Principal Disability Income Retirement Security (DIRS)

[climbhigh]

I am in the process of getting my disability insurance policies in place. My agent, however, is trying to get me to purchase an additional policy - Principal's Disability Insurance Retirement Security (DIRS). This is a separate disability policy that, in the event of a disability, funds would be placed into an irrevocable trust and invested on my behalf to be used once I reach age 65 (and my main DI policy stops paying out). This policy is based on the idea that if you are disabled "who is going to save for your own retirement?"

 

What are people's thoughts on this? Seems to me like its mixing investing and insurance, which is a major no no around here...

 

[Scott at MD Financial Services]

It is a pretty basic issue for most in that if you can't qualify for enough coverage on pure disability insurance (where they pay the money to you) then you can buy this coverage in addition to your disability contract in order to have money put away for you in an account that is tax deferred until retirement.  I think about it this way, if you can't save for retirement with the distribution from your disability payment this is a way to continue to have money put away for you so that at age 65 you are taken off of claim that you will then still have a comfortable retirement.  These contracts can be bought from several carriers and are relatively inexpensive for the benefit being bought.  The account fees are fees are pretty small, typically on a $4k per month account funding level the monthly fee is about $25.  The final issue to realize is since the contributions are an insurance payment the basis (amount contributed to the account) will all come out tax free so the distribution at retirement will not be all taxed, only the gain.

[LBKCLU]

I agree with Rex.

These retirement protection policies are not "Own-Occupation" and you must be totally disabled in order to receive benefits (they are "all or nothing"). As a result, in my opinion, you are better off counting your retirement contributions (employee and employer contributions) as income in order to allow you to qualify to purchase a larger amount of individual coverage.

As Rex stated, depending upon your earned income and employer provided group LTD, if any, this may require two companies - especially after you complete your training and your income rises.

Also, keep in mind, that Principal offers association discounts, as well as, multi-life discounts in addition to the 10% Mental/Nervous and/or Substance Abuse Disorder Limitation Discount. If want is being illustrated for you does not include one of these, you are likely going to be paying more than you should.

Finally, as a resident, you qualify for up to $6,000 month of individual coverage, regardless of your income or employer provided group LTD coverage. Therefore, if you are in a high paying medical specialty, two carriers are advisable - even as a resident - in order to allow you to potentially reach a higher level of coverage than any one would allow on their own without having to do additional exam, blood tests, urine tests or answer medical questions in the future.

Hope this helps.