The golden years are no longer so golden for many American retirees. Over the past three decades employers and the government have shifted the financial responsibility for retirement onto the shoulders of workers and the results are not encouraging. “The rate of bankruptcy filing for those 65 and older is now three times what it was in 1991,” said Christopher J. Grover, attorney, Jeffrey Freedman Attorneys, PLLC. “Studies have found that vanishing pensions, soaring medical costs and inadequate savings are putting these individuals under severe financial stress.”
A study from the Consumer Bankruptcy project cites several issues that today’s retiree has to deal with including: increases to the Social Security retirement age, lack of employer contributions to retirement plans, minimal income adjustments to keep up with inflation, and growing healthcare costs. It is also not uncommon for parents to be responsible for loans they have co-signed for their children or to be raising their grandchildren.
“This is a recipe for disaster, and the result is an increase in bankruptcies for a specific group of people,” Grover said. “Bankruptcy is supposed to provide a fresh start for debtors, but for older people, their earning potential and savings are usually decreasing while expenses continue to increase.”
Although the actual number of seniors filing was 100,000 per year from 2013 to 2016, there are likely many more who are in financial distress. People who show up in bankruptcy court are always at the tip of the iceberg, according to Robert M. Lawless, law professor at the University of Illinois and author of a study on the topic. Older people now represent a bigger slice of all bankruptcies, with 12.2 percent of filers age 65 or older, compared to 1.2 percent in 1991. The Employee Benefit Research Institute found that the median household led by a senior had liquid savings of $60,600 in 2016, with the bottom 25 percent of households only holding $3,260 in savings.
“This is not enough to protect someone who has a catastrophic health problem. We expect Medicare to cover older Americans, but the gaps in coverage, and the high premiums and deductibles for supplemental insurance can be devastating,” Grover said. “In 2013 the average Medicare patient spent 41 percent of their Social Security check on out-of-pocket expenses for health care.”
Frequently, seniors forego necessary medication because they can’t afford the co-pays.
“These people worked hard and did all the right things, but any life-changing event can throw their finances into chaos. An illness, divorce, death of a spouse — paying back their children’s loans or helping support adult children — their incomes can’t support those kinds of expenses,” Grover said. “Bankruptcy can help get them back on a balanced budget, but they can’t just go out and get jobs that will help them recover their wealth.”