In light of Disability Insurance Awareness Month, it’s important to realize that disability and financial protection are not distant concerns. In fact, the Social Security Administration reports that 1 in 4 of today’s 20-year-olds will acquire a disability before reaching retirement age. Four in 10 Gen Z adults now worry about being able to afford basic living expenses with a disability.
Fortunately, there are options for financial protection that now extend beyond traditional forms of insurance.
Securing your financial future with assets can impede insurance, but INvestABLE Indiana is helping Hoosiers with disabilities save, while preserving their insurance benefits.
Current Coverage Options
Many employers offer short-term and long-term disability insurance, covering 40-60% of an employee’s pre-disability income. These are viable solutions when someone suddenly acquires a disability. But they also have downsides. In addition to protecting only around half of an employee’s earnings, the benefits from these insurance policies are often taxed as well.
The most common insurance solution for people with disabilities is Social Security Disability Insurance (SSDI). This is a monthly payout program based on lifetime average earnings rather than current income. SSDI can provide critical support, such as:
- Automatic Medicare eligibility after 24 months
- A yearly cost-of-living increase added to benefits
- Benefits for dependents (such as children under 18)
- Trial work periods with benefit protection
- Retirement protection (Receiving SSDI freezes your earnings record, which could increase your retirement income)
However, SSDI also comes with rigid medical requirements, strict income limits, and an application process that takes 6-8 months on average.
Unlike SSDI, the Supplemental Security Income (SSI) program does not require a work history. Geared more toward children and seniors, SSI provides monthly payments to cover basic living expenses.
The drawback of SSI and Medicaid is that both programs restrict the amount of money you can save or invest while receiving financial assistance.
Investing Without Losing Insurance
An ABLE (Achieving a Better Life Experience) account allows people with disabilities to save up to $100,000 without losing their SSI or Medicaid benefits. Prior to ABLE accounts, saving more than the SSI limit of $2,000 meant becoming ineligible for monthly payments.
The money invested in these accounts can grow tax-free and apply toward a broad range of needs categorized as Qualified Disability Expenses.
These expenses include:
- Education
- Health and wellness
- Employment training and support
- Assistive technology
- Legal fees
- Transportation
“We see a lot of individuals who are using their accounts to save for a down payment on a home or save for an accessible vehicle,” said Amy Corbin, executive director of INvestABLE Indiana, the state’s ABLE account program. “If an individual is limited to only having $2,000 to their name, it can be very challenging to save for many things, to save for just about anything.”
According to the National Disability Institute (NDI) report, The Extra Costs of Living with a Disability in the U.S., adults with disabilities require, on average, 28% more income to achieve the same standard of living as a similar household where no one has disabilities. ABLE accounts make this quality of life closer in reach.
This year, Indiana expanded eligibility for these accounts, raising the age of disability onset requirement from 26 to 46 years old.
“By raising the age of eligibility, we are opening the door for more Hoosiers — especially veterans and individuals who experience a disability later in life — to plan for their future without fear of losing the benefits they rely on,” said Indiana Treasurer of State Daniel Elliott. “INvestABLE Indiana helps ensure that a disability does not define or limit a person’s financial security.”
“INvestABLE Indiana saw an increase in enrollments by over 200% with the age of onset increase,” Corbin added. “We see individuals across all ages utilizing this important financial empowerment tool to save for their or their loved ones’ needs.” (Anyone can contribute to an account — family, friends, employers, etc.)
The age expansion is stirring up excitement among Hoosiers.
“One woman contacted me months in advance of the change, knowing she would soon be eligible,” Corbin said. “Her sister already had an account, and she was excited to soon be eligible as well, so she signed up right after the new year. Like many, if not most ABLE savers, she was eager to save money and not have to spend down resources to maintain eligibility for important benefits. ABLE account owners can now build up their assets and save for qualified expenses that improve their health, independence or quality of life.”
For more information or to open an ABLE account, visit in.savewithable.com.
Images courtesy of INvestABLE Indiana.
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