Retirement age changes; need for disability insurance does not

When the recession hit and the stock market plummeted, more than a few workers watched their savings disappear. Hard-earned retirement funds dropped in value by as much as half. For younger workers, the result was a change in investment strategy. For older workers, though, the result was a change in retirement plans: They would stay in their jobs for as long as possible if only to maintain their benefits.

What many older workers may not realize is that remaining in the workforce past the Social Security Administration’s age of retirement has some serious — and often expensive — implications for long-term disability insurance. And older workers may need that coverage more than ever; the cost of treating an injury could easily wipe out the little savings they have left.

A recent study indicates that workers age 50 and older may be unprepared for a disabling injury. Only 51 percent of these “older” workers have long-term disability coverage, while 62 percent of “younger” workers (age 18 to 49) are covered. When it comes to supplemental insurance, only one-third of the older workers took advantage of their employers’ programs. Less than 30 percent opted for voluntary coverage through their employers (employees pay discounted group rates out of their own pockets).

Younger workers were much more likely to participate in every one of these programs, although the reason isn’t clear. One possible explanation is that employers pay the full premium or a hefty portion of it for younger workers. Not so for older workers: The premium increases as workers age, and an employer may not offer any discount to a worker past the “official” SSA age of retirement.*

We will continue this in our next post.

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Alan Olson practices employment law throughout the United States from his offices in New Berlin, Wisconsin. Attorney Olson may be contacted at [email protected] with questions about the information posted here or for advice on long-term disability benefits claims.

Source: Chicago Tribune, “Disability policy might benefit older workers,” Janet Kidd Stewart, May 11, 2012

*The 1983 Social Security Amendments adjusted the retirement age upwards for workers born after Jan. 1, 1938. Using a formula based on birth year, the SSA retirement age gradually increases from 65 for workers born in 1938 to 67 for workers born after 1959.

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