For a rapidly growing share of older Americans, traditional ideas about life in retirement are being upended by a dismal reality: bankruptcy.The signs of potential trouble — vanishing pensions, soaring medical expenses, inadequate savings — have been building for years. Now, new research sheds light on the scope of the problem: The rate of people…
For a rapidly growing share of older Americans, traditional ideas about life in retirement are being upended by a dismal reality: bankruptcy.
The signs of potential trouble — vanishing pensions, soaring medical expenses, inadequate savings — have been building for years. Now, new research sheds light on the scope of the problem: 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.
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.
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.”
“You can manage O.K. until there is a little stumble,” said Deborah Thorne, an associate professor of sociology at the University of Idaho and an author of the study. “It doesn’t even take a big thing.”
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.
Robert M. Lawless, a law professor at the University of Illinois and another author of the study.
The next generation nearing retirement age is also filing for bankruptcy in greater numbers, and the average age of filers is rising, the study found.
Professor Thorne; Professor Lawless; Pamela Foohey, a law professor at Indiana University; and Katherine Porter, a law professor at the University of California, Irvine. The project — which is financed by their universities — collects and analyzes court records on a continuing basis and follows up with written questionnaires.Marc Stern, a bankruptcy lawyer in Seattle, said he had seen the phenomenon again and again.
Some parents, Mr. Stern said, had co-signed loans for $10,000 or $20,000 for adult children and suddenly could no longer afford them. “When you are living on $2,000 a month and that includes Social Security — and you have rent and savings are minuscule — it is extremely difficult to recover from something like that,” he said.
Others had co-signed their children’s student loans. “I never saw parents with student loans 20 or 30 years ago,” Mr. Stern said.
“It is not uncommon to see student loans of $100,000,” he added. “Then, you see parents who have guaranteed some of these loans. They are no longer working, and they have these student loans that are difficult if not impossible to pay or discharge in bankruptcy, and these are the kids’ loans.”
Keith Morris, chief executive of Elder Law of Michigan, which runs a legal hotline for older adults, said the prospect of bankruptcy was a regular topic for his callers.
“They worked all of their lives, and did what they were supposed to do,” he said, “and through circumstances like a late-life divorce or a death of a spouse or having to raise grandkids, have put them in a situation where they are not able to make the bills.”
For Lawrence Sedita, a 74-year-old former carpenter now living in Las Vegas, the problems began when he lost his health insurance about two years ago. He said he had been on disability since 1991, when a double pack of 12-foot drywall fell on his head at work.
After his union, the New York City District Council of Carpenters, changed the eligibility requirements for his medical, dental and prescription drug insurance, he lost his coverage.
Mr. Sedita, who has Parkinson’s disease, said his medical expenses had risen exponentially. (A spokesman for the union declined to comment.)
A medication that helps reduce the shaking — a Parkinson’s symptom — rose to $1,100 every three months from $70, Mr. Sedita said. “I haven’t taken my medicine in three months since I can’t afford it,” he added.
He said he and his wife, who has cancer, filed for bankruptcy in June after living off their credit cards for a time. Their financial difficulty, he said, “has drained everything out of me.”