How Does a Disability Impact Spending in Retirement?

For a variety of reasons, people who have suffered a disability before retirement age and after finding themselves having to manage their spending in retirement quite differently than if they had not had a disability. Let’s review the major reasons that a disability will affect retirement spending. 

 First, we will look at the pitfalls of a disability prior to full retirement age. 

As you know, full retirement age, according to the Social Security Department, is age 66 or over depending on your birth year. This age will allow you to qualify for Medicare and not be reliant on an employer plan. If you become permanently disabled prior to 65 Medicare qualifying age, then you may face additional cost for health insurance if you are not covered by another plan. Additionally, you may not be able to make additional savings in a retirement account, thereby reducing your retirement assets. Reduced income, as a result of leaving work early, may also mean you are tapping into retirement savings to meet everyday living or healthcare expenses. It may become even more daunting if you have a spouse who left work early to become a caregiver. All these things add up. And it not only affects your personal financial needs, but also those of your spouse and family. And don’t forget, to qualify for Medicare, prior to age 65 you have to be considered permanently disabled through the Social Security administration for 24 months (about 2 years) before qualifying for Medicare. 

Another barrier to income before full retirement age is Social Security. First you must have paid into Social Security for a period of time before you can qualify for Social Security benefits. If you do not have the required time, you will not qualify for social security at all. This, however, does not apply to the spouse of a social security beneficiary regarding spousal or survivor benefits. 

Now let’s review the effect of disability in retirement when you’re at full retirement age. At this point you automatically qualify for Medicare which gives you the assurance of health insurance. However, if you have a disability, you need to make sure that the Medicare plan you choose is going to cover your healthcare needs. Carefully review your options. Buying an additional Advantage plan or Supplemental plan with a stand-alone Prescription plan should also be included in your overall retirement expenses/costs. Patients that have a long-term illness as well as an expensive one such as cancer, need to be extremely diligent in controlling and managing the cost of their care. Careful due diligence must be maintained in understanding treatment cost, availability of care and type of care. 

Patients must also consider other healthcare needs and costs arising from the aging process. For instance, are you going to have to downsize your home and what kind of market are you going to find yourself in at that time? Long term planning is always a good practice when considering these things. Are you going to need long term care or nursing home care, and for how long? Where will the funds come from to manage these costs?  

Unlike years ago, when multigenerational families lived together and shared expenses as well as caregiving, we have long been in an age of “self-reliance” and autonomy. Which means the burden of caregiving is often difficult to acquire. A personal experience. 10 years ago, I lived in a community and subdivision of nineteen homes. Four of which housed multi-generational families, out of medical necessity. My husband and I even had plans drawn up for a large carriage house to be built on our property for his mother and mine in the event they needed to be near family for caregiving. It did not work out that way as my husband shortly after began his journey with Myeloma and I became his caregiver. And I did leave work for several years to be a caregiver for him. He retired early from his career, we spent more on healthcare as a result of his illness and our “planned retirement lives were forever changed as a result. We had planned, but even that planning fell far short of what was really needed for future healthcare needs. And the expenses and costs go far beyond the normal medical bills. 

What I have learned from my experience is to plan for the unexpected. Not only the cost of future healthcare expenses, but also, look at how to manage your financial lives if employment changes. Consider current and future housing needs. Are steps manageable, are doors and halls wide enough for wheelchairs, do you have access to bathroom and bedrooms that are easily accessible from outside? Do you need to consider moving to be near family?  

My suggestion is to look at scenarios and make achievable plans before you are in a crisis.  

It is true that hindsight is 20/20. If I could do it all over again with what I know now, planning for the future would have been considerably different. Now, as a widow, my needs have changed. Because I had to leave work for a period of time to care for my husband, I was no longer depositing into a retirement savings program. And because we spent so much of our retirement savings on his care, I am in makeup mode. I’m also considering my needs, imaging as well, as if I should find myself unexpectedly with an illness that may cause my early exit from the workforce. I have purchased Cancer insurance, reviewed, and expanded my life insurance portfolio, (not just for beneficiary needs) and purchased a home that I can age in. Though I am not yet 65, I am keeping abreast of Medicare changes so that I can make the right decisions when that time comes.  

It’s never too late to plan and make adjustments that can benefit you now and, in the future, no matter what your life status or health status is currently.