RJS 5-31-25

Episode Transcript

Speaker 1 (00:00):
Good morning to all. Craig Shillig here and this is
Safe Money. I'm here every Saturday to talk with our
listeners about financial strategies we use to manage and protect
assets safely. I've been an insurance agent for over twenty
four years. During that time, I've learned a few insurance strategies,
like using annuities as safe money harbors, or using cash

(00:23):
value life insurance to supplement retirement income. Just a reminder,
you can call our office at five six three three
three two two two zero zero if you'd like to
enroll into one of my virtual Medicare community meetings. I
give those via zoom. I do two every month, or

(00:44):
you can email me at Craig at Craigshillig dot com
and that's my name, cr Aig at Craig scchi lllig. Today,
I want to continue my talk about disability since May

(01:07):
is Disability Awareness Month and we're going to talk about
disability income. This is also known as paycheck insurance. What
is your plan if you get sick or hurt and
cannot work. I'll come back to this question in a
few minutes. When I say the word disabled, the word disabled.

(01:28):
When I say this word do you think of someone
sitting in a wheelchair inside a nursing home. No one
ever thinks they will ever become disabled. Yet, according to
the Social Security Administration, one in four American adults will
become disabled before reaching age sixty seven. So why is

(01:52):
there a disconnect? Would you believe it has to do
with the wording. If I replace the word disabled with
the phrase sicker, hurt and can't work, You're less likely
to find anyone who thinks they will never become sicker hurt.
That simple word change is a phrasing. That simple word

(02:16):
change in my phrasing makes the risk easier to relate to.
This opens the possibility of discussing paycheck insurance protection options
for a bunch of you guys out there, since no
one can predict how long their recovery from an illness
or injury will last. Now, by nature, most human beings

(02:40):
have a superiority complex when considering physical or mental disability.
That's why life insurance is often much easier to sell
than a disability insurance contract. Everyone knows that I know
one day I'll die, but I'll never be sick enough

(03:03):
or injured enough to keep me from working. For a
very long time. That's a very naive sentiment and quite
a distance from actual reality, and has become sicker injured
every year seriously enough that they're unable to They're unable
to work for a significant period of time, and their

(03:26):
income is affected. Over fifty percent of bankruptcies that occur,
those people actually had health insurance, but they didn't have
paycheck insurance. Let me share some facts with you. Only
fourteen percent of Americans have individual disability coverage. The top

(03:50):
causes for a long term disability i e. A long
term sickness or illness, muscular skeletal disorders, cancer, stroke, heart disease,
mental health, and circulatory issues. Those are the top of
ability are pregnancy, muscular skeletal disorders, digestive disorders, and mental

(04:17):
health issues. Remember there's over three thousand things that can
go wrong with the human body on any given day.
Let's talk about the need for paycheck insurance protection. Determining
the appropriate level of coverage is highly specific to each client.

(04:37):
Most clients have five basic needs if they were to
become sicker, hurt, and can't work for an extended period
of time. A place to live, food, transportation, utilities, and insurance.
So let's talk about a place to live. Everybody either
pays the rent or has a mortgage. Second one food

(05:01):
everyone needs to eat. The third one's utilities, and I
don't care if it's your air conditioning. Your cell phone's
technically a utility, electricity, heating, TV streaming services, and of
course Wi Fi. We can't live without Wi Fi. Transportation costs,

(05:21):
so most of us either have a car payment or
a bike payment or something some mode of transportation. If
you live in the city and you take the metro,
you still got to pay for that too. Then insurance,
there's home or renters insurance, auto insurance, life and health insurance.
Who's going to pay for your health insurance premium if

(05:44):
you can't earn an income. Another often missed item in
this subject matter is childcare. Who's going to pay for
childcare if you don't have a paycheck. The annual price
of a childcare of child care continued to rise in
twenty twenty four, with prices increasing by twenty nine percent

