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 39% of Americans have enough savings to cover a $1,000 emergency, according to a 2021 Bankrate survey. Meanwhile, 38% would have to go into debt to cover the cost. 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 64% 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 109%.)
  • 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.
  • Half of Americans receive health care coverage through an employer, 20% from Medicaid, 14% from Medicare, 6% through individual policies and 9% are uninsured, according to 2019 data from the Kaiser Family Foundation.
  • For a household with median income and employer-provided health coverage, potential health care spending was 11.5% of income in 2019, up from 9.1% 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 2020 Cost of Care Survey puts the average annual cost of a semi-private nursing home room at $93,072. You might pay $110,964 in California, $104,028 in Florida and $147,828 in New York, but just $60,228 in Texas. Nursing homes in big cities tend to be especially pricey.
  • Cash-value life insurance accounted for 59% of new policies sold to individuals in 2019, vs. 41% for term insurance, according to the 2020 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.

Next: Step 1: Emergencies

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