The Income Gap Hiding in Your Benefits Package
Why high earners with good benefits are often the most exposed — and don't know it.
Group Long-Term Disability through your employer typically pays 60% of your base salary after a waiting period of 90–180 days. That sounds like coverage. But the definition of "salary" in most group policies is narrow — and high earners feel the gap most sharply.
What is typically not covered by group LTD: bonuses, commissions, equity compensation, deferred comp, employer 401(k) match, self-employment income, and partnership distributions. If those components are a significant part of your compensation, your actual replacement rate under a disability claim may be well below 60% of what you actually earn.
| Total Compensation | Base Salary | Group LTD Pays | Actual Replacement Rate |
|---|---|---|---|
| $200,000 | $150,000 | $90,000/yr | 45% of total comp |
| $350,000 | $200,000 | $120,000/yr | 34% of total comp |
| $500,000 | $200,000 | $120,000/yr | 24% of total comp |
Illustrative only. Actual group LTD benefits vary by policy. Many plans also cap benefits at $10,000–$15,000/month regardless of salary.
The second issue most people miss: Group LTD ends when you leave the job. If you change employers, get laid off, or go independent, that coverage disappears. An individual disability policy follows you.
The third issue: Group LTD benefits are taxable if your employer paid the premiums. After taxes, a $90,000/yr benefit may net you $60,000–$70,000.
The Financial Resilience Diagnostic calculates your actual disability income gap — the difference between what you'd receive from all sources (group LTD, Social Security disability, any individual policies) and what your household needs to maintain its financial obligations. For most high earners, the number is larger than expected.