.

Risk versus reward is something we all have to evaluate in these situations. I don't think there is one right answer for everyone. It depends on the level of assets we have and our risk tolerance, among other things.

 

[Dash man]

If you’re considering keeping the LT disability policy, I suggest you read the policy carefully to see how long and for what it will payout. I seem to remember my old policy ended when reaching social security age. It also took six months to kick in before benefits began.