1. What is a Loss of Earning Capacity Calculator?

Definition: This calculator estimates the financial impact of reduced earning capacity, particularly relevant for retirement planning or disability cases.

Purpose: It helps individuals and financial planners quantify potential income loss when earning capacity is reduced due to retirement, disability, or other factors.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( LEC \) — Loss of Earning Capacity (USD)
• \( E \) — Expected earnings (USD)
• \( k \) — Capacity factor (dimensionless, between 0 and 1)

Explanation: The formula calculates the difference between what you could earn at full capacity and what you can earn with reduced capacity.

3. Importance of LEC Calculation

Details: Understanding potential income loss helps in retirement planning, disability claims, career transitions, and financial preparedness.

4. Using the Calculator

Tips: Enter your expected full earnings potential and a capacity factor (0 = no earning capacity, 1 = full capacity). Default capacity factor is 0.5.

5. Frequently Asked Questions (FAQ)

Q1: What exactly is the capacity factor?
A: It represents your remaining earning capacity as a fraction of your full potential (e.g., 0.7 means you can earn 70% of your previous income).

Q2: How do I determine my expected earnings?
A: Use your current salary or average earnings over recent years, projected forward with reasonable assumptions.

Q3: When would I use a capacity factor of 0?
A: For complete retirement or total disability where no future earnings are expected.

Q4: Can this be used for partial retirement calculations?
A: Yes, set the capacity factor to reflect your expected reduced work hours or pay rate.

Q5: How often should I recalculate this?
A: Re-evaluate annually or whenever your earning potential or capacity changes significantly.