Risk Management and Financial Planning in Boston, MA.

When people think about risk management strategies for their wealth, they often focus on protecting investment portfolios, retirement accounts, or other assets. However, one of your most valuable assets may be your ability to earn income.

If you’re a professional or executive in the Boston area, years of future earnings could potentially exceed the value of your current investment portfolio. Yet disability planning is often overlooked until a health issue or injury creates an unexpected interruption in income.

According to the Social Security Administration, approximately one in four of today’s 20-year-olds may experience a disability before retirement. While many professionals focus on protecting their investment portfolios and growing their wealth, far fewer consider the financial consequences of losing their ability to earn an income. 

For higher-income individuals, a prolonged disability could affect not only day-to-day cash flow but also retirement contributions, long-term investment growth, and other financial goals that depend on continued earnings.

Many employers offer long-term disability (LTD) coverage as part of their benefits package, which can provide an important first layer of protection. However, group disability plans often replace only about 60% of base salary. If your employer pays the premium, those benefits may also be taxable, potentially reducing the amount of income available to support your lifestyle.

This becomes even more important for higher-income professionals whose compensation extends beyond salary. Bonuses, commissions, deferred compensation, equity awards, and other incentive-based earnings are frequently excluded or only partially covered under many employer-sponsored plans.

For example, let’s say you earn $250,000 annually but receive a significant portion of your compensation through bonuses and incentive pay. A disability benefit based solely on base salary could leave a substantial income gap during an already challenging time.

A good starting point is reviewing your employee benefits package or pay stub to determine whether long-term disability coverage is currently in place. If coverage exists, it’s worth understanding how much income it would replace, whether benefits are taxable, which forms of compensation are covered, and how long benefits may continue.

At Sherr Financial Associates (SFA), we view income protection as a foundational component of financial planning in Boston. Disability coverage should not be evaluated in isolation but as part of a broader strategy that includes retirement planning, investment management, emergency reserves, and overall risk management. 

By understanding where potential gaps exist today, you can make more informed decisions about how to address those risks within your long-term financial plan.

Read our new blog on: “Do You Have Enough Disability Insurance?”

Many people assume employer disability insurance solves the problem. In reality, it may only address part of it.

Think of employer disability insurance like the spare tire that comes with a new vehicle.

It’s valuable to have. But it may not be designed for every situation or every destination.

Group disability plans often provide affordable coverage because risk is spread across many employees. However, they may include limitations on income replacement, portability, benefit definitions, or coverage amounts.

Individual disability policies may offer additional flexibility. Potential advantages can include:

• Portable coverage that remains with you if you change jobs
• Customizable benefit structures
• Additional income replacement
• Coverage for highly compensated professionals
• Options tailored to specific occupations

This can become particularly important if you are a physician, attorney, executive, or business owner with a high income. 

At SFA, our Boston financial planners evaluate disability insurance as part of a broader financial strategy rather than viewing it as a standalone product decision.

Check out our new blog: “Group vs. Individual Disability Coverage: What’s the Difference?”

Many graduation gifts are forgotten within a few years; the “gift that keeps giving”, as they say, would be helping a new graduate build a strong financial foundation that can influence financial decisions for decades.

If your child or grandchild is beginning their first professional job, they may soon encounter concepts such as:

• 401(k) plans
• Employer matching contributions
• Vesting schedules
• Health Savings Accounts
• Employee stock plans
• Roth IRA opportunities
• Student loan repayment options

Unfortunately, many young professionals receive little practical education on these topics.

Let’s look at a hypothetical example of two graduates who each earn similar incomes and ultimately save the same amount for retirement.

Sarah begins contributing $500 per month to her 401(k) immediately after graduating at age 22. Her employer matches 50% of the first 6% of her salary, adding approximately $150 per month to her account. Together, Sarah and her employer contribute about $650 per month. Assuming a hypothetical average annual return of 7%, by age 32, she could accumulate roughly $110,000. ¹

Now consider Jake, who waits ten years before beginning to save. At age 32, he starts contributing the same $500 per month and receives the same employer match. Even though Jake will contribute the same amount each month going forward, he missed out on 10 years of contributions and, more importantly, 10 years of potential growth on those early dollars.

By age 65, Sarah’s account could grow to approximately $1.4 million, while Jake’s account could grow to roughly $700,000. Although both saved consistently and received the same employer match once they started, the graduate who began earlier could end up with nearly twice as much simply because time had more time to work in her favor.

The lesson isn’t necessarily that recent graduates need to maximize every retirement account immediately. Rather, it’s understanding that even modest contributions made early in a career may have a meaningful impact decades later. When combined with an employer match, those early years can become some of the most valuable saving years of a person’s lifetime.

¹Please note this is a hypothetical example and is for illustrative purposes only. No specific investments were used in this example. Actual results will vary.

Life insurance discussions often become confusing because there is no universal solution. The right answer depends on your goals, family situation, financial resources, and time horizon.

At a high level, life insurance generally falls into two broad categories: term life insurance and permanent life insurance.

Term Life Insurance

Term insurance provides coverage for a specific period, such as 10, 20, or 30 years.

It’s often used for:

• Income replacement
• Mortgage protection
• Raising children
• Temporary financial obligations

Because coverage is temporary, premiums are typically lower than permanent insurance.

Permanent Life Insurance

Permanent insurance is designed to remain in force throughout life as long as policy requirements are met. Depending on the policy structure, it may include cash value accumulation and other planning features.

Permanent insurance may be considered when addressing:

• Estate planning goals
• Legacy objectives
• Long-term family planning
• Business succession considerations
• Wealth transfer strategies

The important point is that life insurance should support your overall financial plan.

At SFA, our comprehensive financial planning in Boston can help you evaluate both options based on your specific circumstances rather than defaulting to a one-size-fits-all recommendation.

Many people delay obtaining life insurance because they assume the process will be complicated, invasive, or time-consuming. In reality, today’s underwriting process is often much simpler than many expect.

Depending on the carrier and policy size, you may be asked to provide:

• Basic health information
• Medical history
• Prescription information
• Lifestyle details
• Income information
• Existing coverage information

Some policies still require medical exams, while others use electronic records and data verification to streamline underwriting.

Think of the process like applying for a mortgage. The lender wants information before making a decision, but the process is usually more manageable once you understand what’s involved.

One of the biggest benefits of working with an experienced financial advisor in Boston is having someone coordinate the process for you.

At SFA, we help clients compare carriers, review pricing, coordinate applications, and evaluate whether existing coverage still aligns with current needs. Many people are surprised to learn that they may be carrying too little coverage or paying more than necessary for existing policies.

One of the most common life insurance misconceptions is that only the primary income earner needs coverage. That assumption overlooks the tremendous value of unpaid contributions within a household.

Consider the responsibilities often handled by a stay-at-home spouse or parent:

• Childcare
• Transportation
• Household management
• Scheduling
• Meal preparation
• Educational support
• Family logistics

If those responsibilities suddenly disappeared, many families would face significant new expenses. 

For instance, professional childcare alone can cost thousands of dollars per month in the Boston area. Now add transportation assistance, household support, tutoring, meal preparation, and other services.

The financial impact can be substantial.

This is why life insurance planning should account for both paid and unpaid contributions to the household.

Coverage decisions shouldn’t be based solely on income. Your financial plan should also consider the broader role each family member plays in maintaining the family’s lifestyle and day-to-day operations.

At SFA, we help families evaluate life insurance within the context of a coordinated financial plan, helping connect protection strategies with retirement planning, investment management, estate planning, and long-term family goals.