August 7, 2018 — Since 1991 older Americans have experienced a three-fold increase in the rate they file for bankruptcy. From February 2013 to November 2016, there were 3.6 bankruptcy filers per 1,000 people 65 to 74; that rate was only 1.2 in 1991. Today one in seven bankruptcy filers is of retirement age, 65 years or over.
The problem is that there are so many causes, and many times it is a combination of problems that sinks the ship. Leading the list of causes is increased spending on medical care. As we age it gets worse: while folks 65-74 spend 34% of their Social Security income on medical expenses alone, that rate goes to 74% among those over 85.
There is no shortage of other contributors to the exploding rate of older people experiencing bankruptcy. A significant percentage of the population has almost no liquid assets. According to the Employee Benefit Research Institute, the median 65+ household had liquid savings of only $60,600 in 2016. The bottom part of the distribution had a lot less than that, so all it takes is one emergency to send these people into bankruptcy.
Fixed pensions are increasingly a thing of the past. Divorce, death or poor health, and unemployment are other reasons why older boomers have to declare bankruptcy. Having to take care of an adult child or elderly parent is yet one more reason why people experience financial distress.
The full report, using data from the Consumer Bankruptcy Project,
“Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society” by Deborah Thorne, Pamela Foohey, Robert M. Lawless, and Katherine Porter finds that older Americans are struggling with increased financial risks, namely inadequate income and unmanageable costs of healthcare, related to reductions to their social safety net. The authors conclude that … “as a result of these increased financial burdens, the median senior bankruptcy filer enters bankruptcy with negative wealth of $17,390 as compared to more than $250,000 for their non-bankrupt peers.”
What can you do
Sometimes bankruptcy is the only way out of a bad situation. If that is the case, hire a good lawyer to help, who might be able to suggest steps you can take just short of declaring. Along the way you can try to reduce expenses, work longer, or rethink your support of family members.
For further reading:
Too Little Too Late: Bankruptcies Soaring Among Older Americans
Comments? Have you ever had to declare bankruptcy? If so, tell us what steps you took and how it worked out for you.