According to an article posted today in the New York Times by Tara Segal Bernard, "[f]or a rapidly growing share of older Americans, traditional ideas about life in retirement are being upended by a dismal reality: bankruptcy."
According to Ms. Bernard, "[t]he signs of potential trouble — vanishing pensions, soaring medical expenses, inadequate savings — have been building for years." A large part of her conclusions are drawn from a recently published study by the Consumer Bankruptcy Project, which found that the "rate of people 65 and older filing for bankruptcy is three times what it was in 1991, the study found, and the same group accounts for a far greater share of all filers."
Ms. Bernard further reports that:
Driving the surge, the study suggests, is a three-decade shift of financial risk from government and employers to individuals, who are bearing an ever-greater responsibility for their own financial well-being as the social safety net shrinks. The transfer has come in the form of, among other things, longer waits for full Social Security benefits, the replacement of employer-provided pensions with 401(k) savings plans and more out-of-pocket spending on health care. Declining incomes, whether in retirement or leading up to it, compound the challenge. As the study, from the Consumer Bankruptcy Project, explains, older people whose finances are precarious have few places to turn. "When the costs of aging are off-loaded onto a population that simply does not have access to adequate resources, something has to give," the study says, “and older Americans turn to what little is left of the social safety net — bankruptcy court."
"The forces at work affect many Americans, but older people are often less able to weather them, according to Professor Thorne and her colleagues in the study. Finding, and keeping, one job is hard enough for an older person. Taking on another to pay unexpected bills is almost unfathomable. Bankruptcy can offer a fresh start for people who need one, but for older Americans it 'is too little too late,' the study says. 'By the time they file, their wealth has vanished and they simply do not have enough years to get back on their feet.'”
Ms. Barnard also cites statistics from the Federal Reserve’s survey of consumer finances, via the Consumer Bankruptcy Project, showing that filings by people in the 55 to 64 age group increased by 66% from 1991 to 2016 and filings by people in the 65 to 74 age grou increased by 204% over the same period.
According to Ms. Bernard:
The data gathered by the researchers is stark. From February 2013 to November 2016, there were 3.6 bankruptcy filers per 1,000 people 65 to 74; in 1991, there were 1.2. Not only are more older people seeking relief through bankruptcy, but they also represent a widening slice of all filers: 12.2 percent of filers are now 65 or older, up from 2.1 percent in 1991. The jump is so pronounced, the study says, that the aging of the baby boom generation cannot explain it.
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