May 2019 Coaching Call/Disability Awareness Month

Richard Pasick joins Frank Congilose this month to discuss Disability Awareness. They give some insight, information, and strategies for protection when it comes to planning for an unexpected disability.

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Transcript

Speaker 1: 0:00

The following show is for informational purposes only. Individual situations may vary and the information should be relied upon only when coordinated with individual professional advice.

Speaker 2: 0:11

Welcome to discovering response for wealth. This is your host, Frank Congilose. Yellows, hard to believe we're here in the the month of May and it's, you know, disability awareness month. Our guest today is Richard Pasick a senior vice president over at CandA financial group. Rich, welcome to the show is great to see you. Hi, good morning. Thanks for having me. So rich, you know this an interesting topic when we talk about you know, disability awareness month and you know, we just, you know, even that whole context of disability cause you know, as a society we always think it's going to be somebody else we never think is going to be us. So I'm just curious statistically, is it always the other guy? Is it a very small percentage of the population that actually gets hurt or gets sick? What actually takes place? Well, the fact is according to, to disagree to counsel for Disability Awareness, frank, that one in four 20 year olds entering the workforce will become disabled one time or another before they reached retirement age. That's incredibly high. So when we think of that, I guess the issue that really comes up, you know, and know I'm in the middle of actually not in the middle, I'm just wrapping up a new book that I call it. You know, I think the name of the book I call it last check is the fact that in the event that that occurs, one of the greatest risks that we have financially is the loss of our income. And so the question that I would pose to you at that point is, so if we're talking about, you know, 25% of the population or whatever may be happening at a claim, where do they get their income from in the event that they get sick or they get hurt. And even this, when we talk about percentages of, you know, where do they get it from? Is it usually an injury because everybody thinks I'm not going to get hurt. I'm pretty careful, I don't do things. Or is it through sickness? What occurs? Right? Well, the younger cohort that's really buying disability insurance that equal in their thirties and forties and sometimes twenties, uh, the fact is they think they're invincible, that it's going to be an injury and they're really healthy. So that's not going to occur to them. But the fact is about 88% of claims are not injury-related there from sickness. So it's a very high claim cell. When it reloads, there's also something else and they're not protected, that's a problem. So they may rely on what they have to work. In some cases they have group disability, they have workman's comp. But the fact of that Workman's comp cases are that only 1% of disability claims resulting from a work related injury. The rest came from sickness or injury elsewhere. So let's just kind of play through this. So if you've got a professional out there, they're earning$100,000 a year or um, whoever it might be and they get sick or they get hurt and something occurs. So the first question is, is if it didn't happen at work, it's not worker's comp. That's right. And we already identified based on what you said, that less than 1%. Correct. So then if it's not worker's comp then, then what? So some employers do provide group disability, some don't. Let's start with, if they don't, where do they go then? Well, let's talk about the facts first. There's 51 million American adults working today that do not have any disability insurance beyond what's Social Security Administration offers. So let's talk about the social security, uh, and how does social security disability when there's a reason for that. And the reason for that for our listeners is the fact that what occurred over time is that healthcare costs and benefit because over time I've been going to higher and higher. And so, you know, we went from years ago where the employer would pay for our coverage too. There's a cost sharing. And so we go from cost sharing to kind of whittling down benefits and expenses so that people can maintain the essential, you know, which is the medical coverage. So many employers haven't gone into the air of disability or they've been looking at it and saying let's let people get that on their own. So if they don't have it, you know, then they're going to, you know, what's available, which is are we on social security or we state disability, what is it rich or the state disability was just talk. Since you're sitting in New Jersey, we'll pay up to 26 weeks. So that's the first six months of disability. What happens afterwards, of course be relying on social security and before you go to an afterwards, the question I have is, so someone's making$100,000 a year, are they paying them$100,000 a year now? Probably somewhere around 28,000 a year status. So it's significantly less than what they were making before. It's not 100% income replacement. Absolutely not. Yeah. Very good. So that was the first part. And so we get state disability is going to pay. And you were saying they were paying for how long? Again? 26 weeks. What happens after 26 weeks? We'll let the plan is designed as social security may kick in, it should kick in or hopefully a kicks in. But the fact is only 33% of people apply for social security disability benefits or proof for claims. The first time around 22% are on the approved. Then a person has to file for an appeal. Interesting. And why is that? Is it based on the definition from social security? What, what's occurring? That so many people are not so security eligible? He hit that right on the head. Uh, frank, it's the definition. The definition for to apply or actually collect on social security definition is the inability to perform any occupation anywhere in the continental United States and basic duties are standing, sitting, walking and talking. And if you could do those basic things, you may not be considered disabled. And so let's assume, um, they are eligible, then they, they don't what percent? I was going to say what percentage again, are we talking about? So if someone's making$100,000 a year, you know, you have to qualify. So I didn't need 40 quarters, 10 years of paying into the system. So somebody near younger 20s don't have that and they're not going to collect much at