It is no secret America needs lifetime income protection to address life's financial risks. The questions are: what type of protection, where to get the cash needed to buy protection and in what amounts?
For most people, their most valuable asset is their ability to earn an income that is sufficient to pay their expected future living expenses, including retirement. If for some reason they lose their earning ability, their dependents could suffer economic losses and diminished lifestyles. They buy disability insurance to protect themselves against that risk.
I believe, however, that the industry needs to rethink how it offers income protection. I believe this new, broader approach should allow consumers to better understand what their financial lives will look like, their need for lifelong income and help them prepare for life's uncertainties.
I see five income protection stages in life. Each of these stages requires cash investment and can use financial solutions to minimize the risk of income loss. Let's look at each stage.
Stage 1: Investing in An Education
The first step in income protection is to acquire skills sufficient to earn a living wage. Most people are not born into families that have the financial resources to fully fund higher education. To our benefit, we are beneficiaries of free, publicly funded universal elementary and secondary education. If we decide to gain the knowledge to pursue a trade or profession, we need to find the money to pay for that education. That is where a critical cost benefit decision needs to be made. For the most part, we have unnecessarily directed most everyone down a path to obtaining a college education with assurances that the education will guarantee a high-paying job.
Unfortunately, one must choose a field of learning very carefully. With the average four-year college education costing between $38,000 at an in-state public college or university to over $140,000 at private institutions, how this decision is made couldn't be more important. Choose a trade or profession that is not in demand, and you have wasted time, money and work that will not pay off. As an added impact for these students, they will have the pleasure of repaying student loans for a good portion of their adult lives.
To make the education cost/benefit decision, individuals need to balance the desire to learn a subject and its potential to provide future income. Ultimately, the trade-off is to choose an area of knowledge (e.g., technology, science, computing, marketing, management) that we enjoy and have a passion for, that is in demand by employers and can produce a reasonable level of future income that will provide for our needs. If the education decision is made properly, the likelihood of emerging with the ability to earn a living wage is increased dramatically.
Finding new and better utilization of existing solutions to provide cash for higher education is step one in effective lifetime income protection.
Stage 2: Reskilling
The Cambridge dictionary defines reskilling as the process of learning a new skill so you can do a different job or of training people to do a different job. During 2020 we witnessed thousands of people (e.g., airline pilots, Broadway performers) whose jobs disintegrated. These people were faced with the need to find an entirely new profession or field of work. They were faced with the need, cost and challenge to reskill. For others reskilling is a task that they will need to embrace in the next decade as new Fourth Industrial Revolution technologies, such as artificial intelligence, are rolled out.
The financial question is, Who pays for reskilling? Today the answer is that the impacted employee usually pays. Our federal and state governments have not as yet funded broad-based programs to allow individuals to be trained for new jobs. Some companies, such as Amazon, have established programs to help workers obtain new skills as their old jobs are eliminated due to implementation of new technologies. If workers are not lucky enough to be employed by one of these organizations, the cost burden will fall fully on them. Where do they get the funds to get the technical or professional training needed to pursue a more employable field of knowledge? This effort may involve going back to school for a year or more.
Harry N. Stout has been the president of Fidelity & Guaranty Life, deputy chief executive of Old Mutual Financial Network, and managing director of Insurance Insight Group. He is also the author of 
