More Retirees Than Ever Are Filing for Bankruptcy
Ada Noda, an 80-year-old great-great-grandmother, in 2008, owing to ballooning medical bills from her 2004 emergency open-heart surgery was forced to unwillingly file for bankruptcy. She no longer could afford to pay her bills. They had grown so large that she knew she would never ever be able to pay them back. The harsh reality of being broke hit her hard.
Cheryl Mcleod from Las Vegas filed for bankruptcy in January this year when she started finding it difficult to keep up with her mortgage payments and other expenses. “I am 70, and I am working for less money than I ever did in my life,” she bemoaned.
Filing for bankruptcy among the elderly is not a new phenomenon but the rate at which it is growing is worrying. After having worked hard and with dignity the least an elderly can ask for after retirement is to spend the rest of his life with pride and respect. Today these traditional ideas about life in retirement are being upended by the dismal reality of bankruptcy. Making matters worse for the older people facing heavy debt loads are the unscrupulous debt-collectors.
A recent report from the federal Consumer Financial Protection Bureau found that debt collection was the most complained about product or service among consumers over 62.
The rate at which people older than 65 are filing for bankruptcy is three times what it was in 1991, a study found and the prediction is that it shall rise further.
The study found that the prime reason for seeking bankruptcy among the elderly was unmanageable medical expenses, with about three in five respondents voting for it. A little more than two-thirds cited a drop in their income as being the reason while nearly three-quarters put the blame on hounding by debt collectors. This surge is the result of a shift that started three-decades ago making the individual far more responsible for his financial well-being and making the government and the employer less answerable. This shrinking social safety net makes the elderly more vulnerable. Declining incomes, whether in retirement or leading up to it, compound the challenge.
According to the Employee Benefit Research Institute, in 2016, the median household led by a person 65 or older had liquid savings of $60,600, whereas the bottom 25 percent of households had saved at most a miserly $3,260.
That certainly doesn’t provide much of a financial cushion for an emergency health problem. Older Americans generally turn to Medicare to pay their medical bills. Since all costs are not paid for by the Medicare, and the patients are forced to shoulder a major part of it, is the reason why many patients especially from the lower-income group are forced to spend more of their own income and savings on those bills.
Also, many elderly Americans are going broke, not just because of their own spending and high health care costs, but also because their assets are being depleted by relatives or close friends who feel entitled to get an expected inheritance now, rather than after the elder has passed away, which is what getting an inheritance normally means.
In fact, senior citizens lose over $2.6 billion from financial exploitation every year, according to a MetLife Mature Market Institute study.
The 2005 Bankruptcy Reform Act made filing for bankruptcy more time consuming, expensive and in some cases, even more difficult, but it failed to deliver the intended results. It did not change the number of people who opted to file bankruptcy, nor did it succeed in reversing the trend of seeking bankruptcy among the elderly. After all, bankruptcy is the last solution, and what other ways does a broke person have other than having to file for bankruptcy.
Faced with a grim financial situation a young and employed person can toil and work extra hours or may even seek a second employment to ward of the financial strain, the challenge for seniors, however, is that when they run into financial trouble their options may be somewhat limited. Salaries for the elderly who seek employment are also lower than what it might have been had they been in their prime.
"It's an epidemic," says Jenefer Duane, Founder and CEO, Elder Financial Protection Network.
If as a nation we have today come to a stage where a large number of those who devoted their entire lives to building a better and stronger America are forced to face the indignity of being called insolvent, while a minuscule amount of super-rich indulge in their shameless show of extravagance, we must realize that something is going wrong in the society. And upon this realization, we must stand up and ask our governments what is it doing for the future of our nation so that our next generation can enjoy their retirement days with their heads held high and not face the indignation of being broke.