Nearly one in four Americans over the age of 65 has a disability.¹ And when it comes to planning for retirement, taking your disability into account is vital. Disabilities may impact many things, from your healthcare options to your retirement income and estate planning needs. Here are a few key points folks with disabilities might want to consider when planning for retirement.

Replacing Your Income

If your disability keeps you from working, you may already receive Social Security Disability Income (SSDI) or Supplemental Security Income (SSI) benefits. These benefits shouldn't change after you retire, and your retirement budget may look a lot like your current one.

However, if you're forced to retire early because you developed a disability, you need to replace your lost income in retirement. This challenge may require applying for SSDI benefits. These benefits are based on the number of years you worked and the salary you earned during these work years. Depending on your age, you may also be able to withdraw funds from your 401(k), IRA, or other retirement account.

Another potential source of income is private disability insurance. This insurance is designed to provide monthly or lump-sum payments if you develop a condition that keeps you from working. Unlike SSDI benefits, which you may receive for the rest of your life, private disability insurance benefits usually terminate after a few years of payments.

Accounting for Healthcare Costs

Having a disability may mean higher healthcare expenses. From regular medical appointments, medications, therapies, assistive devices, and even potential home modifications, you may spend a disproportionate amount of income on your health in retirement. And while Medicare and Medicaid might cover hospitalizations and medical equipment, they don't extend to out-of-pocket costs like premiums, deductibles, and co-payments.

When analyzing your medical costs in retirement, you first want to see what benefits you have available and what expenses they cover. Then, look for ways to fill the gaps—whether by using a Medicare supplement insurance program, taking withdrawals from a retirement account, or purchasing previously-owned medical equipment instead of buying new. Don't forget to account for inflation, which might increase these expenses over time.

Covering Long-Term Care

If your disability requires help with daily activities, planning for long-term care is essential. Medicare generally doesn't cover long-term care in a facility, and the cost of paying for this care yourself may be staggering. For many people, long-term care insurance may help cover these costs for several years or longer. Generally, the earlier you purchase a long-term care insurance policy, the less expensive the policy premiums. This strategy means looking into your options well before you might have to cover round-the-clock long-term care.

Planning Your Estate

For individuals with disabilities, estate planning is necessary to manage your financial and healthcare affairs according to your wishes. This may involve setting up a “special needs” trust to qualify as eligible for means-tested benefits like SSI and Medicaid, designating a trusted individual to make financial and healthcare decisions if you become incapacitated, drafting a will, or establishing other arrangements to distribute assets upon your death.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which insurance product(s) may be appropriate for you, consult your financial professional prior to purchasing.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

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Footnotes

¹ 8 Facts About Americans With disabilities
https://www.pewresearch.org/short-reads/2023/07/24/8-facts-about-america...