Flat on your back? Is the money still coming in?

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PORTLAND, Maine — Although the risk of experiencing an income-limiting disability continues to rapidly rise among the American workforce, most workers are not preparing for the potential financial consequences that a disability can create.

Never thought about it

According to a new survey from the Council for Disability Awareness, a majority of workers — 56 percent — have never discussed with anyone how they would continue to pay for their living expenses if a disability kept them out of work for several months or longer.

The survey found that while the majority of workers rated their ability to earn a living as the most important contributor to their long-term financial security — three times greater than those who rated retirement savings as No. 1 — two in three workers do not even think about disability when they discuss their “financial planning.”

Findings

Among the workers surveyed:

— Almost 90 percent believe disability planning should start in a person’s 20s or 30s;

— Yet, large majorities (82 percent) are still concerned about how they would pay their normal living expenses if their income suddenly stopped because of an accident or illness;

— Seven in 10 workers could cover their expenses for six months or less, a potential challenge to their financial security since the average long-term disability lasts more than two years;

— Young workers 21 to 35 are particularly vulnerable, as over half (68 percent) indicated that they could cover normal living expenses for just three months or less if they were to lose their income.

“The survey underscores the need for workers to incorporate the financial risks associated with disability into their financial planning mindset and actions.

Most important

“The ability to earn a living is the most important driver of financial security for the majority of people; it needs to be valued like a retirement fund, savings account or a home,” explained Robert Taylor, president of Council for Disability Awareness.

As the survey illustrates, workers are not financially preparing for a disability. Most believe that if they were out of work for a year, they could rely on a patchwork of income sources to make ends meet, including help from friends and family, retirement savings accounts, home equity loans and credit cards.

Most — 62 percent — would rely to some degree on a spouse’s or partner’s income. However, that may be optimistic, since the majority of households live paycheck to paycheck and have a negative savings rate.

The survey also highlights a considerable lack of clarity about employer-sponsored disability programs and the Social Security Disability Insurance program.

Sick leave, disability

Only half of workers who are provided with employer sick-leave benefits feel they understand them very well. For those employees who are offered a long-term disability program by their employer, only 28 percent feel they have a good understanding of the program and close to 20 percent don’t even know if their employer offers a program.

The survey also pointed to a lack of basic knowledge about Social Security disability benefits. One in three surveyed workers does not understand or is not aware of Social Security Disability Insurance, a key disability program for 150 million workers across America.

Need to know

“Broader awareness and education about available disability programs is a critical starting point to helping more workers assume responsibility for their long-term financial security, which continues to shift to the American worker,” Taylor said.

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