FAI’s Managing Director Tim Ogden was cited in an article in Next Avenue by Richard Eisenberg about a new study of 5,000 Americans with household incomes of less than $75,000 per year. This study was carried out by Assurance IQ, a a Prudential Financial subsidiary, and was inspired in part by the US Financial Diaries, led by FAI along with the Center for Financial Services Innovation.
The new study found that 57% of respondents aged 50 and older with incomes under $75,000 struggled to pay bills last year; that 38% couldn’t afford their health insurance deductibles; and that 31% avoided medical care due to cost. If faced with a future unexpected medical expense, 28% said they wouldn't be able to cover it without affecting their ability to pay monthly bills.
The financial volatility experienced by these households—also a main finding of the USFD study—prevents families from planning and saving for financial goals that are (or seem) far in the future.
Ogden said he wasn't surprised by Assurance IQ's findings because incomes are often highly volatile for these households. Many are either hourly workers with varying hours or in jobs that aren't steady.
"Most of what we talk about in financial planning and budgeting starts from the assumption that you know how much money you have and how much you're going to earn. But if you don't know that, how do you create a budget?" Ogden said.
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As Ogden noted, when income is volatile, trying to plan for future expenses, like retirement costs, "is really difficult when you're worried about how much I need to save up for the six-month car insurance payment."
Online financial planning questionnaires, he said, typically assume you know your future income and spending needs.
Access the Next Avenue article (published April 4, 2024) and read the Assurance IQ study report.
