A One-in-Four Chance

Disability Insurance

A One-in-Four Chance

Here’s a stat for you: According to the Social Security Administration, a 20-year-old worker today has a 25% chance of becoming disabled and unable to work for six months or longer prior to reaching full retirement age.

It’s an interesting thought, actually. Not because the topic itself is all that fascinating but simply because, for something typically so far on the back burner it’s almost off the stove, the chances of it happening to you, your spouse, your co-worker with the office next to yours, or your best friend is almost a statistical lock.

I don’t write about insurance a lot, primarily because I know some people would rather chew on glass than read about it. However, no one’s personal financial plan is complete without paying attention to common-sense asset and income protection. Pay a few minutes of attention here for a quick primer on accident and sickness insurance — aka disability insurance — coverage designed to protect your income.

I’m going to focus on private insurance coverage, but understand that if you pay into Social Security — which most do — you may be eligible for disability benefits under Social Security. The problem is that the Social Security Administration’s definition of disability is one of the most stringent around — so much so that some attorneys base their entire practices on fighting Social Security disability decisions. 

Employer benefit

Social Security aside, the most common place you’ll find disability insurance offerings is through your employer. Usually, you’ll see coverage for “short-term” and “long-term” disability. Short-term coverage often refers to a period of six months or less while long-term refers to a period beyond that and often up to your 65th birthday.

While some employers pick up the entire premium, an employee will usually have some portion of the premium to pay. Many times, employees have a few options in varying percentages of current income as benefit options to choose from. With most employer-sponsored plans, employees or their employers make pre-tax premium payments, making the benefit payments — should you receive them — taxable to you.

Individual coverage

If you’re self-employed, in a situation where your employer doesn’t offer coverage, or your employer doesn’t provide enough coverage for your needs, you can purchase disability insurance individually. Individual policies can be more or less expensive than group policies, depending on a number of factors including age, occupation, and health history.

Individual policies also tend to be far more customizable, allowing you to select an elimination period — akin to a deductible — inflation riders, and even specific disability definitions. Because most with individual disability insurance policies pay premiums with after-tax money, benefits are tax-free to you, if paid.

Self-insuring

Then there’s the default option — retaining the risk yourself and using your own financial resources to replace your income. For a long enough period of disability, this could result in something akin to a forced early retirement. Such a situation could be financially devastating. However, short-term disability scenarios are far easier to self-insure. Think of a short-term disability fund as an emergency reserve that’s supercharged to replace income until long-term disability insurance coverage will provide you benefits. While you’re still saving to get there, short-term insurance coverage can hedge your plan and, when you reach your target, you can cut the short-term insurance loose. 

Whether through your employer or via an individual policy, disability insurance can help you protect one of your biggest assets: your income. And when you protect your income, you can also protect your ability to save, which, in turn, helps protect your ability to achieve future goals.

Do you have questions about how disability insurance could fit into your financial plan? Just ask!

Interested in meeting to plan your financial future? You can start by taking a look at the How It Works page to learn more. Then, simply schedule a time for a no-cost web or in-person financial planning consultation.

Jason Speciner
jason@fpfoco.com

Jason Speciner is a CERTIFIED FINANCIAL PLANNER™ professional, an Enrolled Agent, and the founder of Financial Planning Fort Collins, a 100% employee-owned and fee-only firm. He is also a member of the National Association of Personal Financial Advisors (NAPFA) and XY Planning Network (XYPN). Since 2004, he has served clients of all ages and backgrounds with unique experience working with members of generations X and Y. To learn more, check out Jason's blogs and see the media he's been featured in.



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There is a minimum initial investment of $100,000 per Strategy:FOCO client household. This minimum can be met via transfer of existing accounts or with new funds. A client household may generally include accounts for a head of household, a significant other, dependents, and any controlled organizations or entities.

Minimums do not apply to inStream proactive financial planning as a stand-alone service.
ANNUAL FEE
Assets Under ManagementFee as a % of AUM
$100,000 - $249,9991.00%
$250,000 - $499,9990.90%
$500,000 - $999,9990.80%
$1,000,000 - $1,999,9990.65%
$2,000,000 or more0.50%

inStream proactive financial planning as a stand-alone service: $1,000/year or $100/month
MINIMUM ACCOUNT SIZE
There is a minimum initial investment of $100,000 per Strategy:FOCO client household. This minimum can be met via transfer of existing accounts or with new funds. A client household may generally include accounts for a head of household, a significant other, dependents, and any controlled organizations or entities.

