Compute target disability benefit and the gap to fill with private coverage.
Additional private LTD needed (monthly)
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Target monthly benefit
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Employer net benefit (after tax)
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Your income is the asset you are least likely to insure
Most people insure a car worth $30,000 and a house worth $400,000 without a second thought, then leave their single largest asset, their ability to earn, almost completely uninsured. A 35-year-old earning $150,000 will bring in more than $6 million over a career before raises. The Social Security Administration estimates that just over one in four of today's 20-year-olds will be disabled for some period before retirement age. Long-term disability insurance replaces a portion of your paycheck if illness or injury stops you from working, and this calculator sizes the gap between what you would need and what your employer plan actually delivers.
The standard planning target is 60% of gross income. That figure is not arbitrary. When you replace 60% of gross with a benefit that arrives tax-free, the after-tax result lands close to your normal take-home pay, because you are no longer paying payroll taxes, income tax on the full salary, or the costs of commuting to a job. The tool starts from that 60% target and lets you adjust it.
Why your group LTD probably falls short
Employer long-term disability looks generous until you read the fine print. Group plans typically cap at 50% to 60% of base salary, often ignore bonuses and commissions entirely, and, critically, the benefit is taxable when the employer pays the premium. That last point quietly shrinks the protection. A plan that promises 50% of salary delivers far less in your pocket after tax. The calculator accounts for this by reducing a taxable employer benefit by your marginal rate before comparing it to your target.
Sizing the gap on a $150,000 salary
Take someone earning $150,000 who wants to replace 60% of income. Their employer provides 50%-of-salary LTD, but the employer pays the premium, so the benefit is taxable, and their marginal rate is 32%. Here is how the tool finds the gap.
| Calculation | Monthly |
|---|---|
| Target benefit (60% of $150,000, divided by 12) | $7,500 |
| Employer benefit before tax (50% of salary, monthly) | $6,250 |
| Employer benefit after 32% tax | $4,250 |
| Additional private LTD needed | $3,250 |
A plan that looked like it covered half the salary actually nets just $4,250 a month against a $7,500 target. The chart shows the taxable employer benefit shrinking and the private coverage that fills the rest.
The clause that decides whether a policy is worth buying
When you shop for the private LTD that fills this gap, the single most important term is the definition of disability. An "own-occupation" policy pays if you cannot perform the duties of your specific profession, even if you could do some other job. An "any-occupation" policy pays only if you cannot work at all, a much harder bar to clear. For a surgeon, an attorney, or anyone with specialized skills, own-occupation coverage is worth the higher premium. Also weight the elimination period, the waiting time before benefits begin, against your emergency fund. A 90-day elimination period is cheaper than 30 days, but only works if you have savings to bridge those three months.
What does private LTD typically cost?
Expect to pay roughly 1% to 3% of your income per year in premium, with the rate driven by your age, health, occupation class, and the strength of the policy definitions. A buy-up policy filling a modest gap is far cheaper than insuring an entire income from scratch. Because privately-paid premiums make the benefit tax-free, paying with after-tax dollars is usually the smart structure.
Who needs this most?
High earners whose compensation includes bonuses or commissions that group plans exclude, the self-employed who have no employer coverage at all, and anyone in a physically demanding or specialized profession. If your household could not survive on one income or on savings for an extended period, the gap this calculator reveals is one you should close.
Does Social Security disability cover me?
Only partially, and only if you qualify, which is difficult. SSDI uses a strict any-occupation standard and the average monthly benefit is modest, often well under what a professional earns. Approval can take many months and many initial claims are denied. Treat SSDI as a thin backstop, not a substitute for private long-term disability coverage.