MY PARENTS and grandparents were forever affected by the Great Depression of the 1930s. They shunned debt, paid cash for everything, never invested in stocks and kept their modest savings in the bank, mostly in a checking account.
Following the 2008-09 Great Recession, many Americans also changed their financial ways, at least temporarily. We increased our savings rate immediately after the recession. But a few years later, we returned to our high spending ways.
According to a 2019 Bankrate survey, 28% of Americans have no emergency fund, while 25% have some rainy-day money, but not enough to cover three months’ living expenses. Our retirement savings are no better. There’s still too much reliance on Social Security. Speaking of which, let’s not forget that the pandemic is going to hurt Social Security’s trust fund.
Unemployment and businesses closing mean less money in Social Security payroll taxes, plus unemployment and other financial problems often prompt people to claim retirement benefits earlier. Some predict the trust fund will be depleted two years sooner than expected, in 2032 rather than 2034. That means that—to keep benefits flowing—we may need higher taxes or lower benefits. Congress has been aware of the problems facing Social Security for more than 15 years and has done nothing. Will a pandemic motivate politicians to act?
The pandemic has also caused increased worry about health care costs. Social media is full of concern about workers losing their jobs and with it their health insurance. This has resulted in calls for a special enrollment period through the health care exchanges. But families who are affected should still be able to get coverage: The Affordable Care Act allows folks to purchase insurance upon loss of heath care coverage, even if that loss of coverage results from quitting your job.
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Source: Change Our Ways? – HumbleDollar