What should I do now if I expect to be too disabled to work in 10-20 years?

by madoneforever

A reddit friend asked me to comment since I’ve walked this journey already. I had a brief illness when I was 30 and then another long term disability hit when I was 38. The first illness was my wake-up call to prepare for the future. Luckily I did.

1. regardless of insurance you will be expected to apply for SSDI (non need based social security i.e. you can have assets.
2. Pay down all your debts, if you can.
3. Try and live off of 1/2 your earnings now (including debt paydown) and bank the rest in 401K, Roth IRA, Stock Options (anything that has a match or a tax advantage.)
4. Buy a house you can afford now as if you made 1/2 of what you earn – you can always rent out rooms for extra money or to offset the cost. Owning a home is often the only thing that keeps one from poverty.
5. If you have an insurance buy-up at work, do it! Short-term disability pays 40-70% of your earnings tax free and is up to a year. Long-term disability pays 20-70% of earnings until 65 but is difficult to get or maintain and is taxed as income. Settlements by insurance companies are about 10-20% of what you expect i.e instead of 1 Million you will be offered $100K…
6. Any monies you receive put in to passive income sources rental properties, mutual funds, CDs, bonds etc. $40K in an investment and $200 a month income forever is better than money in the bank depreciating.
7. Deduct, deduct, deduct. Study tax deductions medical, investment, home etc.
8. Remember all the things you used to do for yourself, you may need cash to pay someone else to do for you, so you’ll need more income.
9. Medicare – you qualify for the same insurance as old people. You can switch plan A & B annually…but be careful you only have 12 months to choose the premium extended plans C, D Etc. then you’ll be locked out until you are 55 unless you move which may or may not trigger the ability to change all the plans. I really wanted a premium plan but thought I would try the lesser for a year and then got stuck with only A & B. There are free advocates that help with choosing a medicare plan, use them BEFORE your year is up! Also, lock in a good Doctor during sign-up. Many do not take Medicare at all.
10. Once you own a home, if you have to choose between paying creditors or putting money away, put the money away.
11. As long as your expenses meet your income, you’ll be ok.