A study from Standard Insurance Company (The Standard) shows that many Americans are concerned about retirement and the financial impact of lost wages, but they have no idea how going on disability leave — at any age — can significantly impact their ability to retire.
The Standard’s Total Wellness Eco-system study reports 70% of respondents are worried about having money for retirement. But what happens if they lose the ability to work? What happens if they have a medical issue or develop a disability that results in lost wages? In that case, saving for retirement, even at below suggested levels, becomes difficult, if not impossible.
“Fifty-one million working adults are without disability insurance beyond basic Social Security. Without a bigger safety net, an employee’s financial stability could quickly collapse due to an unexpected illness,” said Tom Foran, vice president of Underwriting and Product Development at The Standard.
More than one in four of today’s 20-year-olds can expect to be out of work for at least a year because of a disabling condition before they reach the normal retirement age, according to the Council for Disability Awareness. Moreover, the average duration of a long-term disability is 31.2 months. With most employers suspending retirement contributions during an employee’s leave, retirement savings are often put on hold.
Financial stress leads to poor health, lost workdays
The fear of lost wages is a top concern to 71% of those surveyed in The Standard’s study. And 25% of survey respondents reported that financial concerns caused them health problems. Moreover, financial concerns caused 15% to miss work. In fact, Salary Finance reports that financially stressed employees lose nearly one month of productive workdays per year.
“Money concerns affect health and health issues impact finances,” says Rob Baumgarten, vice president of Retirement Plan Sales at The Standard. “These strong connections make clear the need for a total wellness ecosystem that keeps employees healthy, productive and saving for retirement.”
From millennials to boomers — health insurance is not enough
The Standard’s study found that most employees rely on health insurance and preventative care to protect them financially from the unexpected. They are unaware of the limitations of their health insurance plan when it comes to covering the significant non-medical costs that can arise from unexpected medical events.
“Everybody talks about credit card and student loan debts, but no one — especially younger workers – expects to be diagnosed with an injury or illness that forces them to miss work for a significant amount of time,” said Foran.
“Unless they’re prepared, it can be devastating financially in the short term just to pay monthly bills, and in the long term to retire comfortably,” said Baumgarten.
It’s not too early to prepare for the unexpected
The Standard’s study found that employees don’t know what to do to prepare financially for unexpected events. When they don’t know what to do, they’re most likely to do nothing — which is the worst option.
What you can do:
- Ask your employer about disability coverage. Sign up and make sure you have adequate disability insurance during your employer’s annual Open Enrollment season or through a private insurer.
- Ask about disability coverage when job seeking or ask current employers to provide it. Consider signing up for supplemental insurance products such as accident or critical illness which provide a lump sum of money to offset expenses like co-pays, childcare and more that medical plans don’t cover in the event of a disabling medical condition.
- Start saving for retirement as soon as possible. This will reduce the impact of disability on retirement. Signing up is a great start. Tools and calculators can help you set a personal savings target. Consider a double-digit contribution. The more you save now, the better your chances of reaching your goals. The earlier you start saving, the longer your money has to earn interest and compound interest.
- Accelerate your savings. Build an emergency fund with a goal of saving three to six months of income to cover unexpected expenses. Increase your retirement plan contributions as much as you can — even if it’s in incremental amounts every six months or annually. If you’re over age 50, you can take the opportunity to save even more with catchup contributions. Limits for these contributions are in addition to the regular annual contribution limits and vary each year.
- Build your retirement in different ways. You can add bonuses, tax refunds or other single payments to your retirement account. If your employer’s plan offers a Roth feature, and it fits your situation, think about signing up. A Roth feature offers tax-free growth and withdrawal flexibility in retirement.
Find The Standard’s Total Wellness Eco-system Report here.
About The Report
For this report, The Standard surveyed 1,000 full-time employees, ages 21-69. For retirement plan responses, we talked to employees whose employer offered a 401K or 403B retirement plan. For employee beneﬁts responses, we only talked to employees who were both aware of at least one non-medical employee beneﬁt and whose employer offered at least one non-medical beneﬁt.
About The Standard
The Standard is a family of companies dedicated to helping customers achieve financial well-being and peace of mind. In business since 1906, we are a leading provider of financial protection products and services for employers and individuals. Our products include group and individual disability insurance, group life, dental and vision insurance, voluntary (employee-paid) benefits, absence management services, and retirement plans and annuities for employers and individuals. For more information about The Standard, visit www.standard.com or follow us on Facebook, Twitter or LinkedIn.
The Standard is the marketing name for StanCorp Financial Group, Inc., and its subsidiaries: Standard Insurance Company, The Standard Life Insurance Company of New York, Standard Retirement Services, Inc., StanCorp Mortgage Investors, Inc., StanCorp Investment Advisers, Inc., StanCorp Real Estate, LLC, and StanCorp Equities, Inc.