all. And ultimately there are only insuring on a certain percentage depending on, on a family, kids and so forth. But usually it's, it's probably in around a 2000 on a higher income earner level. Got It. But on average, it's only 1200 bucks nationwide average. And it's interesting when we think in terms of, you know, what these numbers are and how it works because, you know, depending upon where you live, and we live here in the northeast, uh, the cost of living here is significant. Uh,$1,200 a month typically isn't making it for most people as well as, you know, when we talked about state disability. And then the other side of that know, when I think about it is, you know, we talk about financial success is cashflow, uh, under any and every circumstance. And so if our cash flow has taken a hit like that and all of a sudden we went from, you know, earning whatever we're earning to getting, you know, 20, 25% of our income in the form of benefits. Um, we've got some significant gaps as far as on how we do that. So when we talk about that, um, one of the other things I'd like to ask is, you know, just when you think about like short term claims, things of that nature, rich, where are these claims coming from? Cause you mentioned it's typically not an accident. Um, you know that there are more medically related things of that nature. So maybe you can just kind of give an overview as to what type of claims are out there and what are people saying. Sure. According to a website, disability can happen.org. You have statistics up there and musculoskeletal disorders are about 30% cancer, about 15% injuries. As I said before, owning around 12% mental health, about 9% and he kind of circuit tor circulatory stroke and heart pro heart problems or about another 9% very good. So most sir, you know, sicknesses, not injuries. So, so rich, you know, I think that you know, what we've really been kind of stating to our listeners is um, making the case that it could happen. You know, we talked about, you know, a fair amount of the population will incur a claim over their lifetime. We talked about where benefits are available from a statutory base, which is, you know, looking at, you know, what happens if you get hurt at work. We got the worker's comp, but that's less than 1% of claims. Then we talked about state disability, which is relatively short term. We've talked about social security and social security being a 26 week elimination. And then the fact that most for those security claims are not approved on the first time around and barely a little bit more on the second time around. And then the last thing I would say is based upon that, you know, what else would they be looking at, you know, as far as that goes. Yeah, just coming back. One thing, frank, as I said before, 78% of claims to social security claims are denied the first time around. Right? So then they have to go back for an appeal. You ever see an advertisement from an attorney saying we use disability claims or so forth, disabled of Cullom contact us and they want to go back. And the problem right now in nine, in 2018, 850,000 cases or backlog right now, 850,000 cases, these people are waiting disabled, waiting for a check. How they live in, in the meantime, who knows? It's tough. And again, he'd been disabled at least six months to even think about applying it can with that's interesting is um, I do a lot of public speaking and one of the things that we talk about is the fact that, you know, if somebody saves 10% of their incoming year, Yo, um, uh, one year disability, assuming that you worked for 10 years could wipe out 10 years worth of savings. And when you think about that so it can effectively destroy someone's retirement account or you know, seriously put a hit to their cash accounts or their investment accounts. So the question that I would have is what should people be thinking about and what should they be looking at with regard to, you know, how to prepare for this or provide for this or make sure that, you know, their checks continue to come in the event that they were to get sick, her hurt. Why? Yeah. I think people should consider the fact that a disability can happen. It's an industry out there. It's a whole business. The hospitals are not there for nothing. And it's a real concern for many, especially a younger person in the workforce. Look at what's your employer plan is analyze it. It may not be enough. You may be able to supplement it. Look for a personal plan that look at offers. Specialty, I'll knock definition. So if a person cannot do their specialty, own arc, their particular occupation, but may be able to work elsewhere that benefits their claims are paid. Look for tax effects. Group disability is going to be taxable. A supplemental plan may be tax free if it's set up properly. So that's what we want to look at. Uh, we want to look at debt consolidation, ensuring in case they have excess debt, for example, student loan debts and another one could be big money and that they're still liable for it. They don't care, they want their money. And an interesting statistic has reading frank that 44% of bankruptcy claims or resulting from one way or another, a medical loss of income. Biomedical Law, almost a of that's a big number. Crazy. So rich. You know, when people think in terms of, you know, what they have no coverage wise cause you know a lot of times we'll meet with clients and they're like, Geez, I'm not sure if I have it, I don't have it or whatever. Uh, they should be checking with the HR department at work or with whoever you know, with their company handles benefits, uh, to see if they do have anything on the group side. Most group coverages that I've observed over time usually cover 60% some are 50 some kid goes high 70 but they always have caps. And you said something which is interesting. What you said was, is that that benefit is oftentimes taxable. So I always try to have people understand that if you thought of it this way, which is most people don't save 20 and 30% of their income. So it means that they're consuming 70 to 80% 90% of their income. And sometimes more. So if I'm consuming most of that income to pay my bills to live and so forth in the event that I were to get sick or hurt, if all of a sudden my income was reduced by 20 or 30% or 40% because my benefits cover 60% or 70% of you live in on less than half will be living on less. Yeah. How do I make up that difference? Which is when you said you might be able to get some supplements. So maybe just take a moment and just speak to the fact that uh, there are individual programs out there to people should be considering and if someone was looking for