Learn how to effectively plan for retirement with a disability, account for medical expenses, navigate disability and social security benefits, and budget accordingly.
Retirement is a milestone everyone wants to reach. However, planning for it can sometimes be more complex if you also have to anticipate challenges due to your disability. It’s essential to plan for your retirement with these challenges in mind, as a strategic approach can help you meet your long-term needs while also accounting for the nuances of your financial and healthcare situation.
To help you plan your retirement, we’ve compiled a guide of key considerations you’ll need as someone with a disability. With it, you can retire comfortably, knowing you’ve accounted for everything.
If you rely on Social Security Disability Insurance (SSDI) because of your disability, you won’t receive SSDI and retirement benefits simultaneously when you retire. This is because the same payroll tax system funds both programs, and Social Security only provides income to those who cannot work due to their age or disability status. However, if you have disability benefits before retirement, they will convert to retirement benefits once you turn 62.
Fortunately, your income between SSDI and retirement shouldn’t change, so you don’t have to worry about loss of income when you retire. All you need to do is contact Social Security when you plan on retiring to instigate the transition.
Although you won’t have to worry about losing your income after you retire when you have a disability, you should still budget accordingly, as you may face more expenses than others without disabilities. Your budget should factor in the following expenses:
Although you may have to consider additional expenses based on your lifestyle, this list should get you started when calculating how much you should save before retiring.
Regardless of whether you have a disability now or later, retiring comes with unexpected costs that arise with medical conditions. If your current disability worsens as you age, you may have to account for receiving more specialized treatments, assistive devices, therapies, medications, or caregiving services. Some people with chronic conditions may also develop comorbidities—coexisting medical conditions—which may add more costs to their healthcare bills.
Furthermore, the cost of long-term care or home modifications to maintain accessibility may become necessary. While it may be impossible to predict the total costs of unexpected medical expenses, it’s still essential to be aware of what could happen before you retire to have a strategy for when it occurs.
Although living in retirement with a disability can come with its own set of costs, you can thrive as long as you plan accordingly in the following ways.
Retirement accounts like IRAs and 401(k)s can be critical in building financial security for individuals with disabilities. By contributing to these accounts early, you can take advantage of compound interest and tax benefits, growing your savings over time. These funds can become a vital resource for covering expenses in retirement, especially if you face higher costs related to healthcare or accessibility.
If you are receiving SSDI, you can still utilize these accounts. However, if you are utilizing Medicaid to cover medical expenses, excessive withdrawals may disqualify you from receiving coverage. Therefore, it’s important to strategically use your retirement funds without jeopardizing your benefits.
To maximize the value of your retirement accounts, consider contributing as much as you can afford during your working years, taking advantage of employer-matching programs for 401(k)s if available. Additionally, individuals with disabilities may qualify for an Achieving a Better Life Experience (ABLE) account, which allows tax-advantaged savings for disability-related expenses. Combining these strategies can help ensure a steady source of income and financial flexibility throughout your retirement.
Before you retire, you must create a budget you can stick to in retirement. A well-thought-out budget can help you allocate your finances efficiently, cover anticipated expenses, and prepare for the unexpected. Here are some practical tips to help you create a sustainable financial plan:
While you can’t predict everything that happens in retirement, a well-thought-out budget can help support you no matter what happens.
As a person with a disability, picking the right health insurance is critical if you’d like to avoid paying costly medical bills and out-of-pocket costs. Here are some of the most popular insurance options people opt for in retirement:
When shopping around, evaluate your health needs by listing the providers you see frequently and the services you rely on most. You may also need to consider monthly premiums you’re willing to pay, out-of-pocket costs you’re not willing to pay, and how many specialists you need to see because of your disability. If you need help evaluating which insurance is best for you, you can contact insurance agents and experts who can connect you with the right option.
When you retire with a disability, you’ll inevitably contact federal and state assistance programs like Medicare and Social Security. These interactions may be challenging, especially if you’re applying for programs. However, knowing the application process can help ensure financial and healthcare stability during retirement.
If you’re receiving SSDI, you may automatically qualify for Medicare after a 24-month waiting period. You’ll then have the option to enroll in additional coverage, like Medicare Advantage or Medigap, to address gaps in Original Medicare. Be sure to apply during the appropriate enrollment periods to avoid penalties and ensure continuous coverage.
If you haven’t already applied for disability or retirement benefits with Social Security, you must submit an application. For SSDI, you’ll need to provide evidence that illustrates your disability and ability to work in any job. You may even need to work with a disability advocate or attorney to strengthen your application and navigate the appeals process if needed.
If Social Security denies your SSDI application, you can apply for retirement benefits once you turn 62 and have accumulated enough work credits to amount to 10 years of work. All you need to do is apply through the Social Security website and fill out your personal information, such as your Social Security number, birth certificate, bank account details for direct deposit, and work history.
Once you’ve established your budget, health insurance, and Social Security benefits, you’ll also need to create a plan of what will happen to your assets once you pass — estate planning. Beyond managing your financial security, estate planning ensures that your loved ones will distribute your assets according to your wishes and receive the care they need after your passing. Incorporating this into your retirement strategy can provide your beneficiaries peace of mind and financial stability.
Primarily, estate planning involves creating or updating a will, your trust, power of attorney, and healthcare directives. These documents outline your wishes and appoint trusted individuals to decide on your behalf if you cannot.
However, estate planning also includes looking at insurance options that could support your family after you pass and cover any expenses that may come after you pass. This is especially essential if you’re worried your family members will inherit any debt you accrued in your lifetime. Estate planning includes life insurance, which provides payments to your loved ones after passing to cover expenses like unpaid debts, housing costs, or education. It also includes final expense life insurance, covering end-of-life expenses like funeral, burial, cremation, and any leftover medical bills.
Although planning for your retirement can be overwhelming if you have a disability, you’re not alone. There are people to help and plenty of resources to use to your advantage.
Yes, you can receive Social Security Disability Insurance (SSDI) benefits before reaching retirement age. Once you reach full retirement age, your disability benefits automatically convert to Social Security retirement benefits, but the amount remains unchanged.
Once you turn 62, your SSDI benefits convert to retirement benefits — you do not receive both simultaneously.
Planning for higher medical costs is essential when retiring with a disability. Your retirement budget must account for potential expenses like long-term care, ongoing medical treatments, and increased healthcare needs.
Some options like ABLE accounts allow people with disabilities to save money without worrying about their eligibility for means-tested federal benefits. You can also consider a special needs trust for additional financial security.
You can maximize retirement savings by contributing to retirement accounts as early as possible, exploring employer-sponsored disability insurance, and understanding the benefits you’re entitled to through federal and state programs.
Medicaid and Supplemental Security Income (SSI) are two critical programs available to individuals with disabilities. Eligibility for these programs may change once you reach retirement age, so exploring state-specific programs is essential.
Retire comfortably with a solid strategy. My Guide To Retirement has plenty of resources for retirement planning, so you can feel confident entering this next milestone in your life.
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