According to a newly published study, seniors over 65 now proportionately represent the lion’s share of Americans filing for bankruptcy.
Since 1991, bankruptcy filings among Americans age 55-64 are up 66%. Americans between 65-74 are in even worse shape—their filings have increased 204%. All other age groups have experienced a decline in filings to varying degrees.
Analyzing data provided by the Consumer Bankruptcy Project, the study seeks examine the root causes of why seniors have experienced growing financial instability in the past 20 years. Due to a nearly five-fold increase of older Americans involved in the bankruptcy system, the study concludes organic demographic shifting alone can’t account for the scale and rapid growth of the problem.
The Consumer Bankruptcy Project’s (CBP) research paints a picture of thousands of older Americans entering retirement with negative wealth instead of the healthy nest egg we’re all advised to build over time. Based on its findings, the CBP determines a gradual shift of financial risk and responsibility from the government and employers onto the individual is to blame.
Growing support for the idea of individual responsibility has created a high-risk society. With the transition from traditional pensions to 401k retirement plans, higher out-of-pocket healthcare costs, and the shrinkage of social safety nets, American workers must plan carefully throughout their careers to afford to retire.
But even still, economic events (such as the 2008 recession) and unforeseen personal misfortune can be enough to wipe out the best-laid retirement plans. In a questionnaire to bankruptcy-filers over 65, the CBP found three in five respondents attributed their decision to file partly to unmanageable medical costs.
Seniors are also being impacted financially in ways we haven’t seen in decades past. Slightly over a third of respondents also said they struggled with debt related to caretaking or taking on the financial burdens of family members. Providing for aging parents and cosigning for their children’s student loans were two big factors motivating seniors to file for bankruptcy.
According to the study, these increased and new costs of living and aging in America collide with a culture and social system that increasingly tells the individual “you’re on your own,” rapidly creating a bankruptcy epidemic in the senior community.
The CBP’s study should highlight two important realities for our Congressmen:
Blaming senior financial hardship on demographic shifting is sweeping a disturbing trend under the rug. Our government needs to prioritize retired Americans and focus on the very real retirement crisis faced by many seniors in their daily lives.
And we MUST have a REAL discussion about the future of Social Security. If this study tells us anything, it’s that Social Security is now and will always be a critical lifeline to retirees. Third rail or no, it’s time for our elected officials to step up and protect the Trust Fund that all too often is the only thing standing between seniors and bankruptcy.
You can read the Consumer Bankruptcy’s study in full below or download it for yourself by clicking right here.SSRN-id3226574