Risks That Can Derail Your Retirement

We financial planners and financial writers love to trot out hypothetical illustrations along the lines of “If you save 20% of your income starting at age 40, you'll be able to retire by your late 60s, assuming an 8% rate of return” — a scenario I wrote about in March. While such projections are necessary for planning for the future, the truth is that they will most definitely be wrong once the future rolls around. There are just too many unknowable variables, such as future investment returns, inflation rates, and tax rates.

However, the unknowable unknowns aren't just limited to economic variables, as readers often remind me after I write such an article. Here's a tale a GRS reader told in the comments section after my March post:

In 1996 I had $78,000 in retirement funds and was 32 years old (hubby was 38). Then our home was flooded because a contractor doing a city project made a mistake. While struggling with being unable to live in the house, I was diagnosed with cancer and needed surgery ([we had] no insurance). Within a year I had cashed out the $78,000 to begin rebuilding the house and pay for surgery (we recouped a very small portion of the loss from the contractor). We sold the house and walked away with $11,000 to our name. That was in 1998.

We've tried to get back on track, but every time I save, something happens to eat it up: chronic illness, cost of experimental medication, hurricane and tornado damage to home over three years (part not covered by insurance), and more. Life lesson for us: Continue to save because it's the responsible thing to do. Plan for the future, but be prepared for something to get in the way of those plans.

A sad story with an important lesson: Along your road to retirement, you may encounter speed bumps, fender-benders, road blocks, and perhaps outright tragedies. While many will be unpreventable, the financial fallout can be mitigated.

In this post, we discuss the most common causes of financial derailment, and what you can do to keep your plan on course. While many of the solutions are specific to each particular risk, there's one line of defense that will protect your financial empire regardless of the method of assault, and that is a big, fat emergency fund. You've heard it before, but we'll say it again: Have three to six months' worth of living expenses in cash, ready to be deployed when the possible becomes the present.

Illnesses and Accidents
Health problems are expensive and can impair a person's ability to earn a paycheck. They can also force older Americans into retirement earlier than planned. Studies indicate that as many as 45% of current retirees quit work due to health problems or disability. The haleness and heartiness of a household's breadwinner(s) aren't the only factor; the health problems of other relatives, such as children or elderly relatives, can consume savings and impede a career.

Your defense
As the sad tale of the above GRS reader shows, being diagnosed with a serious disease while lacking health insurance can lead to financial disaster. Being properly insured is an absolute necessity. However, no insurance policy covers all procedures and all costs. Reduce the burden of out-of-pocket expenses by participating in your employer's flexible-spending plan, if offered, which allows you to set aside money for qualified health-care expenses. The money you contribute is not subject to income or payroll taxes.

The decision to acquire disability insurance, which replaces your paycheck in case you're unable to work, is not as clear-cut. You already have some coverage through Social Security, though the definition of disability is very stringent. You may also have coverage through your employer. If you decide to purchase disability insurance for yourself, you'll find that it can be expensive and complicated. However, the more your job requires that you be in good physical shape (e.g., traveling, meeting with clients, holding a scalpel, violin, or other tool), the more you should consider disability insurance. Many employers, professional associations, and other groups offer group disability policies, which can be less expensive and easier to qualify for.

Finally, one of the best ways to keep health-care costs down is to be healthy. As much as 70% of health-care costs are due to lifestyle choices — eating too much, moving too little, and putting things in our mouths that smoke, impair, or bear no resemblance to anything in nature.

Job Loss
Once the boss stops sending a paycheck, either due to a layoff or company collapse, contributions to the 401(k) also stop. Depending on the person's employment prospects, it may also be just a matter of time before debt piles up or the nest egg is cracked to cover living expenses. It's a recipe for a delayed retirement.

But it's not only the unemployed who find it harder to save for retirement. These days, income insecurity also takes the form of stagnant or reduced wages, while the costs of many goods and services keep rising. In many cases, the first item in the budget that gets sacrificed is contributions to the 401(k) or IRA.

Your defense
Strengthening and expanding human capital is one of the most under-appreciated concepts in financial planning. To shore up your ability to turn your talents into dollars, develop multiple skills, stay on top of the trends in your company and its industry, and become crucial to your employer or, if you're self-employed, your customers.