Minimums do not apply to inStream proactive financial planning as a stand-alone service.
ANNUAL FEE
Assets Under ManagementFee as a % of AUM
$100,000 - $249,9991.00%
$250,000 - $499,9990.90%
$500,000 - $999,9990.80%
$1,000,000 - $1,999,9990.65%
$2,000,000 or more0.50%

inStream proactive financial planning as a stand-alone service: $1,000/year or $100/month
MINIMUM ACCOUNT SIZE
The minimum initial investment for the Invest:FOCO platform is only $5,000 per account. This minimum can be met via transfer of an existing account or with new funds. Invest:FOCO is currently available for Individual, Joint, Traditional IRA, and Roth IRA registrations.
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MINIMUM ACCOUNT SIZE
The minimum initial investment for the Invest:FOCO platform is only $5,000 per account. This minimum can be met via transfer of an existing account or with new funds.
ANNUAL FEE
0.65% of assets under management ($65 per $10,000 managed)
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When investment management services are desired, there is a minimum initial investment of $125,000 per Strategy:FOCO client household. This minimum can be met via transfer of existing accounts or with new funds. A client household may generally include accounts for a head of household, a significant other, dependents, and any controlled organizations or entities. inStream proactive financial planning is then included at no additional cost.
ANNUAL FEE
inStream proactive financial planning as a stand-alone service: $1,250/year or $125/month

Assets Under ManagementFee as a % of AUM
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$250,000 - $499,9990.90%
$500,000 - $999,9990.80%
$1,000,000 - $1,999,9990.65%
$2,000,000 or more0.50%
TAX PREPARATION
Strategy:FOCO clients are eligible for a 50% or 100% discount on income tax preparation services offered through Fort Collins Tax Service, LLC. This discount applies to the base cost for return preparation as well as Schedules B & D. More details can be found here.
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Minimums do not apply to always-on, real-time financial planning as a stand-alone service.

For investment management services there is a minimum initial investment of $125,000 per Strategy:FOCO client household. This minimum can be met via transfer of existing accounts or with new funds. Investment management fees are generally debited from the accounts to which they apply. Financial planning services are included for Strategy:FOCO investment management clients at no additional charge.
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Assets Under ManagementFee as a % of AUM
$125,000 - $249,9991.00%
$250,000 - $499,9990.90%
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FINANCIAL PLANNING
Financial planning services are ongoing, and include unlimited phone, email, web and in-person meeting and consultation time. Pricing is based on the unique circumstances of each client situation. Generally, there is a one-time plan development fee ranging from $500 - $2,000 and a monthly fee of $150 - $500; cancel anytime. Clients utilizing investment management services with portfolios of $500,000 or more will typically receive financial planning services for no additional fee.
INVESTMENT MANAGEMENT
Assets Under Management (AUM)Annual fee as % of AUM or flat-dollar
$0 - $249,9991.00%
$250,000 - $499,9990.90%
$500,000 - $999,9990.80%
$1,000,000 - $1,999,9990.65%
$2,000,000 - $2,999,9990.50%
$3,000,000 - $3,999,999$15,000
$4,000,000 - $4,999,999$20,000
$5,000,000 or more$25,000 + $2,000 per additional $1mm
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Your fee is determined by the complexity of your needs and situation. The primary proxy we use for complexity is your investable net worth, which is generally your total net worth, excluding your primary residence. Your investable net worth includes the value of cash, bonds, stocks, mutual funds, rental real estate, and other business or financial interests. This aligns with the holistic nature of our comprehensive services. You can use the chart below to estimate your fee based on your investable net worth. In some circumstances, your fee may be more than the minimums in the chart below.
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ESTIMATE YOUR FEE
Your fee is determined by the complexity of your needs and situation. The primary proxy we use for complexity is your investable net worth, which is generally your total net worth, excluding your primary residence. Your investable net worth includes the value of cash, bonds, stocks, mutual funds, rental real estate, and other business or financial interests. Our transparent pricing aligns with the holistic nature and value of our comprehensive services. You can use the chart below to estimate your fee based on your investable net worth. In some circumstances, your fee may be more than the minimums in the chart below.
Annual Fee Investable Net Worth (INW)
$4,000 (minimum for an individual)Up to $500,000
$6,000 (minimum for couples)Up to $1,000,000
$8,000 - $12,000$1,000,000 - $3,000,000
+ $1,000per additional $1,000,000 of INW