Bankruptcy filings among retirees have soared in recent years as widening wealth inequality leaves millions of elderly Americans in dire financial straits, according to a pair of recent studies that cast a pall over the financial stability of the country's aging population.
The rate at which Americans at least 75 years old filed for bankruptcy more than tripled from 1991 to 2016, while filings among those between 65 and 74 ballooned more than 200 percent, according to a recent study from a group of professors working with data from the Consumer Bankruptcy Project.
The aging of the baby boomer generation has left America with a considerably larger share of older citizens approaching, entering or living through their retirement years than was the case several decades ago.
But the Consumer Bankruptcy Project data suggest older Americans are filing for bankruptcy at such an accelerated rate that "the broader trend of an aging U.S. population can explain only a small portion of the effect."
"One in seven bankruptcy filers is of retirement age, 65 years or over. This is nearly a five-fold increase over just two and a half decades," according to the report. "For comparison, the mean age for filers in 2007 was 44.4 years and in the current CBP [data], less than 10 years later, the mean age is 48.5 – a statistically significant difference. This is a striking change in a short period."
In measuring changes in bankruptcy filing trends among age cohorts, researchers found elderly Americans still represent a relatively modest share of the country's total personal bankruptcy filings each year. Between 2013 and 2016, Americans over the age of 65 accounted for 12.2 percent of all bankruptcy filings in the U.S. Just 3.3 percent of filers were at least 75 years old during that same window.
Still, as of 2016, the share of elderly Americans filing for bankruptcy had ballooned nearly 480 percent from where it sat in 1991. For those over 75, their share of the country's total bankruptcy filings climbed by nearly 1,000 percent.
"The number of senior households filing bankruptcy is not negligible," the study's authors wrote. "By 2050, almost a quarter of Americans, 88 million, will be over 65. If current bankruptcy trends among seniors continue, our bankruptcy courts will be flooded with financially broken retirees."
The authors of the report, titled "Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society," also looked into the primary reasons why elderly Americans found themselves seeking bankruptcy protections. Nearly 70 percent of older Americans who filed for bankruptcy and were analyzed by the Consumer Bankruptcy Project said they "very much" or "somewhat" agree with the idea that financial struggles – either in the form of insufficient retirement income, job loss or a decline in income – were "the reason for their bankruptcy."
More than 62 percent of respondents also indicated medical expenses were "a catalyst for bankruptcy." And 4 in 10 respondents indicated missing work for medical reasons was a primary factor in their decision to seek bankruptcy protections.
Researchers also cited shifts in Social Security eligibility, a decline in pension reliability and popularity and increased focus on 401(k)-style savings programs as contributors to older Americans' shaky financial footing.
"With few exceptions, the road to bankruptcy is long," the report said. "Combined, more than six out of ten older debtors struggled for at least two years to repay their debts before they turned to bankruptcy for help. Struggling for several years to repay one's debts is an unfortunate way to spend one's retirement years."
The study also highlighted a considerable disparity between the haves and the have nots – or, in this case, the older Americans who did not need to file for bankruptcy and those who did. Older filers reported median total debt north of $100,000, compared with just $1,000 owed by their non-bankrupt peers. They also reported just over $90,000 in assets, compared with non-filers' $252,500.
Those findings seem to jell with other research efforts pointing to widening wealth and income inequality among American workers as a whole – particularly as it relates to the elderly and as support programs such as Social Security face questions over long-term funding.
In an effort to project out what present-day wage inequality will look like as the U.S. continues to age and workers phase into their retirement years, researchers at the Urban Institute assembled a recent study that doesn't paint a particularly cheery picture for lower-income Americans staring down the prospects of retirement.
Assuming present day trends continue – including the widening gap between the wages paid to Americans who have earned a college degree and those who have solely graduated high school – Urban Institute researchers estimate the top fifth of U.S. earners between the ages of 67 and 75 will see their incomes jump 3 percent by 2045, 5 percent by 2065 and 7 percent by 2085.
The bottom fifth of earners in that age bracket, on the other hand, are expected to see their lifetime earnings fall by 3 percent by 2045, 6 percent by 2065 and 13 percent by 2085.
"People who experience high wage inequality during their working years are likely to experience high retirement income inequality, because Social Security benefits are tied to lifetime earnings, and people's ability to save for retirement depends on how much they earn," according to the report. "Workers entering the labor force today face historically high rates of wage inequality, and they are likely to continue to rise."
Both research efforts appear to come to different conclusions in terms of how best to go about addressing inequality and shaky finances among seniors and retirees. The Urban Institute report advocates for raising America's federal minimum wage, supporting worker training and apprenticeship programs, reforming Social Security and emphasizing greater financial literacy training.
The authors of the bankruptcy report, meanwhile, advocate for more proactively supporting pension and safety net programs, notably referencing health care support that would help "insure the financial stability of older Americans."
But both reports suggest millions of elderly Americans are increasingly standing on precarious financial footing during their golden years – without much immediate hope of greater stability in the years ahead.
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