Individual age 45 makes 5 annual
payments of $10,000 toa defined contribution plan but is
totally disabled at age 50.
Assumes annual investment return of
8% compounded.
$494,229
$200,986
Gap: $293,243
Example…Disability at age 50
6
But what
happens if disability strikes? The impact can be dramatic.Assume that this same 45 year old
makesfive annual payments of $10,000
to his plan, but at age 50 becomes totally disabled.
Assuming
that the disability is permanent and no more contributions can be made, a
huge gap appears at age 65. Instead of $494,229, the retirement fund would
have grown to only $200,986.That’s a
gap of over $293,000 - a serious one indeed.