All of this modulo American healthcare means a lot of people who follow this script still end up with nothing. This is especially the case for entry-level jobs and other careers that are more available to the newly arrived.
If you work in a median-income job and are miserly for a long time and save up a year's income, you will have around $60k in the bank. Since you don't have a pension, materially all of this will be in mutual funds or the like if retirement is in your plans. But great, you have savings!
Now let anything happen that requires you to visit a hospital unexpectedly. Let's say your appendix bursts, so you couldn't meaningfully have avoided this calamity.
The average cost for an appendectomy in the US is $33k[1]. That's just the surgery, so assume you'll be out $40k or more. Now let your boss be a miser (like yourself) who decides to fire you because you can't come in. Depending on how quickly you find another job, how much it pays, and your ability to avoid another unexpected disaster (car trouble, sick kid, etc.) you could quite easily burn through the entire $60k of your savings from this one incident. So the very next time this happens, you're no better off than the folks who saved nothing.
But wait, it gets worse! Since your $60k was primarily in retirement savings, you will likely end up paying penalties and taxes for early withdrawal. So you will end up spending thousands of dollars to access your money. The rules are designed to kick you while you're down in this respect. And now you have no retirement savings, so people can talk about what a freeloader you are in your dotage.
(The probabilities get worse as you get older. For an example of how bad, check pricing for long-term care coverage or long-term disability coverage. Basically -- you can't reliably out-grasshopper biology.)
Our healthcare system in general makes the grasshopper approach more about luck than is apparent at first glance.
1 - Obviously, insurance currently will pay a large portion of the $33k, as the ACA mandates that health insurers sell a useful product. But this has not been the case except for the last 7ish years, and may not be the case again in the near future. It would be foolish to expect health insurance to function as "health insurance" in America for any extended period of time.
Your retirement savings have creditor protections - if you have hospital bills you cannot pay, you can go through bankruptcy or another non-payment strategy with your retirement savings largely intact.
It sucks ruining your credit with a bankruptcy event, but it beats out draining your retirement plans.
That's a good point. I could probably quibble with the practical aspects of the approach (e.g. job loss resulting from medical catastrophe), but you're right that you could probably preserve some of your retirement assets.
The flip side is this is a contributing factor in everyone's healthcare costs being so high.
This is an absurd strawman. Th emphasis is rightly placed on “modulo”.
You’re saying that because catastrophes happen there’s no point in saving? Yes health insurance was problematic before the ACA, but it definitely served its purpose for simple things like appendectomies. Not every single instance of needing savings is one that is financially ruinous, aka pre-ACA healthcare issue that involved preexisting conditions etc.
> You’re saying that because catastrophes happen there’s no point in saving?
No, nothing in what I wrote says that. Literally nothing I wrote should lead to that conclusion. (Good thing you brought up straw man though!)
The point is that saving doesn't guarantee insulation from poverty, and that in America medical costs are historically a leading reason why that is the case. This is in the context of a discussion around how we treat poor and homeless people.
So if you wanted to take one bullet point from what I wrote, you could do worse than "it's not morally okay to look down on poor people in the US because if you're not relatively lucky, that could also be you" or something similar.
So did things like being rejected for coverage due to "unexplained weight loss" when I was dating and trying to get into better shape and had lost a whopping 5 pounds over a few months (as noted in the application).
From my more cynical older viewpoint, I was never going to get decent coverage on the private market and that was simply a viable reason to present for rejection.
It shared the market with a lot more useless health insurance, and whether the useful plans were actually available to any given individual was not necessarily a function of how hardworking and conscientious they were.
If you work in a median-income job and are miserly for a long time and save up a year's income, you will have around $60k in the bank. Since you don't have a pension, materially all of this will be in mutual funds or the like if retirement is in your plans. But great, you have savings!
Now let anything happen that requires you to visit a hospital unexpectedly. Let's say your appendix bursts, so you couldn't meaningfully have avoided this calamity.
The average cost for an appendectomy in the US is $33k[1]. That's just the surgery, so assume you'll be out $40k or more. Now let your boss be a miser (like yourself) who decides to fire you because you can't come in. Depending on how quickly you find another job, how much it pays, and your ability to avoid another unexpected disaster (car trouble, sick kid, etc.) you could quite easily burn through the entire $60k of your savings from this one incident. So the very next time this happens, you're no better off than the folks who saved nothing.
But wait, it gets worse! Since your $60k was primarily in retirement savings, you will likely end up paying penalties and taxes for early withdrawal. So you will end up spending thousands of dollars to access your money. The rules are designed to kick you while you're down in this respect. And now you have no retirement savings, so people can talk about what a freeloader you are in your dotage.
(The probabilities get worse as you get older. For an example of how bad, check pricing for long-term care coverage or long-term disability coverage. Basically -- you can't reliably out-grasshopper biology.)
Our healthcare system in general makes the grasshopper approach more about luck than is apparent at first glance.
1 - Obviously, insurance currently will pay a large portion of the $33k, as the ACA mandates that health insurers sell a useful product. But this has not been the case except for the last 7ish years, and may not be the case again in the near future. It would be foolish to expect health insurance to function as "health insurance" in America for any extended period of time.