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A disabling illness or injury can occur without notice, and statistics show that nearly one in five people will be sidelined for at least a year during their careers.1 States often require employers to provide short-term disability coverage, but many don’t extend coverage beyond a few weeks or months. In fact, less than half of U.S. companies paid for long-term disability insurance coverage in 2009.2

Even when businesses include disability income insurance in their benefits packages, typical limitations can make group policies inadequate. A well-paid professional in the midst of a productive career generally has much to lose if he or she experiences a disability and is unable to work.

Disability benefits paid from an employer’s group plan, workers’ compensation, or Social Security probably won’t come close to replacing a six-figure income. Individuals with higher incomes may want to expand their disability coverage to help ensure that their incomes, assets, and lifestyles are not left vulnerable.

Potential Problems with Group Coverage

Workers may want to purchase an individual disability income policy if they are self-employed or their employers do not offer coverage — or if they

Since 1975, Social Security beneficiaries have received a cost-of-living adjustment (COLA) to compensate for inflation every year except 2010 and 2011. The good news is that a 3.6% COLA has been implemented for 2012. However, this “raise” may be reduced slightly by higher Medicare premiums, which are deducted directly from Social Security payments.1

How the COLA Is Determined

The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures the spending habits of workers who are generally younger than Social Security recipients. A recent study suggests that, while Social Security benefits increased 31% from 2000 to 2011, typical expenses for people aged 65 and older increased by 73%.2

One suggestion to address this disparity is to base the COLA on the CPI for Elderly Consumers (CPI-E), an “experimental” price index that the government has tracked since 1983.3 Although the CPI-E has increased somewhat faster than the CPI-W, the difference is relatively small. A monthly benefit of $1,000 in 2001 would have increased to about $1,268 in 2011 based on the CPI-W and $1,280 based on the CPI-E.4

Considering Social Security’s fiscal problems,

If you’ve been listening to the news over the past few years, you’ve probably heard a lot about gross domestic product (GDP) in relation to the Great Recession and the economic recovery. When GDP falls for an extended period, it may signal the beginning of tough economic times. Conversely, a rising GDP may indicate an improving economy and the potential for better times.

Gross domestic product is the total value of goods and services produced in the United States. This includes consumer spending, government spending, business capital investment, and net exports (the value of exported goods minus the value of imported goods). You might look at GDP as a speedometer that measures how fast the nation’s economic engine is running.

What GDP Tells Us

The total dollar value of GDP provides perspective on the size of a nation’s economy. The United States has the highest GDP in the world — about two and a half times greater than China’s, the second-largest national economy.1

What matters more for investors, however, is GDP growth. When gross domestic product grows, it may help contribute to higher corporate earnings.

Even though the economy began to grow again in June 2009, jobs were painfully slow to follow. Employment started showing signs of improvement in the second half of 2011, exceeding the expectations of economic forecasters.

Nonfarm payrolls rose by 200,000 in December 2011, marking the sixth straight month that the economy added at least 100,000 jobs.1 In addition, the unemployment rate fell four months in a row, reaching 8.5% in December 2011.2

Employment report data may offer some insight into current economic conditions and potential future trends. In response, markets can rise when a report is viewed as 

Investors, economists, the business media, and the general public all tend to keep a close eye on the following government reports, because statistical changes sometimes mark turning points in the state of the nation’s labor market and the health of the economy.

Windows to the Workforce

The monthly Employment Situation Report released by the Bureau of Labor Statistics on the first Friday of each month has two components.

The past year was marked by a devastating disaster in Japan, fiscal unravelling in Europe, a highly volatile market, and bitter political infighting over federal spending and the national debt. What’s in store for 2012? No one knows, of course, but the consensus seems to be that the U.S. economy will continue to grow slowly, with slight improvement in employment, little change in the housing market, and interest rates remaining at or near historic lows.1 

In short, there may not be much to get excited about. But as 2011 proved, it’s impossible to predict the future. Here are several key areas that bear watching as 2012 unfolds.

European Enigma

A new fiscal pact in December engendered cautious optimism, but the European sovereign debt crisis is far from over. Although Italy and Spain remain a major concern, you might keep tabs on potential downgrading of the credit ratings of other large European economies including France, Austria, and Great Britain.

The European Union is the world’s second-largest economy after the United States and our largest trading partner.2–3 A devalued euro and a weakened European economy could lead to a shrinking market for U.S.