it, ideally, what is it that they should be looking for in terms of a definition? So you mentioned a specialty definitions, but if I don't have a specialty career, um, maybe you can just do a quick overview of what type of definition should I be working for. That's fairly broad. It works. And then even speak to the fact of what's a typical, um, let's call it deductible or waiting period. And then how long should benefits be paid for typically? So maybe you can just hit on some of those key attributes. The first thing in reference to group frank, typically a group may offer 60% of coverage and it's usually an employer paid, which makes it taxable. Okay. But if you're a person's receiving some kind of commissions or bonuses, almost always her interest. Interesting. So therefore somebody is making, you know, 50,000 a year, but another 30,000 at 60% increase in income that that 60 debt, 30,000 is not covered. So we'll look at their bonuses to look at, we'll look at their commissions yellows and we'll analyze that and see if there's room for supplemental plan. So supplemental plan won't, sure, maybe not their specialty occupation, but their particular occupation is in most cases, if a person is suffering a relatively short period disability one, two, three, five years, they're gonna probably want to still stay active some way. They may not be able to go to work and work as hard or in the same job as they were doing before, maybe to travel and so forth. But they might want to do something and at least we don't want their disability going to zero. So we want to still pay and that's how our a definition we'll work. We'll get waiting periods, typically 90 days, maybe 180 days to match those security. But we're gonna really look at that three month elimination period or waiting period. And we want benefits to continue at least until age 65 we may expand that to age 67 or 70 depending on the age of the client, but usually 65 is the lowest one. And a big important benefit we add on is cost of living, sometimes known as Cola. And what this is, this is when a person suffering and disability that their benefits increase compounded with the cost of living. I don't think any group plans I've ever seen have that. So we want that on the plan. So if I were to summarize what you're just saying, there is a, with regard to definition, the best definition somebody can get is what we call own occupation, which means if they can't do what they're currently doing, even though they may be suited or able to do something else, uh, they're still eligible for claim. And then with regard to the elimination period you were speaking to 90 days or if they were going to coordinate it with social security, 180[inaudible] and then the whole idea of how long we want benefits payable for, we want them payable. I always kid and say as long as possible. And for many people that's age 65 or for some of our clients and our people in our community that are uh, trades oriented, sometimes they're limited in their benefits. From what I've seen that sometimes they can only get up to five years or so or a couple of years, five years. Four and skilled worker. Yes. And so for some of them, they still want the maximum benefit. And the last thing I'm going to bring up, because I do see this with business owners from time to time, is uh, you know, if they have a partner or the PR, they have a key employee. And I always say to him, I go, it's like if something happened to your partner, something happen to your key employee, would you pay them? And they go, oh yeah. And I, I'll ask him how long ago paid for her as long as I can. And I said, so you're a hero for as long as you're paying, but will the day ever come that you might have to stop? And I go and they go, oh, go, yes. Then I go, so how does everybody view you when that happens? And they go, not so good. I said, so sometimes it's worth looking at. Maybe there's a better strategy so you never have to put yourself in that place. And so for our listeners that are listening, I would say really two things. One is don't assume your employer's going to take care of you because they're all going to get to a point where it doesn't work for them while they're helping you. They're the hero and the day they have to stop because they will have to stop at some point cause they might have to replace your position and pay that money to someone else. They actually go to being the bad guy. So maybe don't put that on them and take care of yourself. So rich, any other thoughts before we wrap up? Where can people get information about this study? You mentioned there's a website, maybe you could repeat it. Yeah. Again for our listeners, disability can happen. Dot Org is a really nice website. They just redesigned it for disability awareness month. They have some stories in there of actual people, real life people that have a challenge with a disability and it's, they're talking about what happened in the claims and so forth process. Very important to look at and you can see some statistics and so forth that that a person can find, find valuable. Great insight. And you know, it's interesting as we've said many times on this program, uh, the greatest risk to someone's finances is not a market correction. It's not a tax laws change. It's what we refer to as uberous which is excessive pride. It's that belief that a, it's always going to be the other guys. I'm going to be me. So what we say to our listeners is be smart, do the right thing. Make sure you're covered when it comes to this. Uh, you've been listening to discovering responsible wealth though this had been frank Congilose and our guests, which are Richard Pasick CandA financial group rich. So nice to have you with. Thank you Brian

Speaker 3: 17:50

and we wish all of our listeners are great month. Then we'll catch up with the next month.

Speaker 1: 17:57

Advisers of the Institute of responsible wealth may be licensed for investment and insurance products. The Institute of Responsible Wealth as an educational division of CandA Financial Group, CandA financial group and its advisors are an agency or an agent of the Guardian Life Insurance Company of America, New York, New York securities products and advisory services offered through Park Avenue Securities, LLC. Member, Finra, SIPC Park Avenue Securities is an indirect, wholly owned subsidiary area of Guardian. The Institute of Responsible Wealth and CNA financial group are not affiliates or subsidiaries of Park Avenue securities or guardian, Guardian. It's subsidiaries. Agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

Speaker 3: 18:48

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