Loss of a Spouse
Whether through death or divorce, the loss of a spouse can be emotionally and financially devastating. Most married household finances are built on two incomes, or one income and one spouse who does a lot of work that otherwise would cost money (e.g., raising kids). Then there's the division of labor; it's common for one spouse to handle all the bills or one to handle all the investing, with the other spouse being fairly ignorant of what's going on. A death or divorce can leave a spouse on her or his own, often getting by on less income and having to assume all the financial housework.

Your defense
If the death of a spouse would lead to significant financial hardship, then that spouse should have life insurance. Also, don't be in the dark about important aspects of financial planning; each spouse has to at least know enough to step in during an emergency. One subscriber to my newsletter (a man who handles most of the financial duties in his household) annually updates a document he calls “A Letter From Your Dead Husband,” which explains the family finances to his wife in the case of his untimely demise.

As for divorce, it's not very romantic to plan for your marriage's dissolution. But if your matrimony is full of acrimony, begin by protecting yourself while still being fair to your spouse. If you're engaged, a prenuptial agreement can be a delicate topic but a good idea, especially if there are kids from previous relationships.

Natural Disaster
The tsunamis in Japan and tornadoes throughout America demonstrate that Mother Nature is a risk to everyone's financial plan.

Your defense
Have enough homeowners or renters insurance, with an insurer that has a record of honoring legitimate claims. Inventory all your possessions, with proof of ownership for big-ticket items, so you can substantiate your claims if necessary. Keep copies in several places, including in a fireproof safe or safety deposit box, along with other valuable items so that they'll have some extra protection from the elements (as well as thieves).

Kids
It costs $260,700 to raise a kid until age 17, according to the Department of Agriculture (because there's little difference between a cow and a kid). And that doesn't factor in college costs. Yes, children are their own form of natural disaster, at least when it comes to money. (Don't get me started on the hair loss.)

Your defense
Scientists are working on a cure. In the meantime, enjoy all the non-financial benefits of reproducing or adopting. Such as an excuse to play Candyland and Chutes & Ladder, again… and again… and again.

More about...Retirement, Insurance

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Monica
Monica
9 years ago

I think this is a good article with a lot of good points. It’s just as important to plan ahead for the “unknowns” as it is the expected things, like retirement. The total cost of raising kids is a number I’ve heard before. In the spirit of planning ahead, though, my question would be this: What is a ballpark guesstimate of the amount of money to set aside in anticipation of having a child? How much can you reasonably expect to spend on “getting ready for baby”? (Excluding medical costs) I’m sure it varies wildly based on a number of… Read more »

PB
PB
9 years ago
Reply to  Monica

Preparing for a baby can actually be very cheap. There is an enormous amount of used baby clobber out there which can easily flow in your direction. Just set up a family network among siblings and cousins and be open to things that are passed around. Kids grow fast and dont stay in one size long enough to wear things out. Store things by age/size/gender to make them easy to grab later. Second, when you do buy, buy unisex things that can be worn by either boy or girl babies. Third, buy new and invest heavily in a really, really… Read more »

retirebyforty
retirebyforty
9 years ago
Reply to  PB

I disagree with 260k to raise a kid. That’s complete utter BS! It’s up to you how much you’ll spend on a kid. How the heck does people who make minimum wages have kids then?

If the 260k was true, poor people would have died out a long time ago.
We just had a baby and we are spending less money than previously. That’s right! We are so frigging exhausted everyday that we don’t have the energy to spend money. Sure, the kid will get more expensive later, but I still don’t believe 260k.

Karen
Karen
9 years ago
Reply to  retirebyforty

I think the 260,000 to raise a kid is if you want them to get into a good IVY league school and become a doctor or similar. That’s what it costs for private schools, language lessons, music lessons, and all the other things you need on your college application.
You can obviously easily raise a kid cheaper who won’t be as successful.

Peggy
Peggy
9 years ago
Reply to  retirebyforty

You’re right…the USDA analyses don’t take into account the money that having children prevents you from spending. I haven’t set foot in a movie theater in years…

Low-income people with children receive Medicaid and WIC and food stamps and the Earned Income Tax Credit and so on. The USDA doesn’t count these either.

