The three-legs of the financial security stool |

The three-legs of the financial security stool

As I See It
Hal Sundin
Glenwood Springs, CO Colorado
Hal Sundin

Unless there are three solid legs supporting it, the stool on which the average family’s financial security depends, will not stand up. Those three legs are the major costs of health care, children’s education and retirement. (I do not include the cost of purchasing a home because that is an outlay that one chooses in lieu of rent payments.)

The average American’s financial stool is woefully unstable, due to a number of causes. Too many families do not have adequate incomes to cover these costs, and many of those who have the income choose to spend too much of it on goods and services that enrich their lives, rather than on their financial security.

Unfortunately, the cost of all three of these items – health care, education and retirement – are steadily increasing and at rates that are difficult to predict with any accuracy. This makes it difficult for people to include these expenses in their budget, discouraging many from even trying.

Let’s take them one by one.

The easiest is the cost of education, because the costs are pretty well defined and the planning period for a typical family is around 20 to 25 years. Current costs run anywhere from $10,000 for a two-year junior college or trade school, to $60,000 for a four-year state university, to $100,000 or more for a private college.

But those costs are increasing by at least 4 percent a year, which means that in 20 years, they will more than double.

The basis for calculating the cost of living during retirement is also pretty well defined. A common recommendation is about 75 percent of pre-retirement living costs, unless retirement plans include a lot of overseas travel or, conversely, relocating to a place with a significantly lower cost of living.

The challenge is to estimate what living costs will be up to 40 years into the future, making predictions more uncertain. If the cost of living continues to increase at 3 percent per year, in 40 years it will be more than three times what it is today.

The saving grace is that if one can put what they set aside for these two future costs into secure investments yielding commensurate rates of return, the accumulation of that money will keep up with inflation. The real challenge is whether people can earn enough money to be able to fund these savings plans after meeting day-to-day living expenses.

Finally, we come to health care costs, and this is the great unknown. The 50 million Americans currently without health insurance are living under the Sword of Damocles, just one accident or serious illness away from bankruptcy and the loss of their homes and any savings they may have made for their retirement or their children’s education.

Those who have individual health insurance are confronted with high deductibles, the risk of reduction or denial of claims, and the possibility of termination of coverage if they incur major medical costs. They also face the problem of being able to afford ever-rising premiums, now topping $1,000 per month.

Even those with employer-provided health insurance plans face the uncertainty of continued coverage, either from loss of their job or termination of their health plan because the employer can no longer afford it. Some employers will elect to push an ever-increasing portion of the cost onto their employees, raising their share of the cost beyond what they can afford.

The strain of constantly living with these three major financial demands, and the associated uncertainty, particularly concerning health care, is a source of unrelenting stress for the average American family. It’s made even worse by declining income.

Last year on a visit to Norway, I had some lengthy and enlightening conversations with our 1967-68 exchange student “daughter” comparing the lives of average families in the U.S. and in Norway. I was immediately struck by the Norwegians’ total lack of financial stress.

Health care is provided by the government, with universal coverage for everyone, very similar to our Medicare (which does a pretty good job for senior Americans). A major portion of the cost of continuing education for all qualifying students is paid by the government, and a livable income is provided for all retirees.

Sure, they pay high taxes for it, but the taxes leave no one impoverished, and to them it is worth it. We may call it socialism, but they call it peace of mind, and enjoy stress-free lives.

“As I See It” appears on the first and third Thursdays of the month. Hal Sundin lives in Glenwood Springs and is a retired environmental and structural engineer. Contact him at

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