Question 1

What is an 'income replacement gap' in the context of disability planning?

Accepted Answer

The income replacement gap is the difference between your current monthly income and the income protection you already have in place if you were unable to work. For most working professionals, the gap is the part most people underestimate. SSDI alone typically replaces only 30-45% of pre-disability income, capped by the Social Security maximum. Employer-provided LTD (if any) typically covers 60% of base salary, often excluding bonuses and commissions, and capped at a monthly maximum (e.g., $10K/month). If your current income is $15K/month, your protected income might be $7-9K, leaving a $6-8K monthly gap. This calculator computes that gap for your specific income, SSDI estimate, and LTD coverage.

Question 2

How is SSDI calculated and how accurate is the estimate here?

Accepted Answer

Social Security Disability Insurance (SSDI) is calculated based on your Average Indexed Monthly Earnings (AIME) over your 35 highest-earning years (per 42 USC §415). For most middle-income workers, the formula produces a Primary Insurance Amount (PIA) between $1,500 and $3,800/month at full disability. The SSA publishes a precise quick-calculator at ssa.gov, but the formula uses three 'bend points' that adjust annually. This calculator uses the current bend-point formula to estimate PIA given your reported lifetime earnings; the SSA's own statement (mySocialSecurity at ssa.gov/myaccount) is the authoritative source for your actual SSDI estimate.

Question 3

What's the difference between own-occupation and any-occupation disability?

Accepted Answer

Own-occupation: benefits pay if you can't perform the duties of YOUR specific occupation (a surgeon with hand tremor still gets paid even if they could work as a consultant). Any-occupation: benefits pay only if you can't perform ANY occupation for which you're reasonably qualified by education and experience. SSDI uses the any-occupation standard, which is why SSDI denial rates are high (~65% initial denial). Most employer LTD policies use own-occupation for the first 24 months, then transition to any-occupation. Premium specialty policies use true own-occupation for the entire benefit period. This calculator does NOT model the occupation-definition impact on benefit probability — that's a policy-design analysis a licensed DI broker can run.

Question 4

How does the tax-treatment toggle work?

Accepted Answer

Per IRC §104(a)(3), disability benefits are tax-free if YOU paid the premium with after-tax dollars (employee-paid policy, or individual policy purchased outside an employer). Per IRC §105 and Treas. Reg. §1.105-4, disability benefits are TAXABLE if your EMPLOYER paid the premium with pre-tax dollars (most group LTD plans). The same $5,000/month gross benefit nets you $5,000 if you paid the premium personally, or about $3,500-$4,000 if your employer paid (depending on your marginal tax rate). The toggle on this calculator surfaces the net-of-tax benefit so the actual gap is visible. Many employees on group LTD discover this asymmetry only at claim time.

Question 5

What is BLS Work-Life Expectancy and why does it matter for disability planning?

Accepted Answer

BLS Work-Life Tables estimate how many more years a person of a given age, sex, education, and employment status will participate in the labor force. For disability planning, this drives the calculation of the present value of the income-replacement gap — a 35-year-old with a $5K/month gap and 28 years of remaining work life has a much larger total exposure than a 60-year-old with the same gap and 5 years remaining. The calculator surfaces both the monthly gap and the present-value-over-work-life estimate so you can see the total exposure. We use BLS Work-Life Tables for the work-life estimate and IRS Applicable Federal Rate (AFR) for present-value discounting.

Question 6

Does this calculator tell me how much disability insurance to buy?

Accepted Answer

No — by design, and consistent with how Bedrocka Tools handles all YMYL-Insurance content. This calculator computes the income-replacement gap in dollars per month and present-value-over-work-life. The decision of whether (and how much) to buy disability coverage depends on factors this calculator does not model: your savings cushion, your spouse's income stability, your willingness to accept post-disability lifestyle changes, your occupation's actual disability incidence rate, and the specific policy features (benefit period, elimination period, COLA rider, own-occupation definition). A licensed disability insurance specialist can model those factors for your specific situation. This calculator gives you the gap math so you walk into that conversation informed.

Question 7

What inputs do I need to gather?

Accepted Answer

(1) Current monthly gross income (W-2 + 1099 + business pass-through). (2) Lifetime cumulative earnings, or the SSDI estimate from your mySocialSecurity statement (most accurate; pull from ssa.gov/myaccount). (3) Existing employer LTD coverage details: percentage of salary covered, monthly maximum, employer-paid vs employee-paid, base salary vs total compensation included. (4) Existing individual disability policies if any. (5) Age (drives BLS Work-Life Table lookup) + sex + education level. (6) For the tax toggle: your federal + state marginal tax rate at current income.

Question 8

What's NOT covered by this calculator?

Accepted Answer

Workers' compensation interactions (separate from SSDI/LTD — covers workplace injuries with different math), Social Security retirement vs disability transitions at full retirement age, long-term care insurance (separate product, separate math), private student loan disability discharge, disability buyout policies for business owners (used to fund partnership buyouts on partner disability), business overhead expense (BOE) policies (cover business operating costs, not personal income), state-specific short-term disability mandates (CA SDI, NY DBL, NJ TDI, RI TDI, HI TDI, PR), and group association policies through professional organizations. These are real coverage components for some people — this calculator focuses on the personal-income gap only.

Disability Income Replacement Gap Calculator

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