Birth into a poor family
Birth into a poor family

Threat: Birth into a Poor Family


Incidence: 1 in 4 American children are born into a poor family.


Consequence: Highly elevated rates of dropping out of high school, victimization, poor health, incarceration.


Market Protections: No market products exist. Private charities spend a small fraction of what federal and state governments spend on poor kids.


Government Protections: A range of means tested programs funded by federal and state taxes support poor families with children: SNAP (aka Food stamps), Medicaid and CHIP (children’s health insurance), Housing and child care subsidies, free school breakfast and lunch, WIC (women’s, infant and children supplemental nutrition), TANF (temporary assistance for  needy families). Also, a range of tax credits reduce or eliminate tax burdens on poor families: the Earned income tax credit (EITC), child tax credit (CTC), and dependent exemption. 


Overall Threat Assessment: High. Programs tend to reach only a percentage of those in need, and while collectively expensive, are far from generous to poor kids. Collectively, they lift only half of poor children out of poverty, and not very far out of poverty.

Death of a family breadwinner
Death of a family breadwinner

The Threat: Early Death of a Family Breadwinner


Incidence: About 1 of 10 American children will lose a family breadwinner due to early death. Others will lose the breadwinning capacity of a parent due to incarceration or total permanent disability.


Consequence: Reduction in family income by as much as 100%


Market Protections: Companies offer a range of term and whole life insurance policies. Federal tax policy encourages purchase of these policies by corporations on behalf of their employees.


Government Protections: The Social Security program is the largest provider of life insurance in the country. Portions of payroll taxes fund death benefits to qualified families. The benefit is a portion of prior income, likely in the range of 25-75%, with higher income families getting larger payments, but ones that provide for lower percentages of replacement income. 


Overall Threat Assessment: Moderate

Ill health
Ill health

The Threat: Ill-health


Incidence: About 1 in 5 Americans will develop serious disease (cardiovascular or cancer) or be hurt in accidents during their working lives. (Of course, all will eventually suffer similar fates.)


Consequence: Reduced ability to work plus medical expenses that can easily reach hundreds of thousands of dollars.


Market Protections: Commercial insurance companies and employers offer a range of health insurance products. Federal tax policy encourages purchase of these products by corporations on behalf of their employees.


Government Protections: Federal and state governments pay for over half of health expenses in America. Payroll-tax funded Medicare covers the aged and disabled, general taxation-funded Medicaid covers much of the poor, and Departments of Defense and Veterans Affairs cover active and retired military populations. Beginning in 2014, new tax subsidies will help many of the uninsured purchase coverage through federal and state marketplaces called exchanges.


Overall Threat Assessment: High but Falling

Involuntary unemployment

The Threat: Involuntary Unemployment


Incidence: An average American will have 4 spells of temporary unemployment over the course of their careers. (90% will have at least one spell.)


Consequence: Historically, a 2-4 month reduction in family income of up to 100%. In recent years, these periods have lasted much longer and new jobs are often at lower income levels than old jobs.


Market Protections: No insurance company offers a product to protect against involuntary unemployment. 


Government Protections: Unemployment Insurance (UI) provides temporary payments of, on average, 46% of prior income to those who qualify. It is funded by state taxes on employers. The period of benefit has typically been no more than 6 months, but during the recent recession was expanded in most states to almost two years.


 Overall Threat Assessment: High. Only half of those who lost jobs in the recent recession qualified for UI benefits and were spared impoverishment. Many were not able to find new jobs within the 99 week period. Many others found jobs at reduced pay and benefits.



The Threat: Disability


Incidence: 3 of 10 Americans will become disabled enough to miss a 90 day period of work sometime during their careers.  5-10% will become permanently disabled at some point during their working life.


Consequence: Reduction of family income by as much as 100% for extended periods, possibly permanently.


Market Protections: Companies offer a range of disability insurance products to individuals and groups. Federal tax policy encourages purchase of these policies by employers on behalf of their employees. These products, when available, are much more expensive for individuals and small groups. Job loss often means loss of, or gaps in, private disability protection.


Government Protections: Payroll tax-funded Social Security provides long term disability insurance, but not short term coverage. The benefit for those qualifying is a portion of prior income, likely in the range of 25-75%, with higher income families getting larger payments, but ones that provide for lower percentages of replacement income. Benefits are only for those severely disabled, and initial applications are rejected in 75% of cases. After appeals, 40% of applicants receive cash benefits, and Medicare health insurance after two years of disability.


 Overall Threat Assessment: Moderate

Outliving ones savings
Outliving ones savings

The Threat: Outliving One’s Savings


Incidence: Various simulation models predict that 40-50% of Americans are at-risk for inadequate retirement income. This range would be much higher absent fully-funded Social Security. Today, 40% of Americans have no other retirement income other than Social Security.


Consequence: Subsistence-level income or worse in your “golden years.”


Market Protections: Citizens can build their own Individual Retirement Accounts (IRAs) with annual and catch-up contributions. Employers offer a range of pension products to their employees. Historically, such pensions provided a “defined benefit” to policy holders for as long as they (or their surviving spouse) lived. Today, most companies provide matching dollars to a “defined contribution” (401K) plan that carries no such guarantee of payment until death. Federal tax policy encourages retirement savings by deferring income tax on contributions until funds are drawn down.  


Government Protections: Payroll tax-funded Social Security provides “old-age” insurance to those with sufficient work histories to qualify. The ultimate benefit will be a portion of prior income, likely in the range of 25-75%, with higher income families getting larger payments, but ones that provide for lower percentages of replacement income. Benefits begin as early as age 62, albeit at lower payment levels, or as late as 70. They continue until death.


Overall Threat Assessment: Moderate but Increasing