1 out of 4 Americans will become disabled before reaching retirement age. Most of them do not have a plan for disability. When it suddenly happens, they will turn to Social Security Disability Insurance (SSDI) but will find it woefully inadequate for survival.
Here are 4 reasons why.
1. There is no possibility of a Social Security disability check during the first 6 months of your disability. Why? SSDI has a 5-month waiting period, meaning they do not pay any benefits for the first 5 full months of disability. And they pay one month behind. So, fully six months or more will pass before you can receive the first penny--even if you are approved quickly.
2. The average Social Security disability benefit in 2023 is around $1,558 per month. That isn't enough to live on in today's economy. It certainly isn't what most disabled persons were once earning.
3. It is common to wait 1 to 2 years, or even more, for Social Security to act on your disability claim. In 2023, the average processing time for a new claim is 290 days. And some take even longer. Over 75 percent of new claims will be denied, adding another 12 to 18 months for the appeal process to meander its way through the bureaucracy. No one ever promised that Social Security would be fast. It certainly is not. It is designed to be very slow and deliberate. On top of that, the system is simply overwhelmed.
4. Social Security benefits may not always be around. We think it is solid and permanent because it's part of the US government. But that's a poor understanding of Social Security. The US government does not pay benefits out of its general revenue, but out of special trust funds which were mean to take in as much as they pay out. They don't. Government estimates now say that by 2035, the government will become unable to pay 100 percent of disability benefits unless action is taken by the Congress. Most estimates say that without some drastic action now, benefits will have to be cut by at least 20 percent beginning in 2035. The "action" taken by Congress may be to reduce benefits early in hopes of saving the program later.
Do You Have Alternatives In Case of Disability?
Yes, but you must plan ahead. Once disability strikes it will be too late. I am not a financial advisor or planner--but I offer two common sense suggestions:
One, get your hands on some private disability insurance. The easiest way may be through a group policy with your employer. Many employers offer their employees an opportunity to participate in short term and long term disability insurance at work. The plans can be God sends while the disabled worker struggles to get Social Security approved. These programs are usually a lot faster than Social Security. A lot faster!
Two, save some money now. Find a way to put aside a regular portion of your earnings in a safe investment or savings account. As I mentioned, you certainly will need enough for at least 6 months because no Social Security disability money will be available to most people for at least 6 months (even if things go perfect).
Of course, you can't buy insurance when you need it. And you can't save money after your income is suddenly shut off. The best advice is to plan now. Speak to a qualified financial advisor about the potential for disability and how to plan ahead.
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This article is intended as general information, not financial or legal advice. We encourage you to speak to your financial advisor or professional about this matter.
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