|Birth into a poor family|
- Urge your legislators to resist calls to cut safety net programs and tax expenditures that benefit poor families, especially Medicaid, CHIP, SNAP (Food Stamps), and the Earned Income Tax Credit.
- Ignore any politician who suggests an “entitlement” to “welfare” cash assistance is a problem. The federal entitlement to cash assistance for poor families with children was ended by President Clinton and Speaker Gingrich in 1996. Less than 1/100th of 1% of the federal budget is spent now on time-limited cash assistance to poor families with children.
- Support expansion of programs to cover all poor children. It might have been you who lost out in the “birth lottery.” Today, these programs lift only half of poor children out of poverty. America—the richest nation on Earth in all of human history—can do better.
|Death of a family breadwinner|
- Know the level of death benefit Social Security would provide your family. The average monthly benefit for a widow(er) and two children--$2,500—is a nice base, but will not be enough to maintain many families’ prior standard of living.
- Take advantage of employment based term life insurance. Many companies offer standard coverage of 1-year’s salary that can be multiplied for a reasonable annual premium increment. Note, however, that one can lose all of this coverage with job loss or transitions.
- Supplement Social Security and employment-based protection with private life insurance. Term life insurance is relatively cheap and readily available to those in reasonable health. Purchase a policy sooner rather than later, and lock in a lower annual premium for a long (20-40 year) period. Don’t wait until your 50’s or when you are sick to try to buy. No insurance company wants a likely loss, so will charge a very high premium or offer no coverage at all.
- Purchase health insurance now. Don’t free ride on the backs of fellow Americans. Besides, one accident or illness can leave you with tens, even hundreds of thousands of dollars of medical bills. Personal bankruptcy is a high cost to pay for a gambling loss.
- Don’t smoke. Eat and drink in moderation. Exercise regularly. Use available safety technologies: sunscreen, condoms, seat belts. Don’t drink and drive. Don’t text and drive.
- Resist calls to defund or repeal “Obamacare” or gut current Medicare protections. Be suspicious of reform with funny names like “premium-support” or “vouchers.” These proposals tend to shift risk and costs to citizens, while reducing their bargaining power with providers.
- Support reforms that reduce costs. Know that America is a laggard on cost control—we spend 30-50% more per person on healthcare than any other nation. Without improvements in measurable outcomes. We need to adopt proven cost control strategies, if we are to sustain coverage programs over time.
- Don’t assume you are covered by Unemployment Insurance. Only half of those thrown out of work during the Great Recession qualified. Research your state’s program to understand if you would qualify were you to lose your job tomorrow. (Those who quit jobs are never covered.)
- Don’t spend as if you have a guaranteed income at current levels. The average American will do four stints of unemployment over a 40-year work life.
- Build a family emergency fund that could sustain you for a 3-6 month period without work.
- Resist calls from politicians who want to reduce UI program benefits: they are a lifeline during times of job loss and ought to be expanded to cover the vast majority of workers.
- Know the level of benefit Social Security would provide your family were you to become permanently disabled. The average monthly benefit--$1,100—is a nice base, but will not be enough to maintain many families’ prior standard of living.
- Take advantage of employment based disability insurance. Most large companies, and some small ones, offer standard coverage that pays 60% of salary for the duration of disability. Note, however, that one can lose access to this coverage with job loss or transitions.
- Supplement Social Security and employment-base coverage with private disability insurance. Purchase this policy sooner rather than later, and lock in a lower annual premium for long (20-40 year) periods. Don’t wait until your 50’s or when you are hurt to try to buy. No insurance company wants a likely loss, so will charge a very high premium or offer no coverage at all.
|Outliving ones savings|
- Understand throughout your working life the value of the Social Security benefits you are earning. Review the annual statement the Social Security Administration sends you.
- Participate in your employer pension plan and/or open an Individual Retirement Account. Max out your contributions. Know you will need to supplement your Social Security payment if you wish to maintain your working-life standard of living during retirement. The average Social Security benefit is $1,230 per month.
- Resist the urge to tap into retirement savings for any reason, with the possible exception of education. If you change jobs, rollover your pension, don’t spend the money.
- Hold a well-diversified, low cost portfolio of investments in your pension account. Don’t put all your eggs in one basket, especially your own company’s stock. Way too much risk in one place.
- Try to reduce the risk in your retirement portfolio as retirement approaches. Historically, this has meant less exposure to stocks and more to bonds.
- Pray for high long term returns on your capital. What has happened in the past is no guarantee of what will happen in the future.
- Resist calls to “privatize” Social Security, as this is the portion of retirement income that is not at significant market risk.
- Support reforms of Social Security that shore up the trust fund over the long term. We are all better off if full benefits are funded in advance. Absent changes, Social Security will only be able to pay 75% of earned benefits beginning in 2032.
- Trust no one who suggests Social Security is going bankrupt; it is in need of incremental reform but has no risk of going bankrupt, only of being less than fully funded.
Internal Revenue Service: