Young man wearing a necktie

 

 

 

orange squarepicture of a resume#
car loan
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boy with a skeptical expression #
Celita
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Facts & Stories

Poverty & Disability

Facts

In 2007, an estimated 28.6 percent of people with a disabilities (work limitation) aged 18-64 in the United States lived in families with incomes below the poverty line or $20,650 for a family of four. In comparison, the poverty rate for people without disabilities is approximately 9 percent.

The linkage between poverty and disability is strong and goes in both directions. Poverty causes disability through malnutrition, poor health care, and dangerous living conditions. Disability can cause poverty by preventing the full participation of people with disabilities in the economic and social life of their communities, especially if the proper supports and accommodations are not available. *

Beth's Credit Card

When Beth graduated from high school, she treated herself to a new stereo. She wanted the best and bought the stereo for a $1,000. Although Beth had just landed a job, she had not received her first paycheck, so she put the stereo on her credit card.

The offer for the card, with an 18 percent interest rate, was sent to Beth during her senior year. She planned to pay off the cost of the stereo immediately after receiving her first check. However, since she was just starting out, she had other expenses and she soon found herself paying just the minimum of $20 each month.

Seven-and-one-half years later, Beth finally finished paying for that stereo (which had long since stopped working!). She had paid a total of $800 in interest alone. So, between repaying the loan and paying the interest, she spent close to twice the original price of the stereo.

Mike's Car Title Loan

In January, Mike needed money to pay his Christmas bills and got a car title loan for $1,000 (although his car was worth $5,000) and gave the store the title to his car. Mike promised to pay back the loan in six months.

Each month, the store charged him 10 percent interest for the loan, plus the loan payment. In May, Mike could not make his car title loan payment. The store took away his car (charging him a repossession fee of $50). In June, he had the money to pay off the balance of the loan, plus the $50 to get his car back. However, when he picked up his car, the shop charged him another $150 for car storage. In short, this is what the loan cost Mike:

Loan Amount........................... $1,000

Interest Charged....................... $600 $100 a month, or 10 percent for six months)

Repossession Charge.................. $50

Car Storage Charge.................... $150 ($5 a day for 30 days)

Total Cost to Get His Car Back...... $1,800

Mike was shocked that he nearly lost his car and that the loan cost him $800- in effect, an 80 percent interest rate.

Celita's IRA

At the age of 22, Celita started contributing $1,000 per year (that is $19.23 a week) into an Individual Retirement Account (IRA). Celita stopped putting more money into her IRA after nine years, at age 31. However, she left the money in the IRA so it would grow through compounding until she retired at age 65. Her twin brother, Ozzie, did not start contributing $1,000 into his IRA until he turned 31. But, once he started, he put $1,000 in his IRA every year for 34 years- until he too was 65. Celita and Ozzie both earned 9 percent interest every year on their IRA. Who do you think had more money in their IRA account at age 65?

 
  Celita's IRA Ozzie's IRA
Interest Rate 9% 9%
Number of years
contributions were made
9 years 34 years
Amount Contributed $9,000 $34,000
  $1,000 per year
for 9 years
$1,000 per year
for 34 years
Value of IRA at age 65 $243,863 $196,982

 

It is shocking but true. Even though Ozzie put a lot more money into his IRA, Celita had $46,881 more than Ozzie when they both reached 65. Compounding interest made all the difference for Celita. Compounding interest can work for you too- and not just with retirement accounts, but other savings accounts too! The sooner you start saving, the more money you will have in the future.

Asset Limits

Many government benefit programsincluding Supplemental Security Income (SSI) and Medi-Cal have strict limits on the amount of savings you can have and still receive benefits. If a family has assets (sometimes called resources) over the limit (SSI is $2,000 for an individual and $3,000 for a couple), you will have to "spend down" in order to receive or keep receiving benefits.

These asset limits, which were originally intended to ensure that public resources did not go to "asset-rich" individuals, are a relic of entitlement policies that largely no longer exist. Personal savings and assets are precisely the kind of resources that allow families and individuals to move off, and stay off, of public benefit programs. Yet, asset limits can act to discourage anyone receiving benefits from saving and building assets that provide longterm security.

*Bjelland, M.J., Erickson, W. A., Lee, C. G. (2008, November 8). Disability Statistics from the Current Population Survey (CPS). Ithaca, NY: Cornell University Rehabilitation Research and Training Center on Disability Demographics and Statistics (StatsRRTC). Retrieved July 29, 2009 from www.disabilitystatistics.org

 

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