Senior citizens are declaring bankruptcy at a rate that is more than double 25 years ago, according to the latest statistics.
Americans over the age of 65 declaring bankruptcy have increased an alarming 204% from 1991 to 2016, according to a study conducted by the Social Science Research Network. In 1991 elders made up only 2% of all bankruptcy claims while currently they make up 12%.
In a recent study, “Graying of U.S. Bankruptcy,” a group of professors looked at the main reasons why this is occurring. The study lists several trends including the elimination of many pension plans, workers in their 50s pushed out of the labor market before retirement age and wage stagnation over the last 10 years.
But when asked what is the “single most important thing” in seeking bankruptcy protection, the answer won’t surprise you: Two-thirds cite “medical issues” such as surgeries, medical insurance and prescriptions.
What about Medicare you might ask? Medicare pays for an increasingly smaller share of elder health care costs. There are co-pays for many medical procedures and tests, and it does not cover long-term care, dental care, eye exams, hearing aids and more. Paying for a supplemental policy to cover what Medicare doesn’t pay is out of reach for many seniors.
This leaves seniors exposed to running up credit card debt that can quickly become unpayable. The median senior bankruptcy filer enters has a negative wealth of -$17,390, according to Deborah Thorne from the University of Idaho, one of the authors of the “Graying of U.S. Bankruptcy”
“If current bankruptcy trends among seniors continue,” she says, “our bankruptcy courts will be flooded with financially broken retirees.”
This is not a generation seeking an easy out! Most of these seniors are ashamed to file for bankruptcy. With limited options of returning to the work force and living only on their Social Security, they see no other option.
Many seniors never recovered from the Great Recession in 2008, and for them it is too late to recoup a lifetime of savings. The Federal Reserve’s Survey of Consumer Finances says that 60% of senior households had debt in 2016 and 29% of seniors owed money on mortgages or other household debt.
Are we prepared as a country to return to the days when the elderly were seen as a burden? Before Social Security was created under Franklin D. Roosevelt, many older people were forced to live in “poor houses” or “workhouses.” These were deplorable institutional residences, designed to punish people for their poverty, with “vagrants” auctioned off to employers to pay their debts, including the elderly.
Poorhouses began to fade during the Great Depression as the federal government became more involved with social welfare. Social Security was created to provide a safety net for seniors so they could live out their lives without facing extreme poverty or worse. But according to the nonprofit Kaiser Family Foundation, out-of-pocket health costs for elderly Americans on Medicare is expected to increase to 50% of Social Security income by 2030.
The rising cost of health care is simply unsustainable and affects everyone, not just seniors. In fact, 66.5% of all bankruptcies are tied primarily to the high cost of medical care.
Want to hear something really scary? The National Association of Plan Advisors now advises that a 65-year-old couple retiring in 2019 can expect to spend $285,000 in health care and medical expenses throughout retirement, according to Fidelity Investment companies annual Retiree Health Care Cost Estimate.
Their advice for young couples? Start saving at around age 30 for these medical costs. Provided, of course, you can pay about $3,000 a year each into a Health Savings Account (HSA).
Is this a realistic plan for most young couples today? I guess you can forget about sending your kids to college AND affording medical costs in retirement!
Just this past August, a 77-year-old man shot his wife and then committed suicide telling his family that they simply could not pay their high medical bills. Many seniors just don’t leave notes.
People, we are in deep trouble as a country when it comes to paying for healthcare. One day, if you’re lucky, you too will be old. This is America’s problem, not a political one, and not just a problem for those over 65.
If this is not a wake-up call for a major change in how the U.S. handles the cost of health care, then what is? America, I hope you are listening.
Star Bradbury is the owner of Senior Living Strategies in Gainesville.