Courtney
Courtney
9 years ago
Reply to  retirebyforty

One thing I learned about the USDA figure is that it factors in a larger living space (I think it’s roughly 150 sqft per child) and the associated costs of mortgage/rent, utilities, insurance, etc. That alone could account for nearly 20% of the figure they provide.

kim
kim
9 years ago
Reply to  retirebyforty

I’m not sure how the figure is calculated, but if you count lost wages from one spouse staying home, or full-time daycare costs if both spouses work, it could easily exceed that. Relatively speaking, babies are cheap; it’s kids who are expensive, what with braces for their teeth, routine medical care, larger living space than just the couple would need, larger vehicles, travel expenses, school fundraisers, sports, music lessons, etc.

CB
CB
9 years ago
Reply to  retirebyforty

My take is that if you look at the costs to raise one child from birth to 18 and if that was the only expense you had and it was completely separate and in addition to your own living expenses, it could cost $260k. However, parents buy many things for their child that they use themselves. The recycle clothes and toys, they buy used, etc. If the State had to raise one child and only one child, it would cost ~$260k. I think that’s the point the USDA study makes. Now, since I’m about to have my first and hopefully… Read more »

Megan
Megan
9 years ago
Reply to  retirebyforty

I think that figure takes into account medical expenses, food, and clothing, as well as other “hidden” expenses. I know a few couples who had to buy a new car because they were having babies. I know a few others who moved out of a one-bedroom apartment and into a larger home. I wonder if this number is also adjusted for inflation – $100 today won’t buy as much in five years.

We’re pretty frugal with our kids, but they’re little right now. When my kids are teens, I think that’ll be a different story.

Amanda
Amanda
9 years ago
Reply to  retirebyforty

Some people pay for daycare, which would make about $15,000/year not too unreasonable.

laura
laura
9 years ago
Reply to  retirebyforty

“I think the 260,000 to raise a kid is if you want them to get into a good IVY league school and become a doctor or similar. That’s what it costs for private schools, language lessons, music lessons, and all the other things you need on your college application. You can obviously easily raise a kid cheaper who won’t be as successful.” I find this statement, from Karen to be distasteful. First of all, one’s “success” in life is not dependent on whether or not they are a doctor or have an ivy league education. There are plenty of doctors… Read more »

Nicole
Nicole
9 years ago
Reply to  retirebyforty

$1500 (out of pocket after insurance paid the rest) to remove a bead from a preschooler’s nose. http://nicoleandmaggie.wordpress.com/2011/04/25/dissecting-an-emergency-room-bill/

Tyler Karaszewski
Tyler Karaszewski
9 years ago
Reply to  Monica

My wife is due to give birth to our first daughter in approximately 10 weeks. So far we’ve spent maybe $500. $185 of that was on a car seat. I’m pretty much ignoring everything everyone says about how much kids cost or how to raise them, most of it seems to be at best simply what they did with their own kids, which is fine but hardly makes it applicable to me, or at worst, much seems just plain wrong. $260,000 is about $1,200/month every single month for 18 years. That seems absolutely impossible to spend on a child unless… Read more »

The Other Brian
The Other Brian
9 years ago

The 260K does not include college (which, at a the recent-average 6% inflation rate, will cost an additional 260K for a 4 year state school in 18 years) EDIT: I thought I would share our numbers. My wife and I are 4 years into a SAHM situation. For the 1st 18 mo it was just one child, and for the last 2.5 years it has been 2 kids. When I look at our expenses pre/post children, we are spending about $500 more per month with small children on average. Now that both are out of diapers and no longer needing… Read more »

Tyler Karaszewski
Tyler Karaszewski
9 years ago

So, takes the average of your $500 and $300 monthly figures, multiply by 12 months * 18 years, and divide by two, since you have two kids, and you come up with a cost of about $43,000 per child. Sure, that doesn’t factor in inflation or anything, but it’s still a far cry from $260k.

