Older Americans are filing for bankruptcy at more than double the rate of just 25 years ago, a sign of an “impending storm of broke seniors”, according to a new study.
The rate of people aged 65 and over declaring bankruptcy increased by nearly 204% from 1991 to 2016, a study published by the Social Science Research Network, and the percentage of seniors among all U.S. bankrupt filers increased nearly fivefold over the same period.
Deborah Thorne, one of the study’s authors from the University of Idaho, said “it’s not an individual’s fault” when he has to file for bankruptcy, citing problems with the pension systems and Medicare.
Thorne said his research found that many financially challenged seniors also feel that society doesn’t seem to care about them.
“We’ve become indifferent to what they’re up against,” she said.
“The bills started piling up”
Medical costs are a common tipping point for older bankruptcy filers, the study found.
Although Medicare is a great start to covering healthcare costs for seniors, many people don’t realize it doesn’t cover everything, Thorne said.
Long-term care, hearing aids, most dental care, eye exams for glasses, and foot care are among the many things Part A and Part B health insurance plans do not cover. Medicare can also involve co-payments, coinsurance, and deductibles that can be difficult to pay for some low-income seniors.
“My bankruptcy started with back surgery,” a former bankruptcy filer told the study authors. “I had several medical tests that my insurance didn’t cover. It caused me to fall behind on my medical payments. Next thing I knew, the bills started piling up. I’m got to the point that I owed more than I was earning on Social Security.”
Medical issues can also cause people to stop working, compounding their financial difficulties.
“My wife developed medical issues and had to quit her job, which resulted in a loss of income. About two years later, I developed medical issues and was unable to continue working,” said another respondent told the study authors. “We got to a point where we just couldn’t handle the burden of debt. Constant calls from debt collectors forced us to contact a lawyer for help.”
Out-of-pocket healthcare costs for Americans with Medicare accounted for 41% of average Social Security income in 2013, the nonprofit says. Kaiser Family Foundation reported. These costs are expected to reach 50% of average Social Security income by 2030, the organization found.
Retirement finance experts also agree that older Americans should expect high health care costs.
“A 65-year-old couple retiring this year will need $280,000 to cover health care and medical expenses through retirement. Loyalty reported earlier this year.
Although this is only a 2% increase over last year, Fidelity’s estimate has risen 75% since 2002, when the company first estimated that health care costs during retirement would be around $160,000.
Elderly people unable to cover these costs may go into debt. Medical debt is the most significant barrier to the economic well-being of older Americans, according to a survey of aging professionals conducted by the National Council on Aging found.
“More than half said medical debt was the most significant barrier to the economic well-being of seniors, while nearly 20% said missed utility payments were the biggest problem,” he said. reported the council.
A long road to bankruptcy
Most Americans who go bankrupt try for years to pay their bills first.
Bankruptcy attorney Charles Juntikka said he has seen a “frightening” increase in the number of elderly clients during his 34 years of practice in New York and New Jersey.
Many of them have used credit cards to pay for medical bills, the dentist or their mortgage, then spent years racking up minimum payments of $80 or $90 per month for their cards without being able to cut down significantly. the capital balance significantly.
“The problem with my bankrupt seniors is that they’ve been paying for years,” but the credit card principal is barely moving, Juntikka told ABC News.
Older people are often reluctant to file for bankruptcy, having been raised by people who endured the Great Depression, Juntikka said.
Many think that only “crooked” companies go bankrupt, but honest people pay their bills.
“They want it,” he added.
Usually, something drives people to contact a bankruptcy attorney, and often it’s a creditor’s threat to sue, Juntikka said.
The “Graying of US Bankruptcy” study also found that among older bankruptcy filers, more than four in 10 — 42.6 percent — struggled for two to five years to manage their bills before filing for bankruptcy.
The trend is similar for all bankrupt households, regardless of age, according to the study.
“With few exceptions, the road to bankruptcy is long,” write the researchers.
If you or someone you know is struggling with debt, help is available. One source of information on debt, credit counseling and bankruptcy is this government website, Dealing with Debt.