1. What is the Wage Replacement Ratio?

The Wage Replacement Ratio (WRR) is a calculation used in California to determine the percentage of pre-disability earnings that disability benefits replace. It helps assess the adequacy of disability insurance coverage.

2. How Does the Calculator Work?

The calculator uses the Wage Replacement Ratio formula:

Where:

• \( Benefits \) — Disability benefits amount ($)
• \( Pre\text{-}Disability\ Earnings \) — Earnings before disability ($)

Explanation: The ratio expresses benefits as a percentage of pre-disability earnings, showing what portion of income is replaced during disability.

3. Importance of WRR Calculation

Details: Calculating WRR is crucial for financial planning, ensuring adequate income replacement during disability periods, and meeting California-specific disability insurance requirements.

4. Using the Calculator

Tips: Enter disability benefits and pre-disability earnings in dollars. Both values must be valid (benefits ≥ 0, earnings > 0).

5. Frequently Asked Questions (FAQ)

Q1: What is a good wage replacement ratio in California?
A: Typically, 60-70% is considered adequate, but individual needs may vary based on expenses and other income sources.

Q2: Are California disability benefits taxable?
A: Generally, California State Disability Insurance (SDI) benefits are taxable at the federal level but not state level.

Q3: How often should I calculate my WRR?
A: Recalculate whenever your income changes significantly or when reviewing your disability insurance coverage.

Q4: Does WRR include all disability benefits?
A: Include all disability insurance benefits but exclude other income sources like Social Security Disability Insurance.

Q5: What if my WRR is below 60%?
A: Consider supplementing with additional disability coverage or adjusting your budget to account for lower income during disability.