Most people spend years focused on building wealth, growing retirement accounts, and protecting their investments. But there’s one financial risk that often gets overlooked because it feels unlikely until it becomes personal:

What happens if you suddenly can’t work?

For most people, their income supports nearly every aspect of their financial life, from mortgage payments and retirement savings to college funding, investments, and long-term goals. Yet many people spend more time reviewing their cell phone plan than understanding how their income would be replaced if a serious illness or injury prevented them from working.

At Sherr Financial Associates (SFA), our experience working with individuals and families across the Boston area has shown that disability planning is often overlooked until a major life event forces the conversation. A job change, growing family, home purchase, or unexpected health issue can quickly expose gaps in coverage that may have gone unnoticed for years. By that point, financial decisions often become more reactive instead of proactive.

The reality is that disability insurance is not just about catastrophic accidents. Many long-term disabilities stem from illnesses, chronic conditions, surgeries, or health complications that interrupt a person’s ability to work for months or even years.

For many professionals, long-term disability insurance plays an important role in helping protect income and maintain financial stability during unexpected health events. And for many professionals, employer-sponsored disability coverage may leave larger income gaps than they realize.

How Much Disability Insurance Do Most Employer Plans Provide?

Most employer-sponsored long-term disability (LTD) plans typically replace about 60% of your base salary. In many cases, benefits may also be taxable if your employer pays the premiums, which can reduce the amount of income you actually receive during a disability.

Why Does Disability Insurance Matter More Than Most People Realize?

When you think about financial risks, you may focus on market volatility, inflation, or rising taxes. But your ability to earn an income may be one of your largest financial assets.

Think about it this way: If you earn $200,000 per year and plan to work another 20 years, your future earning potential may exceed $4 million before accounting for raises, bonuses, or investment growth.

That future income stream will more than likely support:

• Your retirement contributions
• Your mortgage payments
• Your family’s lifestyle
• College savings
• Healthcare expenses
• Investment opportunities

Without that income, many other parts of your financial plan can quickly come under pressure. That’s why disability planning is often less about fear and more about protecting the financial foundation underneath everything else.

What Are the Odds of Becoming Disabled Before Retirement?

Many people assume disability is rare or only applies to dangerous occupations.

But statistically, the risk is larger than many realize.

According to data commonly referenced by the Social Security Administration, roughly 1 in 4 of today’s 20-year-olds may become disabled before reaching retirement age.

That statistic surprises many people because most disabilities are not caused by dramatic accidents.

Instead, they often involve:

• Cancer treatments
• Back injuries
• Autoimmune conditions
• Heart disease
• Neurological disorders
• Mental health conditions
• Complications from surgery
• Chronic illnesses

A disability may last a few months. In other situations, it may alter your ability to work long-term. The financial impact can extend well beyond medical bills.

This demonstrates the importance of working with a team of Boston financial advisors who can help you develop an insurance strategy to address potential disability needs, both short- and long-term.

Why Is Employer Disability Coverage Often Incomplete?

Many people assume their employer already provides enough disability coverage.

Sometimes that’s true.

But often, there are gaps people do not realize exist until they review the details carefully.

Employer-sponsored long-term disability plans are usually designed to provide a baseline level of protection rather than fully replace your lifestyle and spending needs.

Many plans:

• Replace approximately 60% of base salary
• Exclude bonuses and commissions
• Cap monthly benefits
• Have waiting periods before benefits begin
• May not fully cover specialized occupations
• Can create taxable income if the employer pays the premiums

That last point is especially important.

If your employer pays the premium, disability benefits are often taxable when received. That means your actual take-home replacement income could be meaningfully lower than expected.

Let’s look at a hypothetical example: The 60% Illusion

Say you’re earning $180,000 annually, or roughly $15,000 per month before taxes. At first glance, a long-term disability policy replacing 60% of your income may sound reasonable. That would equate to approximately $108,000 annually, or about $9,000 per month in benefits.

But the picture may change quickly if those benefits are taxable because your employer paid the premiums. After federal and state taxes, your actual take-home benefit could potentially fall closer to $6,500–$7,000 per month, depending on your tax situation.

Meanwhile, many of your expenses may remain unchanged:

• Mortgage payments
• Property taxes
• Healthcare costs
• Child-related expenses
• Student loans
• Retirement savings goals
• Every day living expenses in a higher-cost area like Boston

And in many cases, bonuses, commissions, or equity compensation are not included in employer-sponsored disability calculations.

