Wouldn’t That Be Loverly!

Every once in a while I read something that just makes me shake my head in disbelief. Today I had such an experience. The gist of the article to which I am referring had to do with a question that was posed regarding the funding of one’s retirement account while on unemployment.

For most Americans – yes, most Americans, having an abundance of financial resources is a pipe dream. Unemployment, as we’ve witnessed during the last 3 months, can be financially devastating in a relatively short period of time. Furthermore, most studies suggest that American workers truly only save for retirement through an employer-sponsored plan. Losing one’s job eliminates both the financial resources AND the access to a retirement vehicle. The fact that this question was asked is actually mind-boggling.

There has been little real wage growth during the last several decades, while expenditures for education, housing, healthcare, food, etc. have grown substantially. As a result, the Covid-19 impact on the economy and workers revealed the fragility by which most Americans live. We’ve seen a dramatic increase in loans not being paid, mortgage and rent relief, and unemployment benefits dramatically enhanced (extra $600/week), and it still isn’t enough for many displaced workers, especially if they live in a major city, such as NYC or San Francisco.

Furthermore, the article went on to discuss the establishment for a rainy day or emergency fund. Yes, I agree wholeheartedly that it is wise to set aside funds for an unexpected life event, but in reality most Americans are living paycheck to paycheck, and barely have the means to meet life’s necessities on a daily basis. This is not because they are buying lattes or eating avocado toast everyday. For Millennials, the reality is that twice as many representatives of this cohort have 50% more in student loan debt than the Gen Xers who preceded them.

My favorite line in the article was “when you’re unemployed, your emergency fund should ideally be heftier than normal”. Now there’s a brilliant statement. Well, if every American knew the day that they would become unemployed, I’m sure that they would do everything in their power to save a little more. Regrettably, the Covid-19 virus didn’t give us a heads up and I suspect that most employers didn’t do the same thing for their employees: they seldom do.

We have significant economic issues in our country, and worrying about whether or not someone on unemployment should continue to fund a 401(k) isn’t near the top of the priority list nor is it realistic. It would be wonderful if the general working population were earning enough in wages that their basic living expenses were more than covered, but we know that is just not the case. Until we get to that desired outcome, we will have to live with the knowledge that shocks to our economy can happen at anytime.

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