The Great New York Earthquake of 2024: Lessons for Financial Preparedness | Jewish Press – JewishPress.com | Jonathan I. Schenkman | May 9, 5784 – Friday, May 17, 2024

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On Friday, April 5, a 4.8 magnitude earthquake struck New York City and surrounding areas. Although it was relatively minor compared to the seismic activity many of my friends had experienced on the West Coast, it was an unexpected and troubling event for New Yorkers. After all, earthquakes are not common in this part of the country.

My initial reaction, when my house shook for about 30 seconds, was complete confusion. My wife mistook the tremors as I was jumping around in my office (apparently, they create enough force to shake the entire house!). At first, I suspected a broken down truck in the street or perhaps a boiler explosion. As we rushed outside along with several neighbors with similar theories, it collectively occurred to us that it had to be an earthquake.

After the initial confusion faded, a feeling of helplessness took over. It was not in my power to stop or mitigate the impact of the earthquake; All we can do is wait for it to pass. Effective earthquake preparation, which is usually conducted in cities most at risk, takes place long before an earthquake strikes. This includes collaborating with engineers to retrofit older structures and design new buildings, bridges and highways to withstand seismic activity as effectively as possible.

Unpleasant surprises that trigger feelings of helplessness can hit our personal finances, too. In fact, the likelihood of negative financial events impacting our nest egg is much higher than experiencing an earthquake. These unforeseen circumstances may include investment failure, loss of a family member, disability of the breadwinner, and more. Just as cities fortify themselves against earthquakes through preventative measures and infrastructure, every household should strengthen its financial resources so that it can withstand financial adversity. Here are some strategies to consider:

Diversification: Every investment has its day under the sun. Currently, hot investments include private credit, technology stocks, and the S&P 500. However, like all investments, these market sectors will inevitably experience downturns or prolonged stagnation. The same applies to any investment, asset class or strategy. Investors who concentrate all their money in a few market sectors run the risk of complete exhaustion during recessions. The main guarantee for all investors is diversification. Diversification entails exposure to different investments, so that when one person performs poorly, others perform better, ensuring a balance between winners and losers over time. Planning for the possibility of individual investment failure is crucial for long-term investors.

Life Insurance: The death of a family member, especially if they are the breadwinner or managing the household, can be devastating. Using life insurance to protect against loss of income or to fund home help is essential for every young family. A 20- or 30-year term policy with level premiums can provide relatively inexpensive coverage designed to support families in such difficult circumstances. It is advisable to obtain coverage when young people are healthy, as aging and health problems can raise insurance costs significantly. Individuals who are considered uninsurable due to health concerns can obtain affordable life insurance through employer-provided coverage.

Disability Insurance: Disability insurance provides monthly payments to people whose disability hinders or stops their ability to work. Inability to work may be the result of a devastating accident that leaves you unable to do any work, or a disability that prevents you from practicing the profession for which you were trained. For example, a surgeon who suffers irreversible damage to the wrist due to a sports-related injury may be prohibited from performing surgery again. He may be able to work another job, but with a lower salary. Adequate disability insurance can partially offset this income disparity.

Long-Term Care Insurance: Long-term care insurance policies reimburse policyholders a daily amount for services to help them with activities of daily living such as bathing, dressing, or eating. Sure, you may be one of the lucky ones who will die in their sleep at 120 after living a healthy life to the end, but that's not the reality for most people. Therefore, planning for potential long-term care needs is imperative, because failure to do so can destroy a lifetime of savings or burden family members with care coordination. Getting coverage in your 50s or 60s is crucial.

Estate Planning Documents: None of us know when we will die. Therefore, creating appropriate estate planning documents early is essential. These plans can and should be reviewed with every important life event. Basic estate planning documents include:

Will: This is a document that explains how and to whom your property will be distributed after your death.

Halachic Will: “Shatar Chatzi Zakor” is a Halachic will, drafted in accordance with Jewish law, that creates a means to circumvent biblical inheritance requirements without violating them. Shtar Chatzi Zachor serves as a supplement to the secular will and helps ensure that all of an individual's assets are divided according to their wishes without violating Sharia requirements. Although sample releases are available online, it is advisable to consult an attorney who is well versed in this area.

Durable Power of Attorney: A document that allows you to name someone to make financial decisions on your behalf if you become disabled.

Health Care Proxy: A document that appoints someone to make health care decisions if you become unable to do so yourself.

Living Will: A document stating preferences regarding medical measures to prolong life in the event of terminal illness, permanent disability, or loss of consciousness. You should consult your rabbi regarding this type of document to determine any halakhic standards.

Beneficiaries: Regularly review the beneficiaries of your investment accounts, insurance policies, retirement accounts, and annuities to ensure they are consistent with your wishes. These labels replace instructions, emphasizing the importance of accuracy.

Trust: Some individuals may need trust as part of their planning. A trust may help protect and manage your assets during your life and after your death, which may prevent the need for court proceedings after your death. Consult your estate planning attorney to see if a trust is right for you.

The Great New York Earthquake of 2024 reminds us of the uncontrollable nature of life. However, we can take precautionary measures to mitigate the consequences of these unexpected events. The best time to implement these risk mitigation strategies is today!

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