Today’s Safety Net

PROTECTING YOUR family against financial disaster is vitally important. But it isn’t cheap—and many folks aren’t doing an especially good job:

  • Just 40% of Americans have enough savings to cover a $1,000 emergency, according to a 2019 Bankrate survey. Meanwhile, 34% would have to go into debt to cover the cost and another 14% say they would be forced to cut other spending to pay for the emergency. A Federal Reserve study was equally bleak: It found that four out of 10 Americans either couldn’t cover a $400 financial emergency or, to do so, they would have to borrow or sell something.
  • Cash can be a great comfort: A 2017 Consumer Financial Protection Bureau study found Americans with less than $250 in the bank scored just 41 out of 100 in financial wellbeing, vs. 59 for those with $5,000 to $19,999 set aside.
  • Almost half of Americans receive health care coverage through an employer, 21% from Medicaid, 14% from Medicare, 7% through individual policies and 9% are uninsured, according to 2017 data from the Kaiser Family Foundation.
  • For a household with median income and employer-provided health coverage, potential health care spending was 11.7% of income in 2017, up from 7.8% a decade earlier, reports the Commonwealth Fund. These figures reflect a combination of employee premiums and plan deductibles.
  • Out-of-pocket medical costs devour 18% of the average retiree’s income, according to a study by Boston College’s Center for Retirement Research. This excludes long-term-care costs. For 6% of retirees, medical costs eat up more than half of their income.
  • Genworth’s 2019 Cost of Care Survey puts the average annual cost of a semi-private nursing home room at $90,155. You might pay $105,120 in California, $102,565 in Florida and $139,357 in New York, but just $58,400 in Texas. Nursing homes in big cities tend to be especially pricey.
  • Cash-value life insurance accounted for 60% of new policies sold to individuals in 2018, vs. 40% for term insurance, according to the 2019 Fact Book from the American Council of Life Insurers. Term insurance is far less expensive and typically the best bet for individuals, and yet cash-value policies continue to dominate new sales.
  • The top reason Americans give for owning life insurance is to cover burial and other final expenses, according to Limra, an industry research group. Limra also found that 40% of children under age 18 have life insurance—arguably unnecessary, given that children typically have nobody who depends on them financially.
  • Among households with children under age 18, one out of five have no life insurance, says Limra. Of these households, four in 10 say they would immediately have financial trouble if a primary wage earner died today, while another three in 10 would have trouble keeping up with basic living expenses after several months.

Next: Step 1: Emergency Plan

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