How to prepare for unexpected financial events and risks

Steps you can take to help make sure unexpected events don't interfere with your long-term financial plans
It's impossible to eliminate all risk from our lives, financial or otherwise. We can't control whether markets go up or down. A divorce, serious illness — or even a large, unexpected bill — could create a financial shortfall that throws your careful plans off track. "A number of life events can risk changes to income or savings and threaten an individual's or family's financial well-being," says Lauren Sanfilippo, senior investment strategist in the Chief Investment Office for Merrill and Bank of America Private Bank.
While you can't prevent these scenarios, you have options for helping preserve your finances from most of them, says Rachel Scholl, managing director, Merrill Lending Sales Executive, Bank of America. Here's how you might prepare for some of the most common — and risky — what-ifs.
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What if you have a sudden need for cash?

View slide 1 of 3. The risk: 46%. Percentage of consumers who reported facing an emergency expense in the prior three months. Source: LendingClub and PYMNTS Research, "Consumer Emergency Expenses Rise 16% Year-Over-Year to $1,700, Far Exceeding the $400 Benchmark," June 26, 2023.  selected View slide 2 of 3. The potential cost: $1,300. The average bill for a car repair, one of the most common unexpected expenses. Source: LendingClub and PYMNTS Research, "Consumer Emergency Expenses Rise 16% Year-Over-Year to $1,700, Far Exceeding the $400 Benchmark," June 26, 2023.  View slide 3 of 3. What to know: Unexpected bills crop up all the time, and the amount due could exceed the cash you have on hand. One recent survey found that the average cost of an emergency expense is $1,700. Footnote 1. And as any homeowner knows, homeownership can lead to potential headaches. A leaky roof, a broken furnace or a plumbing mishap can put your budget in disarray. "We never want to be in a situation where we have to take steps such as liquidating assets at an undesirable time in the market or running up credit card debt to pay bills," says Scholl. 
Ways to prepare: Maintaining a sufficient emergency fund is key, notes Scholl. Review several months' worth of recent expenses alongside your monthly budget (PDF) to identify ways to save money for an emergency. Consider working with an advisor to determine how much cash you should have readily available and what type of account to keep it in, such as a savings or money market account.
For unexpected home repairs, a source of funding may be your home itself, says Scholl. A home equity line of credit, for example, may carry a lower interest rate than what you'll pay on credit cards or personal loans. But keep in mind that if your loan has an adjustable rate, your payments could rise (and fall) over time, and if you don't pay back what you owe, your house could be at risk of foreclosure.
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What if you're faced with major medical expenses?

View slide 1 of 3. The risk: 23%. Percentage of adults who experienced a major unexpected medical expense in the past year. Source: Board of Governors of the Federal Reserve System, "Economic Well-Being of U.S. Households in 2023," May 2024.  selected View slide 2 of 3. The potential cost: $1,000 to $1,999. The median cost of unexpected medical bills in 2023. Source: Board of Governors of the Federal Reserve System, "Economic Well-Being of U.S. Households in 2023," May 2024.  View slide 3 of 3. What to know: Unplanned medical expenses can be a big blow to your finances. For some, it can lead to cashflow problems - 21% of Americans with a household income of $90,000 plus find it difficult to afford their healthcare costs. Footnote 2. After retirement, the costs can be even steeper. A nursing home stay could cost more than $100,000 per year, and hiring a home health aide for roughly six hours per day could cost more than $6,000 per month. Footnote 3. "Seven out of 10 Americans turning 65 today will have some health event for which long-term care is necessary, Footnote 4, and the cost can decimate savings," says Robert Murray, director, insurance relationship manager, Retirement and Personal Wealth Solutions at Bank of America. 
Ways to prepare: Check if your employer offers a flexible spending account (FSA) or a health savings account (HSA); both are tax-advantaged accounts that allow you to pay for healthcare expenses with pre-tax funds. The HSA — available only for those with high-deductible health plans — can be particularly valuable because unused funds carry over year to year and earnings keep growing tax-free, allowing you to tap the account tax-free for medical expenses when you most need the money, even in retirement.
Consider a long-term care insurance policy to help preserve your wealth and that of your children, who often shoulder the costs of caring for aging parents.
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What if you lose your job?

View slide 1 of 3. The risk: 45%. Percentage who say a change in income or employment status is causing them to save less. Sources: Bankrate, "2025 Annual Emergency Savings Report," February 13, 2025; U.S. Bureau of Labor Statistics, "Unemployed persons by duration of unemployment," accessed January 16, 2025. Data is seasonally adjusted.  selected View slide 2 of 3. The potential cost: 23.7 weeks. The average duration of unemployment in December 2024. Sources: Bankrate, "2025 Annual Emergency Savings Report," February 13, 2025; U.S. Bureau of Labor Statistics, "Unemployed persons by duration of unemployment," accessed January 16, 2025. Data is seasonally adjusted.  View slide 3 of 3. What to know: Not only can an unexpected job loss affect your future earnings potential, but it can also deplete your savings and threaten your short- and long-term financial goals. 
Ways to prepare: Make sure you have enough funds to last at least six months to give you time to find a new job. Build up savings accounts and other liquid investments such as money market funds, which you can tap into for extra cash.
Keep in mind that if you rely on an employer-sponsored healthcare plan, you'll also have to come up with a strategy to maintain insurance coverage. You may be able to join a partner's plan, pay to continue with your former employer's group plan for up to 18 months under COBRA or shop Go to third-party website healthcare.gov popup or your state's health insurance exchange, if it has one.
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What if there's a divorce?

