Most Americans Are Still ‘Woefully Under-Saved’
Five years after the Great Recession, most Americans still haven’t established firm financial footing.
Only 22 percent of Americans have enough emergency savings to cover the recommended six months’ worth of expenses, according to a new report from Bankrate.com.
Of those surveyed, 21 percent had less than three months’ expenses saved.
Related: Americans Low Savings Rate a Bad Sign for Good Economy
“These results are further evidence that Americans remain woefully under-saved for unplanned expenses, and rather than progressing, are moving in the wrong direction,” Bankrate chief financial analyst Greg McBride said in a statement.
The number of Americans without any emergency savings reached a five-year high of 29 percent, up from 26 percent last year. Nearly a quarter of Americans said their savings had deteriorated in the past year.
Six months of emergency savings is the minimum amount recommended by many planners. Those with children or who have poor health or poor job security may need to an even larger emergency fund.
When an emergency hits those without an emergency fund, they often use credit cards or dip into retirement savings, both pricey options that can lead to further financial hardship.
A separate study released last month by BMO Harris Premier Services found that three quarters of consumers had dipped into their rainy day fund, with unexpected car and home repairs the most common reason cited.
Of those who had used emergency funds, about half replenished their savings within six months, while 20 percent never replaced the savings they had used.
Coming Soon: Deductible Relief Day!
You may be familiar with the concept of Tax Freedom Day – the date on which you have earned enough to pay all of your taxes for the year. Focusing on a different kind of financial burden, analysts at the Kaiser Family Foundation have created Deductible Relief Day – the date on which people in employer-sponsored insurance plans have spent enough on health care to meet the average annual deductible.
Average deductibles have more than tripled over the last decade, forcing people to spend more out of pocket each year. As a result, Deductible Relief Day is “getting later and later in the year,” Kaiser’s Larry Levitt said in a tweet Thursday.
Chart of the Day: Families Still Struggling
Ten years into what will soon be the longest economic expansion in U.S. history, 40% of families say they are still struggling, according to a new report from the Urban Institute. “Nearly 4 in 10 nonelderly adults reported that in 2018, their families experienced material hardship—defined as trouble paying or being unable to pay for housing, utilities, food, or medical care at some point during the year—which was not significantly different from the share reporting these difficulties for the previous year,” the report says. “Among adults in families with incomes below twice the federal poverty level (FPL), over 60 percent reported at least one type of material hardship in 2018.”
Chart of the Day: Pragmatism on a Public Option
A recent Morning Consult poll 3,073 U.S. adults who say they support Medicare for All shows that they are just as likely to back a public option that would allow Americans to buy into Medicare or Medicaid without eliminating private health insurance. “The data suggests that, in spite of the fervor for expanding health coverage, a majority of Medicare for All supporters, like all Americans, are leaning into their pragmatism in response to the current political climate — one which has left many skeptical that Capitol Hill can jolt into action on an ambitious proposal like Medicare for All quickly enough to wrangle the soaring costs of health care,” Morning Consult said.
Chart of the Day: The Explosive Growth of the EITC
The Earned Income Tax Credit, a refundable tax credit for low- to moderate-income workers, was established in 1975, with nominal claims of about $1.2 billion ($5.6 billion in 2016 dollars) in its first year. According to the Tax Policy Center, by 2016 “the total was $66.7 billion, almost 12 times larger in real terms.”
Chart of the Day: The Big Picture on Health Care Costs
“The health care services that rack up the highest out-of-pocket costs for patients aren't the same ones that cost the most to the health care system overall,” says Axios’s Caitlin Owens. That may distort our view of how the system works and how best to fix it. For example, Americans spend more out-of-pocket on dental services ($53 billion) than they do on hospital care ($34 billion), but the latter is a much larger part of national health care spending as a whole.
