Retirement Plan Protection
by Gary Fegan
We are all living longer and do not have the luxury of a big business providing a fat pension for us when we retire. So, we must all save for retirement on our own (sometimes your company may help by matching your contributions, or by providing a small pension at retirement). Another possible retirement option is Social Security- but will that really be there for you when you need it? As we are working, and earning money, we can shave off some of that to go into an account for use during our retirement years.
What would happen to that funding if you were to become disabled and your income stopped coming in? How would you continue to fund your retirement account? Chances are you will not have saved enough to retire at that age (you may become disabled at age 35, 40, 47- who knows?), but most everyone will not have saved enough to retire at that young age. Most individuals have an age in mind when they expect to retire.
I plan to retire by the age of 62; everything I do is part of a plan for me to retire at age 62. What would happen if I had to retire today due to a disability? My retirement dreams would be shattered! This is not something most people will accept as a possibility, but it happens all too frequently. If you do not put a plan into action, a disability could financially devastate you, your family, and any hope for a happy and financially stable retirement.
You may think that you will never become disabled, but those under age 35 have a 33.3% chance of becoming disabled for at least six months during their working careers. Men have a 43% chance of becoming disabled during their working years and women have a 54% chance!* You may want to look into a special disability insurance program that replaces your retirement savings in the event of sickness or injury that prevents you from working. This Retirement Protection Plus (RPP) disability policy is available to you and can be purchased regardless of how much other disability insurance coverage you may have already.
RPP is designed to help you maintain a healthy retirement strategy by replacing contributions made to a defined contribution plan during a disability. Once you are eligible for benefits, a monthly benefit insuring up to 100% of your retirement contributions, including any employer matching contributions, will be paid into a trust established by you. When you turn 65, the assets can be distributed directly to you. You may also choose an annuity option that will allow you to take the funds over a period of time to allow for further tax-deferred growth.
Please see an example of how a retirement plan may fare with and without an interruption of benefits below:
A long term disability, if not protected by a strong disability insurance policy and a retirement protection plan, can turn into instant retirement. Many people today rely on their employers to provide the appropriate insurance. Your employer may offer you group long term disability insurance, but there is a good chance you have either no LTD, or what you have is not enough, and your employer almost definitely does not offer retirement protection.
This retirement protection is an essential part of your overall financial plan. You do not want to enter into retirement without enough assets to live comfortably.
Furthermore, the strength of the company that offers the coverage is extremely important. A disability policy is a promise to pay a benefit when you need it most - and a promise is only as good as the company that can honor it.