View slide 1 of 3. The risk: 43%. Percentage of 55- to 64-year-olds who have gone through at least one divorce. Sources: U.S. Census Bureau, "Love and Loss Among Older Adults: Marriage, Divorce, Widowhood Remain Prevalent Among Older Populations," April 22, 2021; I-Fen Lin and Susan Brown, "The Economic Consequences of Gray Divorce for Women and Men," The Journals of Gerontology Series B, December 2021.  selected View slide 2 of 3. The potential cost: 45%. The decline in the standard of living after divorce for women over 50 versus 21% for men. Sources: U.S. Census Bureau, "Love and Loss Among Older Adults: Marriage, Divorce, Widowhood Remain Prevalent Among Older Populations," April 22, 2021; I-Fen Lin and Susan Brown, "The Economic Consequences of Gray Divorce for Women and Men," The Journals of Gerontology Series B, December 2021.  View slide 3 of 3. What to know: Nobody wants to think about - let alone plan for - a dramatic change in their household's income from divorce. Yet the rates of dissolved marriages among those 50 and over have risen since the 1990s, Footnote 5, forcing many to adjust to a single income as they near retirement. 
Ways to prepare: In the event of a marital split, be aware that the laws governing the division of property in a divorce vary from state to state. Keeping an up-to-date inventory of your household assets and debts can help you divide them equitably. In advance of remarrying, consider setting up a trust to help protect your family. With a trust, you can ensure children from a prior marriage are not overlooked as the eventual beneficiaries of your estate while also providing lifetime support to a surviving spouse.
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What if you experience an unexpected loss of income?

View slide 1 of 3. The risk: 1 in 4. Workers who turned 20 in 2023 projected to develop a disability before they retire. Source: Social Security Administration, "Disability and Death Probability Tables for Insured Workers Who Attain Age 20 in 2023," July 2023.  selected View slide 2 of 3. The potential cost: 15% to 70%. Range of lost earnings for households with disabilities. Source: Board of Governors of the Federal Reserve System, "The Hidden Costs of Disability," January 10, 2025.  View slide 3 of 3. What to know: Some of us will be forced to leave a job early due to an illness, accident or other debilitating event, and the odds increase with age. The chances of having to stop working due to disability rise with age - a 50-year-old is more than twice as likely to need Social Security Disability Insurance as a 40-year-old is. Footnote 6. Others will have to adjust to the loss of income that comes with the death of a loved one. Given the high stakes involved, planning for these risks can be crucial. 
Ways to prepare: When it comes to disability, insurance can be a crucial consideration. Find out whether your employer offers long-term disability income insurance and assess whether this benefit provides enough income protection. If not, consider purchasing your own policy to replace at least a portion of your income. And the death benefit from a life insurance policy can help to keep your family solvent should you or your spouse die prematurely.
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What if there's a bear market?

View slide 1 of 3. The risk: 15. The number of bear markets in the S and P 500 since 1945, averaging one every 5.1 years. Source: Bankrate, "Investing in a bear market 2024," January 25, 2024.  selected View slide 2 of 3. The potential cost: 35%. The average decline of the S and P 500 in a bear market since 1928. Source: Bankrate, "Investing in a bear market 2024," January 25, 2024.  View slide 3 of 3. What to know: It's hard to watch your savings shrink at any age. But bear markets may be the riskiest for investors who need to start withdrawing from their savings soon, perhaps to pay for college tuition or to fund retirement. 
Ways to prepare: First, make sure your investment portfolio is well diversified. This means increasing diversification across asset classes, within asset classes and across geographies. "A wider breadth of investments may provide an expanded opportunity set while potentially minimizing losses to your overall portfolio and wealth," says Sanfilippo.
"It's important to take the time to review investment accounts regularly and adjust according to your time horizon," Sanfilippo adds. For instance, a college savings portfolio may be invested for maximum growth when college is 18 years away, but it may be better off in all cash when college is imminent to help reduce the risk of a market drop. An advisor can suggest a strategy that's appropriate for your age, goals, liquidity needs and ability to handle risk.
No one can anticipate every event that life throws our way. Work with an advisor, if you have one, to address any number of risks that can potentially threaten your financial security, says Scholl. Together, you can put plans in place to help prepare for nearly any eventuality.

Next steps

Footnote 1 LendingClub and PYMNTS Research, "Consumer Emergency Expenses Rise 16% Year-Over-Year to $1,700, Far Exceeding the $400 Benchmark," June 26, 2023.

Footnote 2 KFF, "Americans' Challenges with Health Care Costs," March 1, 2024.

Footnote 3 Genworth, "Cost of Care Survey 2023," accessed January 16, 2025.

Footnote 4 U.S. Department of Health and Human Services, "How Much Care Will You Need?" 2020.

Footnote 5 U.S. Census Bureau, "Love and Loss Among Older Adults: Marriage, Divorce, Widowhood Remain Prevalent Among Older Populations," April 22, 2021.

Footnote 6 Center on Budget and Policy Priorities, "Chart Book: Social Security Disability Insurance," updated August 6, 2024.

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