Maggie Jennings is a registered representative with New England Financial in New York and has been a supporter of Queercents since our launch over a year ago. She writes articles for us from time to time. These are her words…

New England FinancialImagine: You’re within pennies of affording that dream vacation, only to have your car conk out on you. And then, when you’ve nearly saved enough for a new car, you’re met with an unexpected medical expense that sets you back even further.

If you’re like most Americans, you’ve probably, at one time or another, had an unexpected expense change your short-term financial well-being. Indeed, Americans are facing a bigger financial burden these days. Consumers are realizing that they may not be able to count on traditional social safety nets to ensure their financial well being over the course of their lifetimes.

The government, once a vital part of the social safety net, is facing a looming Social Security crisis as baby boomers approach retirement with less populous generations to support them. In 1950, there were 16 workers supporting every Social Security beneficiary. Soon, there will be less than two, according to a radio address by the President.

A few years ago, investors also learned a hard lesson about trusting their fiscal security to volatile financial markets.

As if this weren’t enough, people believe that they can no longer rely on their employers. Over the last few years, trust and confidence in Corporate America has eroded due to corporate scandals. And, according to new data from Watson Wyatt, of the 627 Fortune 1000 companies that offer pension plans, 113 have either frozen at least one plan or have announced intentions to do so. Finally, competitive pressures are making it challenging for employers to continue to pay for the full cost of medical and other employee benefits as they once did.

Consumers are shouldering more of the financial burden than ever before. Still, many don’t know the importance of protection products. Consider the following statistics:

  • One in three workers over the age of 30 will become disabled for at least three months during their careers, according to America’s Health Insurance Plans (AHIP) and the Society for Actuaries.
  • According to the Life Insurance Marketing and Research Association, in 2004, one third of adults did not have life insurance.
  • The risk is high for Americans to outlive their retirement as the life expectancy continues to increase significantly.

In the era of personal responsibility, where can people turn to make sure that they remain financially secure both now and in the uncertain future? The key to financial security is building a personal safety net to adequately and efficiently insure risks faced throughout life. With an increasingly risk averse populace, the importance of guarantees is at the forefront.

Unfortunately, investments, though a powerful tool for helping consumers grow wealth, cannot themselves adequately fund and finance the cost of caring for a long-term illness or that of a loved one. Nor can they adequately ensure that an individual won’t run out of money if they live a long and prosperous life. Since consumers can’t invest away their financial risks, they must insure for them.

There’s no silver bullet that will prepare consumers for future financial burdens, but there are some simple steps to help mitigate the risk:

  • Understand your options. This includes learning about the types of products that can help you achieve your goals — products for protection now and products to help prepare for the future. It’s not enough to know which product can fulfill which need. The key is knowing which option is right for you now depending on your individual circumstances. Recent college graduates, baby boomers and retirees, for example, all have drastically different risk tolerances and needs.
  • Work with your insurer. An insurer can help you build a solid financial foundation. Many consumers don’t understand which insurance coverage they need to protect themselves and their family or how much coverage is enough. Insurance providers can help consumers match the right products with the right life stage or life situation.
  • Work with your financial professional. An experienced financial professional can help you understand how insurance and related income products can fit into your overall portfolio to protect and grow wealth over time.

The future is uncertain, but being proactive about a creating your own personal safety net can pay big dividends down the road.

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Maggie Jennings
New England Financial
mjennings@ny.nef.com

Read Maggie’s last post: Asset Allocation: A Key to Portfolio Success