2020 certainly was a year. While few of us are sad to see it go, there are lessons to be learned from this most unusual time. Hindsight 2020 is Living Confidently’s newest series, exploring the ways we can look back to move forward from the financial challenges of the COVID-19 pandemic.
If nothing else, 2020 was a stark reminder of the importance of a protection-first mindset — prioritizing the financial well-being of yourself and those you love. Between February and March 2020, the US personal savings rate skyrocketed from 8.3 percent to an unprecedented 33.7 percent.1 Across the country, millions of Americans did their best to create a financial cushion to protect against a seemingly unprecedented emergency.
EMERGENCIES CAN BE MITIGATED
Yes, financial emergencies can happen when we least expect them — to us as individuals or to the entire world, but the financially confident among us know that with the right emergency planning we can expect the unexpected. Having the right protections in place, like a solid emergency fund, disability insurance and life insurance, is one of the surest ways to ride out a setback.
Among other things many Americans learned in 2020, we found that previously steady passive income streams — like rental properties — are less reliable than was assumed. For Americans in need of true, guaranteed income sources, like retirees, an annuity or whole life insurance could be a great consideration for any portfolio.
LONG-TERM JOB LOSS
Unexpected job loss is always an emergency, but what if you were unable to go back to work for months or years? After 2020, this thought experiment feels all too real for many. This year saw entire industries shut down indefinitely, stranding millions of Americans jobless. One insurer reported that one third of all short-term disability claims filed in April 2020 were related to COVID-19.2 In addition, many survivors of COVID-19 have reported long-term medical challenges that make returning to work impossible.
INCOME PROTECTION CAN HELP
Income protection through disability insurance can help make sure that you and your loved ones avoid the worst effects of unexpected job loss due to a disability. With income protection in place, you can still earn money while unemployed due to sickness or a disability, even in the event of industry shut down or long-term illness.
HEALTH SAVINGS ACCOUNTS
Speaking of long-term illness, COVID “long haulers” are individuals who have experienced health problems long after recovering from their initial bout of the virus.3 For many Americans experiencing long-term health problems, a health savings account (HSA) can help safeguard against high medical costs. As a result of the CARES act, passed in response to COVID-19, HSAs can now also be used to purchase over-the-counter medication and menstrual care products.4
As we move into a new year and see, perhaps, the end of the COVID-19 pandemic in the distance, it’s important to look back and reflect. Millions of Americans have experienced — or are still experiencing — the effects of a financial emergency. With this knowledge still fresh in our collective consciousness, the value of protection-first planning is more apparent than ever.
As a first step, try taking a written inventory of your layers of financial protection. Then, take your list to a financial professional for evaluation and suggestions.
Brought to you by The Guardian Network © 2021. The Guardian Life Insurance Company of America®, New York, NY.
2021-115042 Exp. 1/2023
1 BEA statistics, BEA.gov, accessed January 2021.
2 Unum Disability Guide 2020, unum.com, accessed January 2021.
3 Long haulers: Why some people experience long-term coronavirus symptoms, health,ucdavis.edu, December 8, 2020, accessed January 2021.
4 IRS outlines changes to health care spending available under CARES Act, IRS.gov, June 17, 2020, accessed January 2021.
Annuity and Whole life guarantees are backed exclusively by the strength and claims-paying ability of the issuing insurance company. While the primary purpose of life insurance is death benefit protection, it is important to understand the advantages that cash value accumulation can provide to clients, including supplemental income during retirement.