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> My savings had already been wiped out by a car accident I am always amazed when I see statements like this coming from people in highly-paid professions. It

> My savings had already been wiped out by a car accident I am always amazed when I see statements like this coming from people in highly-paid professions. It seems like the OP has already figured out that financial insecurity contributes a LOT to stress and can force us into very sub-optimal decisions. Props to them for connecting those dots. I hope everybody reading this post takes a moment to review their financial readiness for different levels of calamity. If you don't have an emergency fund, make some small adjustments to pile up the cash ASAP.

maxerickson 8y ago
Disability insurance too.
- mmt 8y ago
  Unfortunately, this advices is potentially too shallow to be useful, as (private/individual) DI is tricky. For it to be useful long-term, you'll need to find a policy with both guaranteed renewal and guaranteed coverage increase as your income rises, before any chronic conditions appear (or are diagnosed) or things like car accidents occur and become pre-existing conditions. There are other details that make shopping for a policy tedious/tricky, such as differences in "own occupation" coverage, post-disability inflation protection not being standard, and the fact that you probably want to choose a company that'll be solvent 40 years later (since there's no pre-existing condition exclusion-exception portability like for health insurance, AFAIK). Meanwhile, while you're employed, those payments, which can be $50-$100/mo post-tax, may be a total waste, since your employer is likely paying for group disability coverage, and no (reasonably-priced) policy will double-pay. Usually, anything you get from Social Security (or any state-mandated) disability will also reduce the benefit. That is, the total from all sources will be capped by the most generous policy at somewhere around 60% of pre-disability income. The market seems to be geared toward self-employed professionals, such as dentists, rather than the typical tech worker. All that said, here's my advice: If your employer offers you a "tax option" or "imputed income" on the disability insurance premium, choose it (and if they don't offer it, ask for it). Paying the extra few dollars per paycheck in tax will mean that 60%-of-pre-disability-income won't be subject to income tax and would actually be close to a total income replacement.
  - lgregg 8y ago
    Do you have any suggestions on where to learn more about DI?
    - JacobDotVI 8y ago
      Patio11 has a great tweet thread about it: https://mobile.twitter.com/patio11/status/988094196274769920 https://mobile.twitter.com/patio11/status/988094196274769920
  - ThrustVectoring 8y ago
    >For it to be useful long-term, you'll need to find a policy with both guaranteed renewal and guaranteed coverage increase as your income rises, before any chronic conditions appear (or are diagnosed) or things like car accidents occur and become pre-existing conditions. That's only true if you want to increase your spending as your income increases. If you start out with an upper-middle-class paycheck and lifestyle and get disability insurance for that, and save 100% of any pay raises on top of that, then a simple cost of living adjustment is more than enough. And even without a COLA adjustment, your long-term savings should be accruing faster than inflation anyhow. Rough math says that if you can't save enough to replace 2% of your income in a year, then you can't afford to retire after working 50 years. >That is, the total from all sources will be capped by the most generous policy at somewhere around 60% of pre-disability income. This is more than it sounds like, since private disability benefits are untaxed. For anyone with a six figure income, that's $5k/mo in after-tax income. Plus, this income is 100% portable within the US - you no longer have to live within the high COL areas where the tech jobs are.
    - mmt 8y ago
      > if you want to increase your spending as your income increases For many people, I think you have this backwards. That is, they seek an increased income in order to support increased spending, such as for raising children. Regardless, the kind of savings discipline you propose seems like it would apply to a minority of those near the start of their careers.
  - 8y ago
deleted 8y ago
[deleted]
geoffw8 8y ago
I actually took out income protection insurance for just this reason. I'm a contractor and so being able to work is very important. My policy pays out after 13 weeks of incapacitation.

maxerickson 8y ago

Disability insurance too.

mmt 8y ago
Unfortunately, this advices is potentially too shallow to be useful, as (private/individual) DI is tricky. For it to be useful long-term, you'll need to find a policy with both guaranteed renewal and guaranteed coverage increase as your income rises, before any chronic conditions appear (or are diagnosed) or things like car accidents occur and become pre-existing conditions. There are other details that make shopping for a policy tedious/tricky, such as differences in "own occupation" coverage, post-disability inflation protection not being standard, and the fact that you probably want to choose a company that'll be solvent 40 years later (since there's no pre-existing condition exclusion-exception portability like for health insurance, AFAIK). Meanwhile, while you're employed, those payments, which can be $50-$100/mo post-tax, may be a total waste, since your employer is likely paying for group disability coverage, and no (reasonably-priced) policy will double-pay. Usually, anything you get from Social Security (or any state-mandated) disability will also reduce the benefit. That is, the total from all sources will be capped by the most generous policy at somewhere around 60% of pre-disability income. The market seems to be geared toward self-employed professionals, such as dentists, rather than the typical tech worker. All that said, here's my advice: If your employer offers you a "tax option" or "imputed income" on the disability insurance premium, choose it (and if they don't offer it, ask for it). Paying the extra few dollars per paycheck in tax will mean that 60%-of-pre-disability-income won't be subject to income tax and would actually be close to a total income replacement.
- lgregg 8y ago
  Do you have any suggestions on where to learn more about DI?
  - JacobDotVI 8y ago
    Patio11 has a great tweet thread about it: https://mobile.twitter.com/patio11/status/988094196274769920 https://mobile.twitter.com/patio11/status/988094196274769920
- ThrustVectoring 8y ago
  >For it to be useful long-term, you'll need to find a policy with both guaranteed renewal and guaranteed coverage increase as your income rises, before any chronic conditions appear (or are diagnosed) or things like car accidents occur and become pre-existing conditions. That's only true if you want to increase your spending as your income increases. If you start out with an upper-middle-class paycheck and lifestyle and get disability insurance for that, and save 100% of any pay raises on top of that, then a simple cost of living adjustment is more than enough. And even without a COLA adjustment, your long-term savings should be accruing faster than inflation anyhow. Rough math says that if you can't save enough to replace 2% of your income in a year, then you can't afford to retire after working 50 years. >That is, the total from all sources will be capped by the most generous policy at somewhere around 60% of pre-disability income. This is more than it sounds like, since private disability benefits are untaxed. For anyone with a six figure income, that's $5k/mo in after-tax income. Plus, this income is 100% portable within the US - you no longer have to live within the high COL areas where the tech jobs are.
  - mmt 8y ago
    > if you want to increase your spending as your income increases For many people, I think you have this backwards. That is, they seek an increased income in order to support increased spending, such as for raising children. Regardless, the kind of savings discipline you propose seems like it would apply to a minority of those near the start of their careers.
- 8y ago

deleted 8y ago

[deleted]

geoffw8 8y ago

I actually took out income protection insurance for just this reason. I'm a contractor and so being able to work is very important. My policy pays out after 13 weeks of incapacitation.