(06:07):
from twenty twenty to twenty twenty four. This is according
to the Childcare Aware of America's latest annual report. While
the five year increase in childcare prices from twenty twenty
to twenty twenty four was twenty nine percent overall prices
with inflation rose by twenty two percent. That's the latest

(06:29):
analysis from Childcare Aware of America found the national average
price of childcare for twenty twenty four was thirteen twenty
eight dollars a year. On average, placing two kids at
a childcare center costs at least nineteen percent more than
the typical rent in all forty nine states plus the

(06:53):
District of Columbia. The tab also exceeded typical annual mortgage
payments in forty five states plus DC, according to Childcare Aware.
And I have several clients that are in that boat.
Your childcare payment custos more than your mortgage. Now, no
one wants to dramatically change your lifestyle, so these monthly

(07:16):
amounts can be different for everybody. Let me put it
in another way. You can call it your mug plan.
Your mug plan is very simply mortgage, utilities and groceries.
These amounts, if you share them with me, it will
help me steer you in a direction of how much

(07:36):
monthly income payment protection you would want. So let's talk
about where's the money going to come from? If you're
sick or heard and don't have paycheck protection insurance. You
can use your savings or investment your four one K accounts.
We could sell items, or we can change our lifestyle.

(07:57):
According to the US Bureau of Economic Analysis, the household
savings rate in February of twenty twenty five was four
point five percent. I would guess that most of this
is attributed to four to one K and retirement accounts, which,
if drawn upon prior to age fifty nine and a half,
are subject to income taxes early and early withdrawal penalties

(08:21):
of ten percent. So that's not really a great place
to pull money. These assets might be good for an
immediate source of money, but would not be adequate in
the long term. So okay, we could sell some items. Sure,
that's an option, But selling when money is needed versus
when someone wants the item puts a buyer in control

(08:44):
of the value of that item. Sometimes this is referred
to as the fire sale. Why pay fair market value
for something that I can get cheaper? Or we can
change our lifestyle. People have worked hard to get to
where they are today. Baby steps backwards might be acceptable,
but no one wants to go back to the beginning.

(09:09):
So there's some short term solutions. UH employer provided short
term disability coverage also known as STD insurance, which usually
only lasts three to six months. It's employer provided salary
continuation plan workers' comp insurance, which only applies to work

(09:30):
related job related injuries and can only last normally a
maximum of two years. What if we have as sickness
or an injury that is permanent and lasts a lifetime cancer, stroke,
heart disease. Remember, sicknesses cause a disability. Injuries can be

(09:51):
fixed fairly quickly, usually less than three weeks. How about
employer provided long term disability also sometimes referred to as LTD.
So there's pros and cons of that. Here's some of
the pros. It's very little cost to the employee because
normally the employer absorbs most of the premium or all

(10:13):
of the premium. You usually do not have to prove
any insurability. So those are the good things. So on
the bad side, the cons The employer controls the benefits
and the options, and understand that these benefits can change
from year to year when you go through your benefit
annual benefit enrollment period. Group short term and long term

(10:38):
disability definitions usually have a less liberal contractual definition. This
is also very important for qualifying for the definition of disability,
So try this definition. You cannot perform the main material
duties of your current occupation and you're under a doctor's care,

(11:02):
versus you cannot perform any occupation given your education and experience,
and you're under a doctor's care. There's usually offsets due
to taxes and other benefits. Under employer brans, benefit is
usually gross taxable to the employee, which means if they

(11:22):
tell you you're getting five thousand dollars a month, that
is gross, not net. You still have to pay taxes
when you're disabled. Uncovered compensation employees in higher income tax
brackets and certain job descriptions don't cover bonus income and
commission income. So if you're a salary plus commission employee,

(11:47):
most of the time your short term and long term
benefits only cover your salary, not your commission, and it
does not cover bonuses. So if you got a bonus
last year, that's not going to be included. Social Security
disability income. We could go on that this program has
very specific qualifications and as soon as it would pay

(12:10):
out would be one hundred and eighty days. Given everything
that's happening in Washington right now, I'm going to tell
you that if you apply for SSD I right now,
you can go to SSD SSA dot gov slash benefits,
slash disability. I'm gonna hang a guess that if you

