We recently had a conversation with Amanda, who is retiring at the beginning of the new year. Her personal disability policy is coming up for renewal, and she was curious if she should keep it.
The primary purpose of disability insurance is to protect your earned income. If you’re no longer working, there’s no paycheck to protect—so the core function of the policy becomes irrelevant. Most disability insurance policies, in fact, end coverage at retirement age or have age limits built in, often 65 or 67. Many also have a requirement that you are working and drawing income to maintain coverage.
There are a few scenarios where keeping some form of coverage might make sense. If you’re still earning income through part-time work or freelance gigs, disability insurance could still be useful. If you’re retiring early because of declining health, you may already be close to qualifying for benefits, so reviewing your policy carefully is important. And while not the same as disability insurance, long-term care insurance might be worth exploring to cover assistance with daily living activities – if you are young enough and healthy enough to apply.
To make the right decision, start by reviewing your policy. Check the terms, age limits, and whether you’re still eligible for benefits. Talk to a financial advisor to assess whether any residual coverage is worth keeping or if it’s time to let it go. If you’re worried about health-related expenses in retirement, long-term care or critical illness insurance may be more appropriate.
For most retirees, disability insurance is no longer necessary. Once you stop earning income, the need for income replacement disappears. Redirecting those premium dollars toward other retirement needs may be a smarter move.
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/ SIPC.
This is a hypothetical situation based on real life examples. Names and circumstances have been changed. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your advisor prior to investing.