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Side effects of disability

| Monday, Dec. 19, 2005

Ken and Ginnie Imm of New Kensington have literally known each other all of their lives. Born in the same hospital on the same day, they “met” in the nursery, began dating when they were 16 years old, and went on to marry and raise a family.

The Imms bought a second home and a new car a year ago. Their children grown, they were enjoying the fruits of years of hard work. Then, on Jan. 30, 2005, tragedy struck. At the age of 57, Ken had a stroke that has left him unable to work or care for himself. Ginnie quit her job in order to care for him.

Ken had always worked two jobs — a full-time job and flooring work on the side; and Ginnie had worked 16 years at a day-care center. Without full-time income and mounting medical bills, Ginnie realized how important savings are.

“We are too young for Medicare, and you need to be on full-time disability for two years to start to collect it otherwise. Our health insurance is $665 per month, and Ken's life insurance is another $153 per month. That doesn't include the copays for doctor visits, medication and the like,” Imm says. And that is on top of expenses such as a mortgage, utilities and groceries. The couple receive a monthly Social Security check, but a large chunk of that goes toward insurance premiums, copays and related expenses. Yet, the basic needs remain — a roof, food, clothing, etc.

The Imms have cashed out some of their 401(k) in order to cover expenses, but Imm wishes they had saved more. “I realize now that savings is so important. You don't think, even at our age, that anything will happen to you for quite some time. You're more focused on doing things for your children and enjoying life.”

Imm wants to share her story so that other families might be able to avoid such hardship. In retrospect, she feels as though she and her husband should have saved more and made better use of 401(k) programs offered by their employers.

“You need to save and put more money away for a rainy day,” she says. “You don't know when it's coming."

Savings options

According to financial experts, it is imperative to set aside money each month. Allstate Bank refers to savings as the base of a financial pyramid. Here are options:

  • Emergency fund: Financial professionals believe that three months to six months worth of living expenses should be kept in a separate account should you lose your income. The money should be enough to pay the rent/mortgage, car loans, credit card balances and other regular expenses, as well as pay for food and other household necessities. The account should be liquid, meaning it can be accessed easily and without penalty. A bank savings account is perfect for an emergency fund.

  • 401(k): Most people are familiar with the retirement savings accounts known as 401(k). These are pre-tax deductions taken from an employee's paycheck; with pension programs dwindling, this likely will serve as a primary source of retirement income. Many employers match employees' contributions. Because these investments are based in the stock market, they have the potential for larger gains than putting money in a bank account. There is, however, a penalty for drawing money before retirement. There are provisions for drawing money in times of financial hardship.

  • IRA: If neither you nor your spouse has a retirement plan at work, an Individual Retirement Account may be the best way to enjoy tax-deferred growth on retirement savings. This tax-deferred compounding benefit is the key to an IRA's building power. And if you are eligible, you may be able to deduct your contribution from your taxes.

  • Certificate of Deposit: A certificate of deposit (CD) is an excellent way to save money and earn a higher interest rate than you would with a bank savings account. The drawback is that CDs are not liquid; if you cash out early, you will lose interest and, possibly, part of your investment. Typically, you invest a fixed amount of money for a predetermined amount of time called the term, and you're guaranteed your principal plus a fixed amount of interest, which you receive periodically throughout the term.

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