(12:31):
even can get to court, you're not going to see
anything for a minimum of three years. But that's my opinion.
Who can get sold security disability? You may be able for.
You may be eligible for SSDI if you have a disability,
a disability or blindness, and enough work history. So let's

(12:55):
talk about disability or blindness. You must have a disability
that affects your ability to work for a year or
more or result in death if you continue to work.
Your condition must also limit you from earning income above
an amount that they call substantial gainful activity SGA. In

(13:16):
twenty twenty five, SGA is one six d and twenty
dollars a month, or twenty seven hundred dollars a month
if you're considered blind under SSDI rules. SSDI uses different
rules to determine the substantial gainful activity. If you're self

(13:37):
employed item too, you have enough work history, so generally
you must have worked for at least five of the
last ten years to qualify four any SSDI coverage. People
under the age of twenty four may not need to
or have worked as long. There's an old story out

(13:58):
there from the IRS and the SSA world about an
accused drug dealer that was selling drugs on the street corner.
He was appearing before a judge in the SSDI court
regarding a claim of disability after he had been released
from incarceration from a prison sentence. His SSDI claim was

(14:20):
that he was allergic to plastic and therefore it couldn't
work in any occupation. The judge asked him if his
asked him his work history, and he told the judge
that he was sent to prison for selling drugs on
the street corner. The judge understood and said he'd make
his ruling in a few days. The written ruling was

(14:42):
released about a week later. The judge rule that the
SSDI claim was denied. The admitted former drug dealer has
a very good history of sales experience. Since he's allergic
to plastics, he can sell pencils on the street corner.
I only share this story with you to give you
an example of how difficult it is to qualify for

(15:06):
SSDI coverage. Please note that all paycheck insurance policies do
not pay if you commit a crime. Now, in my example,
had a salesperson that was selling a legal item or service,
and had that person had a personal supplemental paycheck insurance policy,

(15:29):
just the thought some of the pros and cons of
owning a paycheck insurance policy would be so some of
the pros. You have control of the contractual language and
you'll know what the definition of sicker herd actually is.
All of your total compensation would be covered. There's more

(15:51):
benefit options. The income would be tax free, not taxable.
The policy is portable and can follow you through your
entire career. So today you can be in sales. Tomorrow
you could be an attorney. In twenty years you could
be a tree trimer. Some policies refund premiums less any

(16:13):
claims paid, so you can get all your premiums back.
So some of the cons some of the cons to
paycheck insurances, well, one, you have to qualify medically and financially,
hence you have to go through underwriting. You must qualify
via gainful employment. For the last most companies are going

(16:36):
to be ninety to one hundred and twenty days. You
have to have proof of employment and income. There'd be
a separate monthly premium cost of the paycheck insurance. Yes,
you have to pay the premiums. Here's three main objectives
or meet excuse me, here's three main objections. I get
to buying disability coverage. I already have coverage with my employer.

(16:59):
I'll never use it. DII coverage is too expensive, so
let's talk about I already have it with my employer.
Rarely do people who have DII through their employer understand
how it works. They've never read the definition in the
employer provided handbook. Nor do they understand the tax consequences
that occur during a claim. No one tells the employee

(17:22):
that you still must pay taxes even when you're disabled.
If you don't remember that, remember this little phrase death
and taxes, because guess what, that's one of the facts
of life. If you have a client that brings home
five hundred dollars of monthly income and their group LTD

(17:42):
covers sixty percent of their monthly base income up to
a five thousand dollars a monthly cap, they will have
a seventy five hundred dollars shortfall from that twelve five hundred,
So their plan may not be as good as they think.
What about the people who say I'll never use it.
It's very difficult for people to see themselves as being

(18:04):
too sick or hurt to work. I get that. Do
they know anyone who has battled cancer, als, multiple sclerosis,
or some other health condition. What would that person tell
you about buying disability insurance coverage now when they're healthy.

