When bad health hits, look to this financial tool
(BPT) - Working hard may take a toll on your health. But what are your options when your work pays the price for your bad health?
Chronic illness, an injury or a severe disability can create a financial crossroads for people. Often, people are torn between trying to keep working in ill health, losing important income and benefits, and trying to stabilize their health conditions. A cancer diagnosis, stroke or car accident is just the beginning of a challenging path. Usually, financial problems follow soon after.
Many people have limited options and turn to investments and savings set aside for retirement, like a 401(k) or an IRA. "Many workers make the worst mistake when they borrow money against their 401(k) after a work-disrupting illness or disability," says Tricia Blazier, personal health and financial planning director for Allsup. "This devastates your financial future for the long term, and it's very difficult to recover."
But nearly three times as many American workers are insured for Social Security Disability Insurance (SSDI) benefits because they pay FICA payroll taxes as those who establish a 401(k). That breaks down to 152 million workers insured for SSDI, according to the Social Security Administration, and about 52 million with an active 401(k), according to the Investment Company Institute. In addition, it's estimated only 32 million workers have private long-term disability insurance through their employers.
"Really you need all three - 401(k), LTD and SSDI - in your financial toolkit, no matter how old you are," Blazier says. "You need to consider SSDI because you can access this income without penalty or trade-offs before you turn 59-1/2 years old, unlike your 401(k)."
The SSDI program is insurance for workers who experience a severe disability. It pays monthly income for those people who qualify due to a severe chronic or terminal illness or disability, and it includes incentives to return to work if they medically recover.
"The SSDI program has risen in visibility in recent years because of its importance for the aging workforce, especially since so few workers have private disability coverage," says Blazier, who provides guidance with finances and budgeting for SSDI applicants.
"The important thing to recognize is that SSDI has valuable benefits that go beyond monthly income," Blazier added. "They include access to Medicare, dependent benefits, plus the future opportunity to return to work if you are able."
SSDI as part of your financial toolkit
Blazier says many workers don't consider filing SSDI applications because they don't understand eligibility rules or feel conflicted about seeking benefits from the program.
"This is an insurance program, and you've paid the premiums," Blazier says. "You are making a huge mistake if you don't at least find out if you're eligible for SSDI when you quit work due to an injury, illness or disability."
Common questions about this program include:
How do I know if I'm eligible for SSDI? Social Security has stringent rules to receive benefits. Individuals must have paid FICA payroll taxes, usually worked five out of the last 10 years, and have a severe work-disrupting condition that is expected to last at least 12 months or is terminal. Applicants also must be under full retirement age (65-67).
What does it take to file an SSDI application? Options include answering simple questions online at your convenience and letting an expert SSDI representative complete and submit Social Security forms on your behalf, schedule appointments with Social Security weeks in advance, or complete forms and submit them on your own.
Why is SSDI important to my financial future? Receiving Social Security disability income does not have to be a permanent circumstance. Thousands of individuals who experience work-disrupting illness go through rehabilitation, recover and eventually return to work. Your SSDI application is the first step in this process to reclaiming the life that provides you with financial and health stability you need.
Along with regular monthly income, SSDI includes access to health care insurance, dependent benefits, protection for your Social Security retirement income (so your retirement benefits are less likely to be reduced) and return-to-work incentives.
"Your financial future doesn't have to be over, and neither is your career, even though you have to stop working for a few years," Blazier says. "Realize SSDI is an important support for you, and that you've already paid for it."
For more information about SSDI eligibility and your Social Security disability application, visit FileSSDI.Allsup.com.