The economy may be slowly getting better, but there is a group that’s getting left behind. According to Consumer Bankruptcy Project, bankruptcies among seniors is going up. Are retirees going into bankruptcy?
Retirees Going into Bankruptcy
According to the report, bankruptcies have tripled in the last 25 years. In 1991, there were only 1.2 bankruptcies for every 1,000 people over 65.
In 2006, there were 3.6. Over 12% of all bankruptcies are now 65 and older. This is up from 2.1% that same period.
Now, there’s around 100,000 bankruptcies filed by people 65 and older. Though this could easily be more.
How Did This Happen?
When researchers talk about this event, they bring up the idea of “risk shift.” This is when the burden of paying for a risk is moved off the shoulders of a collective and put on individuals. A collective could be companies or government.
Retiring involves risk. You rely on your investments, government programs, and insurance to keep you comfortable.
The programs that retirees depend on are going through constant changes. Right now, there are longer wait times for full Social Security benefits, the replacement of employer given pensions with 401 (k) savings plans, and more expensive health care.
What Do These Programs Do?
You might not be sure what each of these programs do. It seems like everyone has a different definition.
Social Security
This is the biggest source of income for retirees. The retirement age has been increasing over the years.
It used to be 65, but now it’s on its way to 67.
This age increase is cutting people’s benefits.
You can retire starting at age 62, but Social Security will punish you with a lower income. If you have to wait until 67 to retire, then you have to figure out how to make other money last longer.
Benefit Pensions
This is a trade between a company and you. For all the years of working for them, they give you a fixed income when you retire.
This used to be more common, but now companies are trying to figure out how to cut costs. This was the first thing to get cut.
What has taken the place of benefit pensions is the 401((k). Sometimes businesses put money into it, but it’s usually up to you to put money in it.
Though 401(k)s can be at the mercy of the stock market and fees of Wall Street.
So it’s not a great substitute.
Healthcare
Healthcare is another big problem for seniors. Medicare doesn’t cover everything. People usually have to get supplemental insurance from a private market.
Surgery, treatments, and medication have been rising in cost. Because of this, insurance can’t give the same kind of coverage that they used to.
This means you can’t get the same amount of coverage without spending more money that you aren’t earning.
Most retirees spend around 20% of their income on out of pocket health care.
Read more about the state of American retirement here.