(18:26):
Imagine a health prevent event that prevented you from working
for an extended period of time. So let's talk about
DII coverage being too expensive. I get this all the time.
Paycheck insurance costs too much. Paycheck insurance costs normally one
to three percent of your total income. Compared to the

(18:48):
assets you already have ensured, the cost is negligible. If
you earn over one hundred thousand dollars a year, your
income would be worth millions over your career lifetime. How
does that compare to the value of your home or
your car? Remember your car's a depreciating assets. So you

(19:09):
paid sixty grand for it today, what's it worth in
six months? People don't usually buy cars and use them
as an investment. Vehicle disability income is a fundamental financial
safeguard because we all live in a world driven by consumerism.

(19:30):
It takes spending money to live and enjoy life. Americans
spend money on food, shelter, clothing, utilities, transportation, entertainment, education, healthcare, medications,
don't forget about vacations, and the list goes on. We

(19:52):
are dependent on our paychecks. We depend on our income,
but most of us don't save enough for us stained
period of rainy days. Paycheck insurance protects income and should
be an imperative asset to every working American, no matter
their age, occupation, or income level. If you're a self

(20:17):
employed business owner. Business owners need disability products like business
overhead expense coverage, buy sell coverage if you own the
business with a partner or partners, loan indemnification, and key
person disability income to provide business continuity and succession. Key

(20:44):
person insurance is really really important. If you have a
key salesman and they can't come to work tomorrow, how's
that going to affect the overall revenues of the company.
Also helps maintain corporate interests during moments of despair and disablement.

(21:06):
I'll throw another example on the table there too. If
there's two business owners and I'm just going to say
two men, does one of the partners want to work
with the other partner's spouse. Think about that for a minute.
Most people would say the answer is no, and the

(21:27):
reason being is they probably can't contribute anything to the business.
That's why you would have by sell coverage. Keep that
in mind. Business DII products allow clients to look out
for their corporate interests without having to dip into policy
benefits that are earmarked for personal and familiar protection, alleviating

(21:51):
the possibility of future financial burdens on loved ones and
business partners. And I run into this often nobody expects
to die, and nobody expects to get sick or hurt.
Dying's easy. Usually you can replace that with life insurance.
But a lot of people don't plan on getting sicker hurt.
And I can't work or operate my business for twelve months,

(22:15):
twenty four months, thirty six months, and then what are
you going to do? You're gonna sell your share of
the business at a fire sale because your partner is
not going to let you just start using the corporate
account for whatever you want that comes up a lot.
Business DII safeguards business entities and helps keep employees employed

(22:40):
and dependent families looked after. You can't plan for the
future without preserving the here and now. A plan that
includes investments only leaves people vulnerable to the risks in life.
Remember paycheck insurance. Back to my original question when I
started show, what is your plan for when you become

(23:04):
sick or hurt? So again I reiterate, because this is
may get paycheck insurance. Don't forget. I give monthly virtual
meetings regarding Medicare for two different companies every month, and
one meeting I will cover the Medicare supplement plan with
a standalone drug plan. That meeting's usually sponsored by well Mark.

(23:28):
My next couple of meeting dates are going to be
for a well Mark June seventeenth, July fifteenth, and August fourteenth.
United Healthcare is the sponsor for my other virtual meeting,
I focus on the Medicare advantage plans known as Medicare
Parts C, and I cover the four pieces of Medicare

(23:52):
and the benefits of that platform in that meeting. My
next couple of meeting dates for that are going to
be June nineteenth, July seventeenth, and August nineteenth. I usually
do them about the third week of the month. You
can call our office at five six three three three

(24:12):
two two two zero zero for the zoom meeting codes
and additional dates and times I plan those out. I
have dates all the way to December of this year
right now. You're also welcome to email me at Craig
at Craigshilig dot com. And that's my name, c r
ai G at cr ai G S c h I

(24:38):
l lig dot com, and I'd be happy to send
you the virtual Zoomlink meeting codes. This is Craig Shillig
with Safe Money.