Another Use for Disability Insurance: Retirement Planning

Disability insurance has proven to be a flexible product over the years. In addition to short- and long-term products, many carriers offer services and support, particularly around claims management, to help companies more effectively manage employee absences or comply with federal and state leave laws.

Now, there may be another disability feature in your sales toolkit, which could be relevant given the huge generational transition facing our country: In addition to providing a full spectrum of vocational assistance programs, vocational staff can also help employees on disability assess and understand the options associated with transitioning from work to retirement. These services would probably be most valuable to Baby Boomers who are receiving disability benefits. According to data from the Council on Disability Awareness, individuals between the ages of 50-59 remain the largest category filing new long -term disability claims.

The new retirement realities

One of the critical components of managing disability cases is vocational rehabilitation services, which typically include an assessment and determination of possible future employment options and plans based on an individual’s career, education and experience. Part of that assessment includes the viability of full-time and part-time career options. A focus on possible part-time career options might be increasingly important.

This thought occurred to me as I read through the Retirement Re-Set Study issued in July 2011 by SunAmerica Financial Group. The study, conducted by Harris Interactive, used focus groups and a national telephone survey of pre-retirees (age 55+) and retirees, and had a sampling error factor of +/- 3.1 percent.

The study confirmed results of other studies that show a sizeable number of Americans expect to be working past their traditional retirement age, even if it’s part-time. Among its findings:

• Nearly two-thirds of the respondents (65 percent) said they would “ideally like to include some work in retirement. Those age 55-64 are even more likely than those 65+ to say the ideal retirement includes work (79 percent versus 56 percent).”
• Nearly half the respondents (46 percent) cited money as the main reason for working in retirement.
• On average, the pre-retirees expected to retire at age 69 — compared with an average response of 64 years in a similar 2001 study by SunAmerica.

Transitioning from disability

Disability factors into this, since many carriers offer vocational rehabilitation and counseling to workers on long-term disability. As an employee transitions from their disability back to work, the transition usually involves a period of part-time work.

Vocational counselors are cognizant of the issues older workers face as they deal with retirement. Pre-retirees who end up in a disability program can expect to get help managing the transition to part-time work, in the context of their disability event.

So, as older employees struggle with trying to define a new work-life balance in what would be their retirement years, what employers should look for in a disability carrier is a vocational rehabilitation function that will be able to do not just traditional return-to-work, but also assist those employees that become disabled to help some of that life-planning and transition.

The Retirement Re-Set survey highlighted other needs that can be met by disability insurance. For example, employees who defer retirement and stay on the job longer, say into their mid- to late-60s, may be in greater need of disability insurance because they are at greater risk of suffering a critical illness. Illness accounts for 90 percent of all disabilities that keep people out of work, according to a 2010 study by the Council for Disability Awareness.

Better yet, combining disability with a critical illness or cancer product in a voluntary offering may be an even more prudent choice, giving employees a more meaningful option for protecting themselves at no cost to the employer.