How to Save for Disability
Nearly 1 in 4 Americans entering the workforce today will suffer a disability that prevents them from working before retiring, according to the U.S. Social Security Administration. Either an illness or injury could leave you unable to work for several months, or longer. To prepare for a disability, you can either buy private insurance or have enough personal savings to sustain you while you're not working.
Other People Are Reading
Instructions
-
Instructions
-
1
Determine how much money you will need to replace your income. Most people do not need 100 percent of what they made before becoming disabled. They can stop contributing to retirement savings and cut back some unnecessary expenses. Look at past monthly bills to determine how much you spend on the basics of housing, utilities and food. You can also use an online calculator to estimate your income needs.
-
2
Decide how long you want your savings to last and multiple that figure by your monthly expenditures. For example, if you want your savings to last for 12 months of disability and you need $1,500 a month, you would need to save $18,000. The average long-term disability lasts 2½ years, according to the Council for Disability Awareness. 1 in 7 workers will be disabled for 5 years or more, according to the Life and Health Insurance Foundation for Education.
-
-
3
Start a monthly savings program and work toward your goal. If you want to have a disability fund of $18,000 and you can save $300 a month, it will take five years to reach your goal. Keep the money in a savings account or money market account so your assets are liquid and available quickly if you become unable to work.
-
4
Consider purchasing disability insurance as a safety net until your able to save the full amount you need in case of disability. You can purchase an individual policy, but group policies through an employer and professional association are usually cheaper.
-
1
Tips & Warnings
Have the amount you save monthly automatically transferred to a savings or money market account so you're not tempted to spend the funds.
References
Resources
- Photo Credit broken wrist image by askthegeek from Fotolia.com