The Other Brian
The Other Brian
9 years ago

Yep, about 45K per kid. That’s the bill I plan on handing them when they are 18 🙂

jennypenny
jennypenny
9 years ago

I agree that 260K seems high. But you have to factor in other costs–the extra amount you pay for medical and dental insurance, possibly needing a bigger car, carrying more life insurance, using vacation and sick time for their illnesses in addition to your own, etc. I am a SAHM with 3 ages 15, 12, and 8. We live fairly frugally for a suburban family from the northeast (no special tutors, basic sports, coupon religiously, no cleaning lady, cut our own grass, older cars) and they still cost a bundle. There are other incidentals like keeping your home warmer or… Read more »

Ellen K.
Ellen K.
9 years ago
Reply to  jennypenny

I’m very glad you mentioned the higher utility and appliance costs. I’m a SAHM of twin toddlers, and our energy bills are considerably higher than pre-babies. The house needs to be comfortable for small children, who don’t always keep their socks on, let alone an extra sweater. It can take longer to get little kids out the door, so energy is lost there. Appliances get far more use, too, and we have to buy more detergents. We’ve had several repairs to our dryer, which is 7 years old; the repairman said that children’s clothes, with their high cotton content, are… Read more »

Dee
Dee
9 years ago

We have 4 children,live frugally, and I can tell you…it is not cheap. We attend community soccer, travel soccer for 2 children, travel for older son’s sport also. Then there are birthday parties, teacher gifts, pictures, fundraisers almost weekly from their schools, special outfits for said sporting activities, the list goes on and on. Braces for 2 of the 4 (so far) are $5000 / piece. A trip to the emergency room sets you back $100 ($500 for the teeth versus pavement incident last week). I haven’t added up the costs, but that number might be so unrealistic…

Lincoln
Lincoln
9 years ago

Childcare is expensive, whether it is an out of pocket cost or through lost income from a stay at home parent. Then there are all of the daily expenses (more food, clothing, electricity, health care, square footage, insurance, etc.). Also don’t forget the start-up costs including the necessary baby furniture, gear, and accessories.

Rosa
Rosa
9 years ago
Reply to  Monica

I would say regular emergency fund levels – 6 months expenses – and estimate a little high.

I say that because there’s a not-insignificant chance of not being able to work for at least part of your pregnancy. I was on bed rest for 5 weeks with pre-eclampsia and had a preemie who wasn’t allowed out in public for another 5 weeks – that’s more than two months not working, before I could even consider optional maternity leave.

That’s assuming good health insurance, of course.

Pamela
Pamela
9 years ago

This post is a good reminder that we can’t plan for everything and Robert made some good suggestions for being ready for the unexpected. I’d like to add one other non-financial sugestion–strengthen your safety nets. My job gives me access people’s most private financial details. And I’ve observed that a big difference between someone being devastated by an unexpected catastrophe and someone surviving it is how strong a person’s safety nets are. Sometimes the safety net is a nonprofit organization, like the Red Cross, that shows up at your door when you’ve been burned out to help you find shelter… Read more »

Clint
Clint
9 years ago
Reply to  Pamela

Great points My emergency fund needs to grow, but my family safety net–even though I haven’t had to call on it–gives me great peace of mind. (Need to work on those neighbors, though!)

Debbie M
Debbie M
9 years ago
Reply to  Pamela

I had a roommate who joined a church partly for that purpose.

Amanda
Amanda
9 years ago
Reply to  Debbie M

Seems sad to me.

No Debt MBA
No Debt MBA
9 years ago

I’ve always had health insurance but I’ve never pulled the trigger on disability insurance. It’s something that I’ll need to revisit periodically.

My SO keep our finances separate and also save for retirement independently. We use a joint Mint account to give each other read-only access and to get the full picture of our savings and spending together.

I’m a huge believer in catastrophic insurance but self insuring for smaller expenses. It makes preparing for events like these affordable.

SLCCOM
SLCCOM
9 years ago
Reply to  No Debt MBA

If every young person bought a personal disability insurance policy when they got their first “real” job, there is no concern about being eligible, and it is dirt cheap.

We did that, and it is saving our lives now. Don’t “think” about “pulling the trigger” on disability insurance. Just get it. When you realize you need it, it is far too late. And, not incidentally, insurance fraud if you lie to get it. (And they WILL look back, combing through every single entry in your health records.)

Mikey
Mikey
9 years ago
Reply to  No Debt MBA

You can be disabled at any age, and disability policies should not be considered something you get when you are older. I’ve had one since my divorce — I don’t have a safety net, I’m a programmer, and if my hands or arms got hurt or I lost my vision, that would be very bad.

