Comment Response – Blind Belief in Experts

Littleengine made an excellent comment to my post “Blind Belief in Experts“.

Just out of curiosity, when working out how big a safety net to have, did you factor in the possibility of physically not being able to work, in addition to not having a job to work at? From what you’ve written, it seems as if you’ve only addressed half the “equation”, not having a job to rely on, and may be underestimating the amount necessary to live on if, say, you were injured and couldn’t physically work for several months? Or, is that possibility also covered by the type of job you have (i.e. short/long term disability paid for by your workplace), so would also help reduce the size of any emergency fund needed? Too many people, I think, focus only on “will I have this job” and don’t factor into the equation what could happen if they were physically unable to work at the job they had. That’s a separate issue altogether and should be thought about when figuring out how much to have set aside, especially if they have no other ways to provide income while they were off work getting better.

Littleengine makes an EXTREMELY excellent point about considering not just HAVING a job, but also whether I will always be able to physically DO my job. So excellent, that according to the American Society of Actuaries, becoming disabled and not able to work for any period of time is a greater  risk than that of death for workers between ages 25 and 65 at every age. Chances are one in two that a 30 year old will be disabled for more than three months before age 65.

So I just wanted to pull out, for me, what I have going for me in this respect.

First off, I do have both long term and short term disability insurance. If I were to become physically unable to do my current job (which I’ll address how this might work later) I would get 60% of my gross income without income tax removed (which would end up being around 80% of my net salary). With the plan I have I would have to wait 180 days (6 months) before I could get this salary – hence 6 months of salary in an emergency fund would be absolutely required, right?

Sure, for most people, this would be true. However… (there is always a catch, isn’t there?)

I could do my job if I were crippled. I could do my job if I lost both of my arms. I could do my job if I were a paraplegic. If I were confined to sit continuously and never move I could do my job. Because for the most part, and especially in my next step as an academic, my job is one that can be done in my mind. I need only to be able to think and speak, though the ability to type would be nice (but thanks to programs like Dragon-speak, doable). So could I become disabled, sure. Could I become disabled such that I wouldn’t be able to work for more than 6 months? Unlikely. If such a thing happened, would I be able to live for 6 months off of $10,000 (my goal Emergency Fund) and then have access to other non-Emergency Fund money (like my non-retirement stocks and mutual funds), absolutely.

However, this ISN’T true of everyone. I know that working in academia is an “elitist” position where one can do it no matter how old or infirmed, and this is one of the reasons why I love it. However, littleengine is ABSOLUTELY correct that you SHOULD consider your ability TO WORK in addition to whether you HAVE A JOB. So thanks littleengine for bringing this up. =D

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7 Responses to Comment Response – Blind Belief in Experts

  1. mo says:

    does that mean that you don’t get your insurance pay out if you become completely disabled physically?

    • SS4BC says:

      Only if I was unable to work for longer than 6 months. Which, like I said, is a near impossibility – though I suppose losing my arms or legs might require months of physical therapy and rehabilitation and all, which I would then be glad to have the insurance I’m sure. =)

  2. I hate thinking of worst case scenario situations, but you really do have to think of them when you’re making a long-term plan. You never know what might happen and a lot of people don’t plan for the worst, worst case scenario. Better to be too prepared than not prepared enough.

  3. Jessie says:

    wow – your commenter did bring up a really interesting point. I don’t know that I have really considered that yet. I have Short term and long term disability through work – so I think like SSFBC I have to find out how long I would have to wait for benefits to kick in. My E-fund should be able to last however long that is.

    • SS4BC says:

      Most are 60, 90 or 180 day wait periods before you can make a claim. They see these wait periods as the equivalent of paying a deductible for regular insurance.

  4. littleengine says:

    I have to say, seeing my name at the top of the new post was a bit of a shock (as in, oh crap, I’ve gone and put my foot in it on my very first pf blog comment), but was then relieved and glad to see my comment initiated some more thought/discussion on the topic. I’m not sure how differently things work in the US than in Canada (where I live), but I’ve known a few people where they’ve been off work for extended periods of time and while the short/long term disability through work has come through, I do believe it takes awhile. And it’s not as much as whatever they were making before, and is of little consolation if it doesn’t start coming until 3-4 months after the fact. In the most extreme case, I know one man who was in a car accident and ended up with severe brain trauma (long and short term memory loss, etc…) and is now unable to work at all, receiving only a (very) small govt disability payment each month until something is eventually worked out with the insurance companies. *If* anything is eventually worked out. That’s obviously one of the worst case scenarios, and like me in millions said, most people don’t plan for something like that, but I think it’s far better to hope for the best while planning for the worst and to have more set aside than you’ll ever need. If you don’t have a huge emergency fund set up (that mystical 6 month figure everyone throws around), perhaps part of this emergency planning process might be to get something like critical injury insurance? I think that’s what it’s called, anyway, it’s something Gail Vas Oxlade talks about quite a bit on her Till Debt Do Us Part blog/show, and could be helpful for someone who wanted a bigger cushion but doesn’t have the actual emergency fund fully, well, funded, yet.

  5. Red says:

    It’s important that you note that your goal emergency fund would pay for six months of expenses. Because even if you could continue to do your job, you would need time off if you were in an accident that caused you to have two arms amputated. 😉

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