Retirement is a time of choices and a time to do what we have looked forward to for years.
Many of us are taking the right steps - gauging our risk tolerance, investing early, dollar cost averaging, diversifying and rebalancing assets and focusing on the long term.
Retirement planning is necessary for two reasons – our earned income stops when we retire and many of our preretirement expenses continue.
When retirement finally arrives, the hope is we'll have sufficient income from our savings and investments to meet our expenses and realize our desired lifestyle.
Many people spend a lot of time preparing to achieve that goal, and the time spent preparing for a disability shouldn't be any different.
Retirement planning and disability income planning are interdependent. Each process helps to replace a portion of lost earned income, to meet monthly living expenses and to achieve a certain lifestyle.
You may think the two scenarios are much different, but from a cash flow standpoint, they are almost the same. If you become disabled, two things will happen. Your earned income will stop, but many of your pre-disability expenses will continue - just like in retirement.
Your monthly household expenses - rent/mortgage, property taxes, car and house maintenance expenses, utilities, food, clothing, loans, insurance and health care - during retirement are almost identical to what your monthly household expenses would be during a disability.
If sufficient income during retirement is a primary goal, then sufficient income during a disability is equally as important.
If you had to draw from your savings and retirement assets during a disability, how long would those assets last? To determine when they would run out:
1. Calculate your monthly household expenses during a disability.
2. Total your savings and retirement account balances.
3. Divide that number by your monthly household expenses.
Like many, this number may surprise you. Think about the impact on your retirement goals.
Make sure you have adequate disability insurance in place to protect your ability to earn an income if you become disabled.
Since a disability can have a permanent impact on your home, business, education and retirement, Northwestern Mutual offers a diverse line of disability insurance products to help replace income for household expenses and the overhead expenses within your practice or business.
These products also can help you preserve your long-term investments for education and retirement.