Also consider that, with some policies, the younger you are when you buy into it, the less expensive it is.

Rach
Rach
9 years ago

Love this point:
Most married household finances are built on two incomes, or one income and one spouse who does a lot of work that otherwise would cost money (e.g., raising kids)

Thankyou for not undervaluing a sahm!
Great article in general too. We can plan and we should but ultimately we are not in control of our future. Thanks for the reminder.

Adam P
Adam P
9 years ago

“Have three to six months’ worth of living expenses in cash” Only illness and job loss apply to me from the articles list (Toronto is not known to have natural disasters, I’m single and child-free with renters insurance). I have a very good disability insurance package through my professional organization and the province provides free health care coverage, I have dental coverage and prescription coverage through work. So check those boxes off. For unemployment, we are entitled to severance pay by provincial act of 1 week per year worked + accrued vacation pay, which would be ~2 months or so… Read more »

Amanda
Amanda
9 years ago
Reply to  Adam P

“Pride before a crash.” Sometimes it’s just the way that you word your responses to emergency funds that’s irritating.

Adam
Adam
9 years ago
Reply to  Amanda

If I’m wrong…I’ll have to sell some bond funds, possibly at a small loss if interest rates have just risen sharply before I need the cash.

I’ll take that risk.

Anonymous
Anonymous
9 years ago
Reply to  Amanda

I don’t think this is pride. It’s just statistics and some simple math.

Mary
Mary
9 years ago

“It costs $260,700 to raise a kid until age 17.” I’d like to know how they came up with that figure which averages out to $15,335.30 per year. It seems pretty high to me.

Annemarie
Annemarie
9 years ago
Reply to  Mary

Child care could account for a lot of that. Not to mention food in the teen years.

Also moving to a house in a better neighborhood?

PB
PB
9 years ago
Reply to  Annemarie

Also, 3 teenagers + long hot showers on a daily basis = $$$$$

Jeff
Jeff
9 years ago
Reply to  Annemarie

I don’t know if the number is correct, but I do know that my kids have spurred me to: 1) Buy a larger, safer car 2) Buy a house in an in-demand neighborhood because of the schools/child-friendly atmosphere. 3) Spend more in food (especially starting at about age 9) 4) Spend more on health insurance — about $150 a month for them. 5) Spend more on visits to the hospital. 6) Spend money on camps, sports, etc. 7) Spend more on gas shuttling kids around. Obviously, a lot of these are personal choices. But the more I think about it,… Read more »

Luke
Luke
9 years ago
Reply to  Jeff

Genuinely not intended as a political comment, but thank goodness for universal healthcare in the UK!

My fiancee and I would love to start a family some day (no more than 2-3 kids max) and $450/mth (£300/mth) would completely wipe out any ideas of disposable income.

Peggy
Peggy
9 years ago
Reply to  Mary

I dug deep into the USDA analyses when I was doing research for my book. The USDA looks at housing, food, transportation, clothing, health care, childcare, educational, and miscellaneous spending on children. They have a few different data sources, make adjustments for inflation, and then do some number-crunching and extrapolations to create cost of raising a child estimates. I’ve come to three conclusions from my research: 1. What the USDA is presenting an estimate of SPENDING, not of costs. I compared my family’s spending on children against the estimate from the USDA’s online Cost of Raising a Child calculator, and… Read more »

Paul
Paul
9 years ago

Good article. I like the comment about expanding or improving human capital. In general, I think people often get complacent regarding their own improvement.

Tim
Tim
9 years ago

How airtight is a prenuptial agreement? I am under the impression that certain circumstances can negate the prenuptial agreement. Is anyone at GRS a lawyer and would know the answer to this (a great article, J.D.)? As one with a major amount of wealth, I consider it wise to just “see” my significant other on convenient days for both of us. Even in my state, if we lived together for seven years, the law would consider us “married” (or so I’ve been told). Of course, I’d love some legal clarification here. And I’d suggest a marital article for a lawyer… Read more »

The Other Brian
The Other Brian
9 years ago
Reply to  Tim

As someone with a “major amount of wealth” you should probably spend some money and ask a good lawyer that question instead of a web blog.

