Rely on Disability from Social Security?
That's a Bad Idea!
The Social Security Administration (SSA) offers disability income for those who are unfortunate enough to suffer a disability and have met the criteria to qualify for disability income. The eligibility criteria for disability income benefits from Social Security are that, due to a sickness or injury:
1. You cannot perform the work that you did previously;
2. You cannot adjust to other work because of your medical condition(s); and
3. Your ailment has lasted or is expected to last for at least one year or to result in your death.
These are pretty strict criteria. And note that benefits are not payable for partial or short-term disabilities. Before benefits can be paid out to you, you are expected to rely on other sources of income such as worker’s compensation, insurance, or expected to deplete your family savings and investments.
Even if you survive a disability for a year and have depleted your savings and investments, you still may not even meet the Social Security Administration’s eligibility criteria. Note that the SSA requires that you make adjustments to go to work in some other occupation different from what you did before.
For most people this requirement is unacceptable. An example might include working at a convenience store after you are too sick to work in your regular occupation. And relying on worker’s compensation would not be a good idea either because it will only cover for injuries that occur while you are actively working.
The New York Times December 10th, 2007 article “Disability Cases Last Longer as Backlog Rises” by Erik Eckholm reports that decisions on a claim can take as long as three years. In the mean time, many people have lost their homes, declared bankruptcy or died while waiting for a decision. The application process is long and rigorous.
At the time of her article she reported over 750,000 cases that were backlogged. This had grown from about 311,000 backlogged cases in 2000.
In a more recent article from the Washington Post published on October 18th, 2014 by David A. Fahrenthold “It’s just maddening. There’s nothing you can do”. The growing trend of claims in backlogged cases with the SSA has grown to be almost 1 million.
The solution to alleviate the effects of a disability relies on you and your long-term disability insurance (DI) policy rather than the SSA. Your individual DI policy may be tailored to:
1. Pay benefits after only 90 days of being disabled.
2. Pay you when you are totally disabled from performing the material and substantial duties of your own occupation.
3. Continue your DI benefits even if you go to work in another occupation as long as you are disabled from working in your original occupation.
4. Pay benefits until your income recovers in the event of a residual disability, until you reach the age of 65, 67, 70 or potentially pay benefits for life. You must be totally and continuously disabled to receive lifetime benefits.
5. Pay partial benefits for partial disabilities.
6. Make contributions into a retirement protection program if you are totally disabled .
7. Reimburse you for your normal business overhead expenses.
8. Make payments on our business loans.
You and your family are much better off if your income is protected by a disability insurance policy. Responsible planning for protecting your most valuable asset, your income rely on attaining individual DI.
This [publication] is provided for informational purposes only and should not be considered tax or legal advice. Please contact your tax or legal advisor regarding the tax treatment of the policy and policy benefits. You should consult with your own independent tax and legal advisors regarding your particular set of facts and circumstances. The information provided is not intended or written to be used, and cannot be relied upon, to avoid penalties imposed under the Internal Revenue Code or state and local tax law provisions. Please consult with the Social Security Administration for complete details concerning eligibility requirements for Social Security disability benefits. Retirement Protection Plus is not a pension plan or a substitute for one.
Jack Le, CLU® holds a Financial Representative contract with The Guardian Life Insurance Company of America based out of New York, NY.
The views and opinions expressed herein are that of the author and do not necessarily represent the views and opinions of The Guardian Life Insurance Company of America, or its subsidiaries or affiliates thereof.
2018-52172 Exp 01/20