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:

• If hit with a $1,000 emergency, just 43% of Americans would draw on savings, while many of the other respondents say they’d borrow the money, according to a 2023 Bankrate survey. Another Bankrate survey found that 25% have no emergency fund and another 26% have less than three months of living expenses set aside.
• A Federal Reserve study was similarly bleak: It found that just 68% of Americans said they would use cash to cover a $400 financial emergency, while others would resort to other methods, such as putting the expense on a credit card or borrowing from family. (Note that respondents could give multiple answers, so the sum of all answers comes to 110%.)
• 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 49% of Americans receive health care coverage through an employer, 21% from Medicaid, 14% from Medicare, 6% through individual policies and 9% are uninsured, according to 2021 data from the Kaiser Family Foundation.
• For a household with median income and employer-provided health coverage, potential health care spending was 11.6% of income in 2020, up from 9.1% a decade earlier, reports the Commonwealth Fund. These figures reflect a combination of employee premiums and plan deductibles.
• Households headed by a 65-year-old can expect average out-of-pocket costs for medical and long-term-care services of $67,000 over their remaining lifetime, according to a 2022 study by Boston College’s Center for Retirement Research. This $67,000 is on top of what retirees pay in regular insurance premiums. Meanwhile, a 2017 study by the Center found that that out-of-pocket medical costs devour 18% of the average retiree’s income. This excludes long-term-care costs. For 6% of retirees, medical costs eat up more than half of their income.
• Genworth’s 2021 Cost of Care Survey puts the average annual cost of a semi-private nursing home room at $94,896. You might pay $117,528 in California, $103,848 in Florida and $153,300 in New York, but just $61,500 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 2021, vs. 40% for term insurance, according to the 2022 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.

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