Retirement Planning: Another Use for Disability Insurance

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 especially relevant given the huge generational transition facing our country. In addition to providing a full spectrum of vocational assistance programs, vocational staff can help employees on disability assess their options as they transition from work to retirement and attempt to understand the implications and ramifications of the options facing them.

These services are probably most valuable to Baby Boomers who are receiving disability benefits. According to data from the individuals between the ages of 50-59 remain the largest category filing new long-term disability claims.

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 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.

A new retirement era

This thought occurred to me as I read through the Retirement Re-Set Study issued in July 2011 by SunAmerica Financial Group. The study used focus groups and a national telephone survey of pre-retirees (age 55+) and retirees. It confirmed results suggested by other research, showing a sizeable number of Americans expect to be working past their traditional retirement age, even if this means working part-time. Among the findings:

• Nearly two-thirds of the respondents (65 percent) said they would “ideally like to include some work in retirement. Those ages 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.

Predicting employee needs

Disability factors into this, since many carriers offer vocational rehabilitation and counseling to workers on long-term disability. As an employee transitions from disability 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 that can also help employees that become disabled during a time of transition and planning.

The study highlighted other needs that can be met by disability insurance. For example, employees who defer retirement and stay on the job longer 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.)