The number of bankruptcies filed by people 65 and up has tripled since 1991, according to a National Public Radio (NPR) interview with Deborah Thorne, the lead author of the paper, “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society”.
Reasons why include rising medical expenses while incomes are declining. Thorne also points out how full Social Security benefits used to be provided to Americans at an earlier age, “defined benefits rather than defined contributions, where we weren’t taking the risk ourselves.” Now, she says, risk has been shifted onto individuals, causing the financial squeeze on older Americans to become increasingly tighter–when they’re at an age when they can’t simply go back to work and recover lost money. So, they empty their 401(k) accounts to pay bills and, when that’s gone, they file for bankruptcy. You can find more information about older adults and bankruptcy at PBS.org.
Data gathered for this study came from questionnaires that asked 895 filers, aged 19 to 92, why they filed for bankruptcy. People often listed multiple factors, with people 65 and up usually doing so. Approximately three out of five people in this older age demographic listed medical expenses that became unmanageable, while nearly three quarters of people said debt collectors who were hounding them played a role.
Although the study itself does not provide insights into underlying factors, an article by the New York Times does. In 2016, the median household, led by someone who was 65 years of age or older, had liquid savings of $60,600, with the bottom 25 percent of these households capping out at $3,260 in savings. Although people may be able to get by with this amount of savings, when a catastrophic health problem occurs, that doesn’t provide much of a safety net.
Older Americans rely upon Medicare to pay medical bills, but problems with that include:
- coverage gaps
- high premiums
- requirements that patients cover some costs
In fact, in 2013, people receiving Medicare were spending, on average, 41 percent of their Social Security checks on health care costs–and this number was estimated to increase. As another factor, more older adults are carrying mortgage debt than in the past. In 1989, for example, 21 percent of them were; by 2016, that figure was at 41 percent. Yet another cause of increased debt: older adults who have cosigned on their children’s student loans.
In sum, as AARP points out, many people are “not prepared to finance 30 years of retirement.”
Additional reasons for this increase in bankruptcy filings include:
- higher credit card balances by older adults
- increasing costs for housing
- disappearing pensions, replaced by tax-deferred individual retirement accounts (IRAs)
- low interest on savings accounts
- stagnant wages
- home foreclosures and other financial effects from the 2008 Great Recession
This quote by the author of the Graying of U.S. Bankruptcy sums up what many people 65 and up are experiencing: “You can manage OK until there is a little stumble . . . It doesn’t even take a big thing.”