Annemarie
Annemarie
9 years ago

This is fantastic, systematically hitting every concern I have and offering sensible solutions. Thank you.

I would add: don’t discount your kids as a source of human capital. It sounds all Horatio Alger, but if things really go bad, older ones can get jobs and younger ones can help in whatever’s age-appropriate.

Marsha
Marsha
9 years ago
Reply to  Annemarie

Children can be the largest source of human capital in retirement if you raise them right. I’ve taught my sons since they were little that every family member has a responsibility to look after every other family member. I’m saving plenty for retirement, but I’m also investing in my sons’ educations, since I believe that having financially secure children will benefit all family members.

Anonymous
Anonymous
9 years ago
Reply to  Marsha

I feel like the belief that your family members, not society at large, should be looking out for you financially in your old age is the source of many woes and social decline. It constrains your kids unnecessarily and locks us into this mentality that we should expect more security from our family than our community. Families are emotional irreplaceable, but depending on them in the case of financial calamity creates all sorts of warped incentives, e.g., to reproduce for personal security. This is a bad reason to bring another human onto a crowded planet. Demographers report that a reliance… Read more »

Jan
Jan
9 years ago
Reply to  Anonymous

Family should take care of family.
That is the way I was raised.

laura
laura
9 years ago
Reply to  Marsha

While I agree with this statement, but I also believe that it is a parent’s responsibility to be financially secure so that the child can live the life they choose, without trying to figure out how they will financially support the parent in old age. I am particularly sensitive about this issue because my in-laws have not saved any money or planned for their future in their old age. They are approaching their 70s, and we trying to have our first child and save for our own retirement. We will be the ultimate “sandwich generation”, as we try to figure… Read more »

Nicole
Nicole
9 years ago

We spend a lot of money on insurance! But once you have savings that can be wiped out, it is worth it to make sure they aren’t!

Ginger
Ginger
9 years ago

My DH just bought disability insurance but even with it we would be $370 short every month even with major cuts. There is so much that can go wrong and we rely on our employers for so much, including health insurance. I am working on multiple income streams so that one problem, even disability won’t derail our plans.

fetu
fetu
9 years ago
Reply to  Ginger

Americans have no idea how much of a burden they have because medical insurance goes with the job instead of through state support from taxes. It is a double whammy to loose your job and your medical insurance. Welfare states may have their problems but not having to worry about going bankrupt because of having no job and now having cancer or a major car accident is the best thing ever.

Mikey
Mikey
9 years ago
Reply to  Ginger

Multiple income streams is a great idea. In the back of your mind though, keep this thought. If you become seriously ill, you probably won’t be able to keep a business together. You’ll need all your strength to make a cup of tea, never mind making the payroll. Hopefully, you will have family members to help out and/or have easily liquidated businesses. Disability insurance isn’t intended to “make whole”. It is just an additional lifeline, should you need it. I’m not a fan of insurance, especially life insurance for singletons like myself. However, disability makes my list of “must-haves”, while… Read more »

Ryan
Ryan
9 years ago

Good piece with several strong points. I agree that having an emergency fund is great preparation for the unexpected unknowns. I would just add that equally as important is keeping that emergency fund very liquid and in a low risk asset class. For instance, certain asset classes, such as munis, are no longer very low risk securities. Some munis are insulated but overall the asset class is riskier than in the past.

GJ
GJ
9 years ago

I was just reviewing our renters insurance policy yesterday and want to remind everyone that a standard policy DOES NOT protect against damage done from earthquakes and tornadoes. Since we live in the Pacific Northwest, earthquake insurance is a big deal. Don’t ever assume you are covered, check your policy to make sure you are covered for the natural events in your area!

Debbie M
Debbie M
9 years ago
Reply to  GJ

In my area, you have to get flood insurance separately. There’s also some kind of wind damage insurance which is included in some standard homeowner’s insurance policies but not others.

Sarah
Sarah
9 years ago
Reply to  Debbie M

I am reading a book on Hurricane Katrina right now that mentioned plenty of hurricane victims who thought they were covered by insurance ended up not being reimbursed — their insurance covered wind-related hurricane damage, not damage from the water surge. Yikes.

