What’s the worst financial crisis you could experience as you approach retirement? There are a wide range of potential threats. You could get laid off or experience business troubles. Your investments could decline in value. You could face a series of unplanned emergency costs. Any number of issues could derail your retirement plans just as you wind down your career.
Here’s one scenario you may not have considered, though. As you approach retirement, you start to experience medical issues. Your nagging knee injury might develop into a more serious issue. Or your chronic high blood pressure develops into heart issues, and as a result, you have to cut down on stress and work. Maybe you are diagnosed with a serious illness like cancer.
You might receive treatment for the issues, but the pain and the severity of the medical problem makes it difficult to work. Before you know it, you have to leave your career, by either taking a leave or retiring early. Without the benefit of a paycheck, you’re forced to take premature distributions from your retirement accounts to keep your head above water.
Think it can’t happen to you? Think again. According to the Council for Disability Awareness, 1 in 4 adults will suffer a disability at some point in life. The group reports that the average disability claim lasts nearly 32 months.1
Fortunately, there are steps you can take to prevent disability from undermining your retirement plans. Below are three steps you may want to consider. If you haven’t planned for disability risk, now may be the time to do so.
Create an emergency budget.
A budget is always a valuable financial tool, but it’s especially helpful in an emergency. As a general rule, it’s a good idea to regularly use a budget to manage spending and track your progress toward financial goals.
However, you may want to also create an emergency budget. This is a scaled-back budget you could implement if you suffered a disability or other financial emergency. You could use it to immediately cut spending in targeted areas such as travel, shopping and more. By creating this emergency budget in advance, you can quickly make the changes needed to stay financially stable.
Build an emergency reserve fund.
It’s always important to have an emergency fund. As you approach retirement, though, that fund could become even more critical. Rather than keeping a reserve that could fund a few months of expenses, you may want to create one that could fund your lifestyle for a year or more.
A large emergency reserve could help you protect your retirement accounts. For example, if you suffer a disability and have to retire a year early, you could rely on your emergency fund to pay the bills. That allows your retirement assets to continue to grow.
Consider disability insurance.
Disability insurance is often an effective way to manage the financial fallout of long-term disability. A disability insurance policy pays you a monthly benefit to replace lost income if you aren’t physically able to work. The amount of the benefit depends on your income and the terms of your specific insurance policy.
There are two types of disability insurance policies: short-term policies, which pay benefits for several months, and long-term policies, which could pay benefits potentially all the way up to age 65. Disability insurance policies have a wide range of adjustable features, so you can create a policy that meets your needs and fits into your budget.
Ready to develop your disability protection plan? Let’s talk about it. Contact us at Coventry Financial Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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