Working without a net: The shift of economic risk to ordinary families .
Highlights from a Los Angeles Times article
“Economic risks — the costs of being laid off, of suffering a work-stopping illness or of a catastrophe like a house fire — that were once largely borne on the broad shoulders of business and government (are) being shifted onto the backs of ordinary families, from the working poor to the reasonably rich.
Jobs, benefits, housing, health coverage, college and retirement savings, even bought-and-paid-for insurance all played crucial roles in maintaining families’ economic stability during the second half of the 20th century. But the protective value of each has been weakened over the last generation.
On average, 60% of everything we own — is accounted for by the value of our homes … over the last two decades … insurers phased out guaranteed replacement cost policies in favor of “extended replacement cost” policies … It is up to you to figure out what it would cost to rebuild your home. And it is up to you to keep your policy current.
Similar(ly) … the switch from traditional pensions to 401(k)s has left individuals largely on their own to provide for old age … the numbers have flipped. The fraction of private-sector workers relying on traditional pensions has dropped from 62% a generation ago to a mere 10% today, while the fraction depending solely on 401(k)s has jumped to 63%.
Similar changes have occurred in the way people pay for college education, where rocketing costs and the declining availability of federal grants have meant that most families can no longer pay as they go to send their kids to school, but must borrow … Twenty years ago, loans were used to pay about 15% of the tuition, room and board and fees that parents and students paid for college. Today, they account for fully one-third, according to the College Board.
Working Americans and their families are operating on an economic high wire — only one or two missteps from a steep financial fall. Little wonder people are so bleak about their prospects now that times are tough.
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Observation: Many well intended boomers have stashed money into IRAs and 401Ks. Now, as they approach retirement, the bear market has substantially reduced the value of their nest eggs. That, in my opinion, will be the next big financial challenge in the US.
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For the full story:
http://www.latimes.com/news/opinion/la-op-gosselin6-2008jul06,0,4204915,full.story
Peter Gosselin is the author of “High Wire: The Precarious Financial Lives of American Families,”.
The Homa Files 
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