Keith Morris, chief executive of Elder Law of Michigan, which runs a legal hotline for older adults, said the prospect of bankruptcy was a regular topic for his callers. “They worked all of their lives, and did what they were supposed to do,” he said, “and through circumstances like a late-life divorce or a death of a spouse or having to raise grandkids, have put them in a situation where they are not able to make the bills.” For Lawrence Sedita, a 74-year-old former carpenter now living in Las Vegas, the problems began when he lost his health insurance about two years ago. He said he had been on disability since 1991, when a double pack of 12-foot drywall fell on his head at work. After his union, the New York City District Council of Carpenters, changed the eligibility requirements for his medical, dental and prescription drug insurance, he lost his coverage. Mr. Sedita, who has Parkinson’s disease, said his medical expenses had risen exponentially. (A spokesman for the union declined to comment.) A medication that helps reduce his shaking, a symptom of Parkinson’s, rose to $1,100 every three months from $70, Mr. Sedita said. “I haven’t taken my medicine in three months since I can’t afford it,” he added. He said he and his wife, who has cancer, filed for bankruptcy in June after living off their credit cards for a time. Their financial difficulty, he said, “has drained everything out of me.”
As the US population continues to age rapidly, it is having to confront the increasingly reality of bankruptcy during retirement. Long standing issues of shrinking pensions, rising medical costs and poor savings have taken their toll but the rate of those over 65 filing for bankruptcy is three times what it was in 1991, according to a recent study. The research, conducted by the Consumer Bankruptcy Project, suggests that this is a result of a three-decade shift of financial risk from the government and employers to individuals, as the social safety net has shrunk. Such a shift has been evidenced by delays in Social Security benefits, the advent of 401(k) saving plans and increased out-of-pocket spending on health care. Reinforcing this dangerous situation is the risk that older adults have fewer places to turn when are in trouble, with the bankruptcy court often offering the only solution. Worst still, it only requires a small issue to begin this cycle. Although bankruptcy can be weathered by the younger generation, those over 65 do not have enough time to recover. This comes at a time when the current rate of bankruptcy per 1,000 people between 65-74 stands at 3.6, up from 1.2 in 1991. The percentage of those filing bankruptcy who are over 65 has risen from 2.1 percent of claims to 12.1 percent. An increase in those filing for bankruptcy can also be seen in the next generation. For those over 65 who responded to the survey, the bankruptcies were often the result of multiple factors, with 3 in 5 citing medical costs. Separate research has shown that the median household for those over 65 had liquid savings of $60,000, a figure which falls to $3,620 for the bottom 25 percent of households. Although many Americans turn to Medicare for their medical bills gaps in coverage, high premiums and requirements that patients shoulder some costs force many lower-income beneficiaries to spend more of their own income on those bills. By 2013, the average Medicare beneficiary’s out-of-pocket spending on health care consumed 41 percent of the average Social Security payment. The final trouble is that many Americans are carrying significant debts, such as a mortgage or their children’s student loans, into their retirement at a cost that Social Security cannot cover.