Health Care Costs, Economy Pushing Senior Citizens to
Bankruptcy and Poverty in the U.S.
Declining economy, increasing healthcare costs and
lack of retirement preparedness puts older Americans at risk
"Older Americans are hit by a one-two punch of jobs and medical
problems and the two are often intertwined. They discover that they must
work to keep some form of economic balance and when they can't, they're
lost."
Aug. 28, 2008 The financial plight of the oldest
citizens in the U.S. is growing very much worse, according to new
studies. One out of every 10 senior citizens is living in poverty and
the rate of bankruptcy among those ages 65 and older has more than
doubled since 1991. Researchers say the situation is driven by the high
cost of health care and weak economy.
The number of seniors citizens (age 65 and older) in the U.S. living in
poverty jumped to 3.6 million in 2007, up from 3.4 million in 2006. The
percentage of all seniors living in poverty increased from 9.4 percent
to 9.7 percent from 2006 to 2007 (more in
box below).
Individuals nearing or in retirement are realizing
how difficult it can be to manage that debt as they age, says Elizabeth
Warren, a Harvard Law School professor and national expert on
bankruptcy.
"Age is increasingly associated with financial
distress and seeking protection from creditors through the bankruptcy
courts," adds Teresa Sullivan of the University of Michigan.
Warren has been researching and writing on
bankruptcy for years and was joined by Sullivan and Deborah Thorne of
Ohio University in a study published by the AARP Public Policy
Institute. It will also appear in the January 2009 issue of Harvard Law and
Policy Review.
"The story from these data is one of rising risk
with age," said Sullivan, U-M provost and professor of sociology. "The
fact that previous generations show a sharp rise in filings in their
early middle age may signal that people are living with financial stress
for years, putting off the day of reckoning in bankruptcy for as long as
possible."
Health care costs proved to be the top reason for
many of these bankruptcies, the researchers say.
The growing cost of health care much faster than
inflation for other goods and services is also the chief suspect in
why more seniors are living in poverty. Social Security, the most
significant or only income for many retired Americans is increased
annually at the rate of inflation, which is much lower than the annual
jumps in health care prices. As a result, there are fewer dollars
available every year for the cost of living.
On Choice for
President
The deteriorating economy makes bankruptcy a more
urgent national issue. Bankruptcy and consumer finance are issues where
the money and power is all on one side and the middle class families are
on the other. It is also an area where both candidates have an
on-the-record history. They can show what walk they have walked before
they became candidates for president. McCain has carried big financial
institutions, while Obama has worked for families. Elizabeth Warren to TPM Cafι (click
to story)
Expensive health care costs from a serious illness
before a patient received Medicare and the inability to work during and
after a serious illness are the prime contributors to financial crises
among those 55 and older.
They found that individuals 55 and older accounted
for 22 percent of all personal bankruptcies in 2007, compared to only 8
percent in 1991.
But even among those 75 to 84 and receiving
retirement, Social Security and Medicare benefits, the rates soared -
from just 1.8 percent of all filers in 1991 to 5 percent in 2007.
By 2007, the median age for bankruptcy filers had
increased to 43 years old in 2007 from 36.5 years old in 1991. A
declining economy, increasing healthcare costs, and a general lack of
retirement preparedness puts older Americans and their families at
greater risk for bankruptcy and continued financial stress, they
conclude.
This study is cause for concern, said Susan
Reinhard, Senior Vice President of AARPs Public Policy Institute. It
indicates that financial security is progressively eroding for many
older Americans. We are exploring why this is happening and what can be
done to prevent it.
Most Americans have two major assets: their homes
and their retirement plans. And borrowing against those assets can
present new risks when home values and stock markets decline, Sullivan
and colleagues say. In some cases, older Americans trying to help
children and grandchildren, borrow too much, putting themselves at risk.
"Even people who did everything right and took out
fixed-rate mortgages have seen the value of their homes drop," Sullivan
said.
In
2007, the family poverty rate and the number of families in poverty were
9.8 percent and 7.6 million, respectively, both statistically unchanged
from 2006
Aug. 25, 2008 The number of seniors citizens (age
65 and older) in the U.S. living in poverty jumped to 3.6 million in
2007, up from 3.4 million in 2006. The percentage of all seniors living
in poverty increased from 9.4 percent to 9.7 percent from 2006 to 2007
an increase the Census Bureau calls statistically unchanged.
Read more...
During the 16-year span of the study, the median
age of the U.S. population rose slightly, from 33.1 to 36.1. But the
median age of an individual filing for bankruptcy climbed much more
rapidlyfrom 36.5 in 1991 to 40.6 in 2001 and 43 in 2007.
Major reforms to the U.S. bankruptcy codes in 2005
drove overall 2007 filings down to 2001 levels. Americans 34 and younger
accounted for 46 percent of 1991 bankruptcy cases but just 26 percent in
2007.
The massive Baby Boom generation, born from 1946
through 1964, was filing at twice the rate of any other age group in
1991, fueling the increase in the number of bankruptcy filings from 1991
to 2001. But by 2007, they had fallen to second place, behind Generation
X, those born from 1965 though 1981.
Boomers accounted for 12.4 percent of filings in
1991 but just 5.4 percent in 2007 behind Gen Xers at 6.2 percent.
Millennials, those born since 1982, accounted for 1.7 percent of the
cases filed in 2007.
The lower filing rates among younger generations
may be signs they have healthy finances, but might also mean they are
simply juggling, extending and refinancing debt longer, the researchers
say.
Three videos presentations by Elizabeth
Warren that appear on You Tube
Coming Collapse of the Middle Class
Healthcare Aamazing
Conversations
with History
Keep up with the latest news for senior citizens, baby
boomers
