How Long Can You Afford to Be Disabled?

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Here's an example client, Jane, has monthly expenses of $4,000.

Let’s assume she became disabled in October: In November, Jane would completely tap out the $2,000 from her checking account and an additional $2,000 from her savings.

• After December’s expenses were paid, Jane’s balance in her checking and savings accounts would be zero and she’d have to take $1,000 from her CDs.
• To pay January’s expenses, Jane would have to use the $4,000 remaining in her CDs to pay her monthly expenses AND come up with the funds to pay the penalties of early withdrawal from her CDs.
• In February, what would she do?

She’d have no choice but to borrow money from her 401(k), which would have to be re-payed with interest, putting her further behind on a month-to-month basis.

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