An increasing number of Americans are having their retirement plans slashed by bankruptcy.
Since 1991, the rate of people 65 and older filing for bankruptcy has tripled, reports The New York Times, citing a study from the Consumer Bankruptcy Project. The study looked at 895 personal bankruptcy cases and questionnaires from those aged 19 to 92.
It’s due to a confluence of economic factors — including delayed full Social Security benefits, an increase in out-of-pocket medical spending, a rise in pensions replaced by 401(k) savings plans, and dwindling incomes — that have off-loaded of the costs of aging onto a generation with limited resources, according to the study. Consequently, they turn to bankruptcy court.
According to the study, the median wealth for over 65 bankruptcy filers is -$17,390. Non-bankrupt Americans of the same age recorded a median wealth of more than $250,000.
The study also found an increase in the number of bankruptcy filings for the next generation, Gen X, as well. But bankruptcy isn’t a cure-all when you’ve already reached retirement age, the study found. ” For older Americans, bankruptcy is too little too late. By the time they file, their wealth has vanished, and they simply do not have the enough years to get back on their feet.”
Healthcare and Family Support are Major Factors towards Bankruptcy
Respondents of the study cited a decline in income, too many healthcare costs, and too much debt as contributing factors to their bankruptcy.
Not only have healthcare costs soared over the past several decades, Business Insider previously reported, citing the Bureau of Labor Statistics, but baby boomers are entering their senior years with greater health risks, such as “higher rates of obesity and diabetes and lower rates of very good or excellent health status,” according to the 2017 United Health Foundation study. This can lead to unexpected medical expenses.
Respondents also attributed their bankruptcy to spending money to help children or older parents. Business Insider previously reported that one of the most pressing problems facing baby boomers is the need to care for their elderly parents, which comes at a huge cost.
The Times also cited an Urban Institute analysis that found an increasing number of people have more debt as they enter retirement years, especially because of their mortgage — the percentage of those carrying mortgage debt nearly doubled from 1989 to 2016.
