Disability Insurance for Retirement Savings (DIRS)
A long-term disability can affect more than an individual's current income. It can also interrupt the retirement contributions they planned to make throughout their working years.
Disability Insurance for Retirement Savings (DIRS) is designed to help protect an individual's ability to continue accumulating funds for retirement during a qualifying disability, helping address the long-term financial impact of lost retirement contributions.
What Is Disability Insurance for Retirement Savings?
Disability Insurance for Retirement Savings is a specialized disability insurance solution designed to help protect the retirement savings an individual may otherwise be unable to make during a qualifying disability.
Traditional Individual Disability Insurance is generally designed to replace a portion of current earned income. Retirement savings protection addresses a different financial risk: the contributions toward retirement that may stop when an individual can no longer work and earn an income.
Why Can a Disability Affect Retirement Savings?
When someone experiences a long-term disability, the financial impact can extend well beyond their immediate loss of income.
An individual may no longer be able to make regular retirement contributions, and employer contributions may also be affected depending on the individual's employment and retirement plan.
When a disability occurs many years before retirement, the loss of ongoing contributions and potential investment growth can have a significant impact on long-term retirement goals.
How Does Disability Insurance for Retirement Savings Work?
During a qualifying disability, benefits are designed to help replace eligible retirement savings contributions that may otherwise have been lost because the insured is unable to work.
Depending on the specific coverage, benefits may be directed into a trust or other arrangement intended to accumulate funds for the insured's future retirement rather than being paid directly for current living expenses.
How Is Retirement Savings Protection Different From Traditional Disability Insurance?
The primary difference is what the benefit is intended to protect.
Traditional Individual Disability Insurance helps replace a portion of current earned income during a qualifying disability.
Disability Insurance for Retirement Savings is designed to help address retirement contributions that may be lost because a disability prevents the insured from continuing to work and save for retirement.
The two types of protection can therefore address different components of an individual's overall financial plan.
Who May Consider Retirement Savings Protection?
This type of coverage may be worth considering for individuals who regularly contribute toward retirement and are concerned about how an extended disability could affect their long-term financial goals.
It may be particularly relevant for:
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Business owners
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Executives
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Physicians and dentists
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Attorneys and other professionals
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Highly compensated employees
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Self-employed individuals
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Individuals making significant ongoing retirement contributions
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Individuals with many years remaining before retirement
Ultimately, the consideration is not simply an individual's occupation or income. It is how significantly a prolonged interruption in retirement savings could affect their long-term financial plan.
Frequently Asked Questions
Does Disability Insurance for Retirement Savings replace regular Individual DI?
No. Traditional Individual Disability Insurance is generally designed to help protect current earned income, while retirement savings protection addresses contributions that may be lost during a qualifying disability.
Can someone have both Individual DI and retirement savings protection?
Yes, because the coverages address different financial needs, they may be used together as part of a broader disability income protection strategy, subject to applicable eligibility and underwriting requirements.
Why protect retirement contributions against disability?
A long-term disability can prevent someone from making retirement contributions for years. In addition to the contributions themselves, the individual may lose the potential investment growth those contributions could have generated before retirement.