Beth
Beth
9 years ago

My brother had to cash out his 401K due to a fall last year. He suffered a traumatic brain injury and is on disability. He needed his 401K money to live. It’s very scarey what life can bring you in an instant. I wish I can win Powerball so I could take care of him for the rest of his life.

trb
trb
9 years ago

re: kids
Birth control pills and condoms come cheap. These are effectively “child insurance” until people are ready. And for those who decide not to have children, vasectomies cost about $80 after insurance. That’s a sound investment.

Roberta
Roberta
9 years ago
Reply to  trb

Insurance policies vary so much in what procedures they cover and how much they cover, a lot of people reading this won’t have vasectomies available to them for $80 out of pocket. But even paying 100% out of pocket at Planned Parenthood, my husband got a vasectomy for $400. Much cheaper than more kids! And much cheaper than years of birth control copays or condoms or whatever other birth control one might use instead.

krantcents
krantcents
9 years ago

Planning for retirement and life requires doing certain things! Whether it is savings, insurance and just plain thinking about what can happen! It is not easy, but important to avoid some of these problems.

SLCCOM
SLCCOM
9 years ago

The “70%” figure about how much illness is caused by “behavior” is an incredibly mushy number, based on vast medical ignorance. Often this ignorance is by the choice of our insurance companies. And our overworked doctors. Many people in early stages of cancer are exhausted and end up overeating and not exercising. Ditto with autoimmune diseases. Depression will do the same, and effective and reasonably priced mental health treatment is mostly missing in action. People with underactive thyroids that don’t fall to “official” thresholds of “low” are in the same boat. And so on, and so on. Rather than treat… Read more »

Squirrelers
Squirrelers
9 years ago

I totally agree that there are perils and risks along our expected path to retirement. The thing is, these aren’t unexpected events. People do lose jobs, get sick, get in accidents, etc. I know it’s hard to foresee specific events, but the odds tell us that something less than ideal WILL likely happen. It’s just realistic, and we should plan accordingly.

Michiel
Michiel
9 years ago

Nice post. It is always good to keep in mind that we can’t plan for everything. However, it is worthwhile to remember that losing 78k may be unplanned, but having the same troubles without the 78k would be much worse. Plan for the worst, hope for the best.

Ross Williams
Ross Williams
9 years ago

“As much as 70% of health-care costs are due to lifestyle choices” That is simply not true. Its an urban myth that perpetuates the idea that you have control over whether you stay healthy. Exercise, losing weight, not smoking, drinking in moderation, eating fruits and vegetables etc. are all ways to be healthier than you would be otherwise. But, while the may improve your chances of avoiding some kinds of serious illness, they are definitely not guarantees of good health. This list leaves out the most significant risk right now to everyone’s retirement. Ideological hostility to government services. To replace… Read more »

Lisa
Lisa
9 years ago
Reply to  Ross Williams

I completely agree with Ross and I’m so angry that a blog like Get Rich Slowly would allow a post that addresses health insurance issues in such an irresponsible way. Many unemployed AND working people can’t just “get insurance.” They may have a pre-existing condition like gastritis, or a headache (yep, both can be considered pre-existing conditions.) Some buy insurance and while they are waiting for the pre-existing conditions clause to time out, they have a car accdident or contract cancer. A young lady who works for a friend of mine purchased private health insurance (she’s 23 and missed the… Read more »

Catherine
Catherine
9 years ago

I am surprised that divorce got such a small mention in this article when the average person is much more likely to be divorced than widowed. With divorce statistics being what they are, this subject should be a much greater topic of discussion in GRS and other financial websites. A glib sentence to get a prenuptial doesn’t even begin to address the damage that divorce causes most families’ finances. For instance, attorney fees, two residences instead of one, selling assets when the market is off … I could go on, but you get the picture. I have heard it said… Read more »

Rosa
Rosa
9 years ago
Reply to  Catherine

…if it’s the right person. One of my parents is quite financially sane, and one is not. If they were still married, they’d both be broke. As it is, despite the divorce erasing all their assets when they were in their late ’40s, the saver ended up comfortably retired and the spender is stuck still working despite significant health problems.

