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Retirement Planning > Saving for Retirement

LTCI Watch: $400

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The Atlantic Monthly has published an irritating and interesting article called, “The Secret Shame of Middle-Class Americans.”

The author, Neal Gabler, admits that he made some unwise choices, then talks about why he, like roughly half of American consumers, would have a hard time coming up with $400 in cash for an unexpected bill.

See also: PPACA subsidy gap hurts the moderately broke

Gabler, a film historian known for being part of the duo that succeeded Gene Siskel and Roger Ebert at the WTTW show “Sneak Previews” in 1982, seems to have earned, and blown, more money than the typical broke person. But he talks about a problem that clearly affects a huge percentage of U.S. families: Many have already raided their emergency savings, raided their retirement savings, and even raided their parents’ savings to cover what they viewed as must-pay emergency expenses.

Upheaval in the job market, stagnant wages, and rising health care and college bills have all contributed to narrowing the margin between what Americans earn and what they spend on bills and what feel like necessities every month.

See also: High-income uninsured prospects are still out there

Ups and downs in the stock market and low interest rates on savings accounts have discouraged Americans from making much of an effort to try to increase that margin. Workers now tend to think that the stock market is a casino (run by those evil James Bond villains at Goldman Sachs), and that putting money in a bank savings account is about as modern as listening to music on a Victrola.

Americans’ lack of savings is an obvious part of the disability insurance and the long-term care (LTC) planning crisis, and a less obvious part of the caregiving crisis.

Cigna Corp. (NYSE:CI), Aflac Inc. (NSYE:AFL) and Colonial Life, a unit of Unum Group Inc. (NYSE:UNM), have been some of the companies trying to spread the message that typical workers are flat broke, and that the least society could do is give workers access to affordable voluntary and worksite benefits products that could help those workers handle small bills. 

The main theme of the upcoming Disability Insurance Awareness Month (DIAM) campaign, which starts Sunday, is “You should insure your paycheck.” A secondary theme is, “You desperately need to insure your paycheck, because that’s all the cash you have in the world.”

Workers without extra cash can’t afford to pay much for private long-term care insurance (LTCI), let alone save enough to “self-insure.”

Perhaps just as important: Workers without savings have a hard time acting as involved caregivers for their aging parents.

Workers with savings can dig in to enable Mom pay for a little help, or fly out to find Dad a nursing home.

Workers without extra cash can’t pay any extra bills. If they’re long-distance caregivers, they can’t afford to fly across the country to provide hands-on help. They may not even be able to afford to take more than a day or two off from their jobs.

See also: How PPACA squeezes moderately high income 60-year-olds

For decades, society has mooched off of the hidden wealth families stored up by building up an army of adult children who had the cash to work secret caregiving miracles. Today, that hidden wealth is gone.

It’s difficult to know whether there is any real solution to this problem. But it also seems hard to believe that a government that has a tough time coming up with the cash to fight Zika mosquitoes will do much about the effects of financial desperation on the supply of informal caregivers.

All of this makes the people struggling to sell personal protection and retirement planning products more important than ever. The policymakers hate you, because you divert money they could otherwise funnel into health programs (in other words: hospital administration operations) and tech companies (robo existence support services!). But at least you can convey the idea that making financial arrangements for the future is a good thing to do, when it’s possible to do that.

See also:

Analysts: Off-exchange health market needs windows

Panama leak spurs global zeal to crack shell companies


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