A recent study from the Consumer Bankruptcy Project revealed that one in seven bankruptcy filers in the U.S. is at least 65 years old.
What’s more, the number of older Americans filing for bankruptcy tripled between 1991 and 2016—and those over the age of 75 saw a whopping 1000% increase in bankruptcy filings.
A Perfect Storm
Why are retirees in such dire financial straits? According to the report, almost 70% of older filers cited insufficient retirement income, a job loss or a decline in income as the reasons for their bankruptcy. Nearly two-thirds of respondents mentioned mounting medical costs as the catalyst for seeking bankruptcy protection.
Of course, there are other financial struggles that have led retirees to declare bankruptcy. Consider these facts:
- More Boomers are retiring before paying off their mortgages—according to the National Association of Realtors, 44% of retirees between 60 and 70 still have mortgages.
- More Boomers are impacted by the high costs of caring for their elderly parents. According to a MetLife study, adult sons lose more than $283,000 in total income (which includes wages, pension and Social Security), while adult daughters lose an average of $324,000 in total earnings when caring for aging parents. These figures exclude out-of-pocket expenditures assumed by adult caregivers for food, utilities and medical bills, which average about $7,000 per year. This also overlooks a decrease in (or end to) retirement plan contributions, which generally coincides with a time when many workers are looking to ramp up their retirement savings rate.
- More Boomers are financially supporting their children (by taking out—or cosigning—loans to cover their children’s college tuition, which we previously discussed here).
- More Boomers are struggling with large amounts of credit-card debt.
Unlike younger filers, those who seek bankruptcy protection in their so-called golden years don’t have time on their side to restore their finances; rather, the report notes, by the time seniors file, their wealth has vanished.
The study’s authors suggest that policymakers consider additional ways to improve the financial security of older Americans, namely by making medical care more affordable.
Want to avoid the possibility of filing for bankruptcy in your later years? The best prevention starts with making a plan.