Nick
Nick
9 years ago

This is a great article. I would like to comment on Long Term Disability insurance. Other than medical insurance this is my most important coverage. As stated, if you are an individual it can be expensive and hard to get if you have pre existing conditions. Most people get LTD through their employer, if your employer doesn’t offer it you should be asking and pushing for it. It is super cheap for employers to purchase and insurance carriers can’t deny you coverage because of pre-existing conditions on a group plan. Dental insurance is always the second benefit offered by employers… Read more »

Lindsey
Lindsey
9 years ago

This can be one of the most frustrating things about saving, even on a smaller scale. I keep trying to save up an emergency fund and keep having emergencies that wipe it out. For example, I had a good chunk saved (considering my current income) and then had to go to the emergency room in the middle of the night. This is not something that my health insurance covers and carries quite a hefty price tag! Now I feel like I’m starting all over again. I guess the upside is that I really would have been in a mess if… Read more »

El Nerdo
El Nerdo
9 years ago

RE: KIDS & playing ladders and chutes over & over again. I don’t know why one has to become one’s children’s playmate. Adults do their grownup stuff (work, etc), kids play– yes? Occasionally, yes, a game is nice, but on an everyday basis, it’s a bit insane, no? That’s why we have kindergarten, etc. Maybe it’s the way American kids are raised these days, but growing up in the non-helicopter world (Latin America), my playmates were the other kids on my neighborhood. There was no such silliness as “playdates” or “soccer moms”– we played our fútbol in the street, and… Read more »

Paula @ AffordAnything.org
Paula @ AffordAnything.org
9 years ago

It’s frightening to think that a combination of untimely factors — a flood, an illness — can wreck such financial havoc. An emergency fund is, in my opinion, one of the most underrated and underappreciated aspects of budgeting. (I’m not referencing the couple who were afflicted by the flood/cancer … I just mean, in general).

mark
mark
9 years ago

$260k is what the state projects it costs to house an orphan per year. That’s a far cry from what we are spending on our five. Yeah, it ain’t cheap but nothing worth doing or having, is.

PawPrint
PawPrint
9 years ago

I noticed that long term care insurance wasn’t mentioned in the “your defense” section of the illness and disability section. What’s the scoop on LTC from a financial planning view? I know that some insurers are dropping their LTC coverage.

cynthia
cynthia
9 years ago

I may be misunderstanding the numbers, but I think that the 230K factors in such expenses as larger home size and what not, and not just expenses that we spend as parents directly for the child/ren and can more easily quantify.

CH
CH
9 years ago

I find it interesting that the articles talks about having insurance (especially health insurance) like it is easy to get. When I last my job, I could either pay $675 a month, which would have drained my savings at twice the rate of not paying for insurance, or go without because I was told I was uninsurable for 6 months after a tendinitis diagnosis. I wasn’t even eligible for a policy that excluded that problem and other preexisting conditions. I can’t go to the high risk pools until I am uninsured for 6 months. Even if I can find a… Read more »

Alex
Alex
9 years ago

Great article, it’s remarkable how faith, or bad luck, can impact you so much.

I read an article just today, about a women in Belgium, who sold a very old piggybank, that has been lying around for ages, on a flea market. It appeared, her mother had around 30,000 USD of savings in it. Her daughter didn’t know.

Cheers.

rail
rail
9 years ago

When my daughter came along 5 yrs. ago the first thing I did was get life ins. Railroads by nature have great risks. The next thing was disability ins. A broken bone or heart attack would keep me out of service and bills would pile up. I figure around 100 bucks a month for life/disability ins. at group rate. Way cheep if you ask me. A parents #1 responsablity is getting a child 0-18 and out of high school. I will help with collage if she wants to go, but will not bankrupt myself to send her to some Ivy… Read more »

Kevin@RothIRA
9 years ago

OK, I’m a partisan, but putting money into a Roth IRA is one of the best strategies you can have for dealing with the unknown. You’re saving money for the long term (retirement) but you can withdraw your contributions any time before then without tax consequences or penalties. Everyone in the retirement planning world will say “don’t touch your retirement investments”, but out in the real world–where crisis is real– everyone knows better. What’s written in the post about the unknowns of life throwing us a curve ball is so true. That means that our plans have to be centered… Read more »

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