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Today’s typical American family is likely to face many financial challenges and opportunities throughout their lifetime. An individual person’s life goes though many ebbs and flows, yet some still believe life will follow a traditional linear path:

Step 1 – Graduate from college
Step 2 – Start career
Step 3 – Get married
Step 4 – Buy first home
Step 5 – Have children
Step 6 – Children graduate and move out
Step 7 – Children get married
Step 8 – Grandchildren
Step 9 – Retire
Step 10 – Enjoy spending time doing favorite hobbies with my favorite people.

The reality is that anything can happen at any time to throw someone off this linear path. Change is good though—that’s life. How you manage these changes will determine how fulfilling and satisfying your life is. Today we are going to touch on some common belief versus reality life situations and what you can do to plan for the unexpected.

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Common Financial Challenge: Retirement

Belief – I can start saving for retirement when I am older.
Reality – I need to start saving for retirement as soon as I start working.

You hear it often: the sooner you start saving for retirement, the better off you’ll be in the long-run. It also may not seem like it, but it’s easier to start saving at a younger age than when you’re older. You may think, “No, that doesn’t make sense. I will have a larger paycheck when I’m older, so I’ll have more money to put away.”

That is the belief, but the reality is you will likely have many more financial responsibilities when you’re older as well. You’ll have mortgage payments, children to raise, college tuition to cover, one parent may decide to stay at home, a furnace may need to be replaced, etc. Consider the image below from Motley Fool.com.

retirement savings by age

As you can see, on average, around age 35 we have our retirement savings pretty under control. We’re at a good place financially… then life happens.

The moral of the story: start saving for retirement as soon as you possibly can. The portion of your income that you contribute to a retirement account, such as a 401(k) or IRA, also has tax benefits (hooray!) and the amount in a retirement account gets compounded and grows at an accelerated rate (double hooray!)

Common Financial Challenge: Health

Belief – I won’t have serious health problems when I’m young.
Reality – Chronic medical conditions are common, even at younger ages.

If a medical condition is “chronic” this typically means it will last three months or longer. Common chronic conditions include arthritis, asthma, cancer, COPD, diabetes and viral diseases such as hepatitis C and HIV/AIDS. This is a very small list of what can be deemed a chronic medical condition and any one of these conditions can be very serious and can cause individuals to take time off work or even quit their jobs.

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Young people are not invincible to chronic illness. The table below depicts by age what percentage of people have one or more chronic medical condition.

chronic conditions
Chart statistics source: Prevalence of Multimorbidity in a Geographically Defined American Population: Patterns by Age, Sex, and Race/Ethnicity. Mayo Clinical Proceedings. October 2014

It’s surprising to see that over 20 percent of men and women under the age of 40 have at least one chronic medical condition. This fact stresses the importance of having an emergency fund, not waiting to purchase life insurance, and disability insurance.

Common Financial Challenge: Disability

Belief – I won’t be disabled during my working years.
Reality – Long-term disability is common, even in healthy (low risk) office workers.

Here are some statistics to consider from the Council for Disability Awareness:

  • Just over 1 in 4 of today’s 20-year-olds will become disabled before they retire.
  • Over 37 million Americans are classified as disabled (about 12% of the population). More than 50% of these Americans are in their working years (aged 18-64).
  • The average healthy 35-year-old female has a 24% chance of becoming disabled for 3 months or longer during her working career; a 38% chance that the disability would last 5 years or longer.
  • The average disability for a healthy 35-year-old female lasts 82 months (over 6 ½ years).
  • The average healthy 35-year-old male has very similar statistics as his female counterpart with the only difference being a 21% chance instead of 24% in regards to being disables 3 months or longer.

The four most common causes of long-term disability claims are:

  1. Diseases of the musculoskeletal system and connective tissue (28.7 percent of claims)
  2. Diseases of the nervous system and sense orgrans (15.2 percent)
  3. Diseases of the circulatory system (12.4 percent)
  4. Cancer (9.1 percent)

A sudden disability can happen to anyone. While there are higher risks of becoming disabled if you’re a professional bull rider, even low-risk office workers could develop cancer at a moment’s notice. Your income is your most valuable asset and disability insurance protects it.

Common Financial Challenge: Death

Belief – I won’t die at a young age.
Reality – Unexpected death occurs, even in young people who work in safe occupations.

Death isn’t a financial challenge for you, but it will be to those you leave behind. If you have a family, anyone relying on you and your income, your death will not only affect them emotionally, but will negatively affect them financially as well if you don’t plan ahead. Life insurance is the number one way to protect your family from financial hardship should you die prematurely.

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The cost of term life insurance is highly overestimated by the general public and many think it’s a complicated process, which it can be if you aren’t working with a good agency. Here at Quotacy we make getting life insurance easy and will walk you through the process every step of the way. See for yourself how little term life insurance may cost by getting a free quote. No contact information required.

There is no way to 100% avoid any of these challenges. You can play the stocks and hope to strike rich, but there is no guarantee of this. You can exercise and eat healthily to increase your life expectancy, but that doesn’t mean you won’t get hit by a bus walking downtown.

The best thing to do to mitigate these financial risks is to plan for them and manage them if they happen. If you need extra help, work with a financial adviser who can help you make a plan. For life insurance and disability insurance questions, please feel free to contact us here at Quotacy. We are happy to help.

» Learn more: Common Financial Challenges: Belief vs. Reality: Part Two

About the writer

Headshot of Natasha Cornelius, a life insurance writer, for Quotacy, Inc.

Natasha Cornelius, CLU

Senior Editor and Life Insurance Expert

Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.