What’s your biggest asset? The fact and fiction of protecting your paycheck
Published 9:25 pm Sunday, January 26, 2020
- Photo Contributed Nathanael Hughes is a financial advisor with Northwestern Mutual.
CONTRIBUTED BY NATHANAEL HUGHES
When we think about our balance sheet some things that come to mind are our home, cars, boat, camper, etc. It may shock you, but those items are not your most valuable assets….you are.
When we think about our balance sheet some things that come to mind are our home, cars, boat, camper, etc. It may shock you, but those items are not your most valuable assets….you are.
Our ability to wake up, go to work and consistently bring home a paycheck for our families is crucial to our financial security.
Take for example a 30-year-old making a gross income of $50,000/per year working until age 65; their non-inflated lifetime earnings will be $1.75mil.
The reality is that few American workers are financially prepared to weather long term disability injury, illness, or unplanned medical expenses. In fact, according to the [2019] Northwestern Mutual Planning & Progress Study, [85] percent of Americans report feeling financial anxiety today.
Much of this anxiety can be traced to the fear of the unknown. The study cites the top two financial fears as having an unplanned financial emergency and having an unplanned medical expense due to an illness.
Fiction #1
You have enough long-term disability coverage through your employer’s benefit plan.
Fact
If you’re covered by an employer-sponsored short- or long-term disability plan, you’re more fortunate than most. Even if you are provided group coverage, such coverage alone only replaces a portion of your income.
Many group plans only cover [50–60] percent of your base salary. That means if you’re currently making $50,000 annually, 50 percent of that would be $25,000 per year.
If the employer is paying for your coverage or the benefit is deducted from your paycheck, the final take-home would be reduced even further after paying taxes on the benefit received.
Also, take into consideration that if you were to ever leave that employer their group benefits will not go with you.
If you’re unexpectedly faced with illness or injury, supplemental coverage can help bridge the gap between what’s covered by your employer’s group policy and your monthly take-home pay.
Supplemental coverage could ensure you’re better poised to: maintain your current standard of living and minimize the impact on your long-term financial security.
In addition, supplemental coverage moves with you if you change jobs, covers you between jobs and provides critical income protection if you’re
self-employed.
self-employed.
Fiction #2
I am healthy, I will not become disabled in my working years.
Fact
Even if you’re young and healthy, according to the U.S. Social Security Administration, [one-in-four] of today’s 20-year-olds will be disabled for three or more months at some point in their career before reaching age 67.
In addition, the word disability itself may not be what you think. Individual disability income insurance may provide coverage for common conditions like back pain, migraine headache, pregnancy complications or depression.
Consulting an experienced financial professional can help to ensure your policy includes all you need to continue meeting your financial obligations in the event of a disability.
Fiction #3
Long term disability insurance is expensive.
Fact
In most cases, you can protect your income for less than the cost of a daily cup of coffee.
On average, individual disability income insurance costs [$24] and [$47] each month for males and females respectively 1 — while coffee typically costs [$76] each month.
Protecting your most important asset is an easy two-step process. First, check with your employer to discover if it provides any group disability coverage.
Second, consult with a trusted financial professional who can help you to determine how much additional coverage you will need and understand the
contract definitions when looking at the right policy.
contract definitions when looking at the right policy.
Taking these simple steps to ensure you’re adequately covered in an unexpected event will help to relieve your financial anxiety as you’re protecting your most important financial asset.
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Disability income insurance policies contain some contractual features and optional benefits that may not available in all states.
The ability to perform the substantial and material duties of your occupation is only one of the factors that determine eligibility for disability benefits.
These policies also contain exclusions, limitations, and reduction of benefits provisions. Eligibility for disability income insurance, additional policy benefits and qualification for benefits is determined on a case-by-case basis.
To be used with forms ICC16.TT.NCDI.(0916), ICC16.TT.GRDI.(0916), or state equivalent. Not all contracts and optional benefits are available in all states.
Article prepared by Northwestern Mutual with the cooperation of [Nathanael R. Hughes, MBA]. Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company (NM) (life and disability insurance, annuities, and life insurance with long-term care benefits),
Milwaukee, Wisconsin, and its subsidiaries.
[Nathanael R. Hughes, MBA] is an agent of NM based in [Johnson City, TN]. To contact [Nathanael R Hughes, MBA], (423-283-9545), or email at
Nathanael.Hughes@nm.com.
Nathanael.Hughes@nm.com.
