Can You Stay Financially Healthy on Disability?

October 29, 2014

     If you become disabled due to injury or illness, it’s likely that your biggest worry apart from your health is how you will survive financially. This is particularly worrisome to those that are single, the primary breadwinners for their family and people who expect to recover slowly from their illnesses. It’s hard to know sometimes how long your illness will last. Statistically, most disabling illnesses or injuries last less than 12 months, which is still a long time to sustain financially if you cannot work. The key to staying afloat financially when you’re disabled is to take advantage of all sources of income available to you and to reduce expenses where possible.

     “For most of our clients, I recommend having at least six months’ worth of living expenses saved as your cash reserve, which can be used to cover the income loss of a short term disability. Additionally, purchasing long term disability (LTD) insurance is key to having ample long term income replacement should you suffer a long term illness. Be sure to use after-tax dollars to pay LTD insurance premiums in order to receive benefits tax free,” said Jordan Nightingale, CFP® at HFG Wealth Management.

     You may be eligible to receive disability benefits from a group disability insurance policy through your employer, an association, lending institution, individual disability insurance policy or from a government benefit program. If you are entitled to benefits, don’t intend for them to completely replace your lost earnings; most disability benefit programs aim to replace only 50 percent to 70 percent of your pre-disability gross earnings. You may also want to consider disability benefits, workers’ compensation and Social Security disability benefits as a source of income due to illness. Although each situation due to illness is unique, it is helpful to consider having a plan in place.

     Depending on your financial needs, it may be helpful to consider other sources of income as well. If you have a life insurance policy with cash value, consider borrowing the cash reserves. You’ll have to repay the money, but not right away. You will be potentially charged interest on the amount you borrow and the policy loans, if not repaid, can reduce the death benefit or even cause your policy to lapse. Also, if you have established a defined contribution plan, such as a 401(k) plan, you may be able to borrow money from the plan up to a certain limit and repay it. In general, the withdrawal will be tax free, provided you repay the loan.

     With planning, HFG Wealth Management can help make sure you are prepared for many of life’s challenges. At HFG Wealth Management, we embrace a more holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit or call 832.585.0110

Blog Disclosure
Examples are hypothetical in nature and are for illustrative purposes only. HFG Wealth Management, LLC (“HFG”) is an investment adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. The views expressed by the author are the author’s alone and do not necessarily represent the views of HFG or its affiliates. The information contained in any third-party resource cited herein, including but not limited to other blogs, websites or articles, is not owned or controlled by HFG, and HFG does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by HFG of third party or any of its content or use of its content. The standard information provided in this article is for general educational purposes only and should not be construed as, or used as a substitute for, financial, investment, or other professional advice. If you have questions regarding your financial situation you should consult your financial planner, investment advisor, attorney or other professional. A copy of HFG’s current ADV Part 2A discussing HFG’s investment advisory and financial planning services and fees is available for review upon request or at



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