Finance for pharmacists: Disability, income protection, and 401ks

Key Points

Q: Is my employer's group insurance for long-term disability adequate, and what should I look for in an income-protection plan?

Your ability to earn an income is your No. 1 asset. It is important to protect as much of that asset as you possibly can, especially if you have dependents. Whether healthy or disabled, many people still have financial obligations such as student loans, mortgages, auto loans, etc. In the event of a disability, many cannot afford to lose any of their wages. In addition to the lost wages, there are also lost retirement contributions which could drastically set back your long-term goals. Often it makes sense to purchase a private supplemental policy.

Q: My employer offers a matching contribution if I contribute to the 401k. How much should I be contributing to that account?

A: It has been common practice for employers to offer matching contributions to retirement plans. Your goals should dictate how much you contribute, but at the very least, take advantage of any "free money" your employer is willing give you.

A common matching contribution is $0.50 for every dollar the employee contributes, up to 6 percent of the salary. That is the equivalent of receiving a 3 percent raise each year you participate in the plan. Each employer is unique, so make sure to contribute at least enough to get the full match. The IRS contribution limit for 401k plans is $16,500 for 2009. Keep in mind that contributions to an employer retirement plan carry IRS restrictions. With few exceptions, this money is tied up until age 59 ½. Consider other financial needs in addition to retirement before contributing.

Have a professional or personal financial question? Send it to Rick at rick.schultenover@northstarfinancial.com and cc us at drugtopics@advanstar.com
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The information in this article should not be construed as specific investment advice. Consult a reputable adviser for insight into your particular situation.

Rick Schultenover is a financial adviser, associate vice president, and associate partner with North Star Resource Group, Minneapolis, North Star Consultants, Inc., Insurance Products and Services | *CRI Securities, LLC, Securities and Investments, Investment Advisory Services | *Securian Financial Services, Inc., Variable Products and Securities, Investment Advisory Services | North Star Resource Group offers securities and investment advisory services through CRI Securities, LLC and Securian Financial Services, Inc. CRI Securities is affiliated with Securian Financial Services. 128591 D.O.F.U. 1/10.