The gap between your normal monthly cash flow and your actual disability benefit may be larger than expected, especially if your lifestyle and financial obligations were built around your full income.

How Can You Check Whether You Have Long-Term Disability Coverage?

One of the simplest starting points is to review your pay stub or employee benefits portal.

Look for:

• “LTD”
• “Long-Term Disability”
• “Disability Insurance”

If you don’t see LTD coverage listed, there may be a meaningful gap in your protection strategy.

Even if coverage exists, it is worth reviewing:

• The percentage of income covered
• Whether benefits are taxable
• The maximum monthly payout
• Waiting periods
• Benefit duration
• Definitions of disability
• Whether bonuses are included

At Sherr Financial Associates (SFA), we include these types of reviews as part of broader financial planning conversations because insurance decisions rarely operate independently from the rest of your financial life.

What Does “Own Occupation” Disability Insurance Mean?

One area that creates confusion is how disability is defined within a policy.

Some policies use an “any occupation” definition, meaning benefits may only apply if you cannot perform any job reasonably suited to your background or education.

Others use an “own occupation” definition, which focuses on whether you can continue working within your specific profession.

This distinction can matter significantly for:

• Physicians
• Attorneys
• Executives
• Engineers
• Business owners
• Specialized professionals

For example, a surgeon with a hand injury may still be employable in another capacity but unable to continue practicing surgery.

That’s why understanding the structure of your policy matters just as much as knowing you have coverage.

How Does Disability Insurance Fit Into Financial Planning?

Disability planning is often more effective when viewed within the context of your overall financial picture.

That can include:

• Emergency reserves
• Retirement savings
• Insurance coverage
• Investment strategy
• Debt obligations
• Estate planning
• Family cash flow needs

Think of disability insurance like the suspension system in your car. You rarely think about it while everything is working normally. But when the road becomes rough unexpectedly, the system helps absorb financial stress that could otherwise create larger disruptions.

Without adequate income protection, you may be forced to:

• Pull money from retirement accounts early
• Pause investment contributions
• Accumulate debt
• Delay long-term goals
• Sell assets during unfavorable market conditions

A coordinated financial strategy evaluates how these pieces interact together rather than treating insurance as a separate conversation.

Are High Earners More Exposed Than They Realize?

In many cases, higher-income professionals actually face larger disability planning gaps. Why? Because employer plans often cap monthly benefits.

For example:

• A 60% replacement ratio may sound reasonable
• But a benefit cap may prevent higher earners from receiving the full percentage
• Bonuses, equity compensation, and incentive income are frequently excluded

This means someone earning $350,000 annually may replace far less income proportionally than expected.

At the same time, lifestyle expenses often rise alongside income:

• Larger mortgages
• Private school tuition
• Higher savings goals
• Increased fixed expenses
• Business obligations

As wealth grows, the need for coordinated risk management often grows alongside it. Our SFA Private Client services address these scenarios and more.

When Should You Review Your Disability Coverage?

Many people purchase or enroll in coverage once and rarely revisit it afterward.

But disability planning should evolve as your life changes. Consider reviewing your coverage after:

• Getting married
• Having children
• Changing jobs
• Receiving major compensation increases
• Buying a home
• Starting a business
• Approaching retirement
• Experiencing health changes

Even a quick review may uncover outdated assumptions or gaps that no longer align with your current financial life.

How Does Sherr Financial Associates (SFA) Help Coordinate These Conversations?

At Sherr Financial Associates (SFA), financial planning discussions often focus on how different areas of your financial life connect together.

Disability insurance is not viewed as an isolated product conversation. Instead, it becomes part of a broader review that may include:

• Cash flow planning
• Retirement projections
• Investment management
• Tax considerations
• Estate planning coordination
• Risk management analysis

The goal is to help you understand whether your current protection strategy aligns with your lifestyle, responsibilities, and long-term plans. Because insurance coverage that made sense 10 years ago may not reflect where you are today.

How Can Sherr Financial Associates (SFA) Help? 

If you have questions about your current disability coverage, or if you are unsure whether your existing plan still aligns with your financial life today, the team at Sherr Financial Associates (SFA) can help you evaluate how your protection strategy fits within your broader financial plan:

• How much income would actually be replaced? 
• Would those benefits be taxable? 
• How long would the payments last? 
• Which monthly expenses would continue even if employment income stopped temporarily?

When so much of your financial life depends on your ability to earn an income, understanding how that income would be protected becomes a much more meaningful conversation.

Let’s connect today.