The rate of those 65 and older filing for bankruptcy is three times what it was in 1991, a new study finds, as more enter their later years in a precarious position.
https://www.nytimes.com/2018/08/05/business/bankruptcy-older-americans.html
This was in the Seattle Times this morning as well. Those of us without a pension were supposed to put roughly $7000/yr into high-yield retirement accounts every year since age 22 to assure not running out.
From the story:
Very frightening story. I think younger people will benefit from decades of knowing they need to aggressively save for retirement, but those of us in our 50s and early 60s are really at risk. I don’t recall any discussion of needing to save for retirement when I was younger. If I could go back in time, I would make different financial decisions.
I have an aunt and uncle who could easily be featured in this story. 80ish and close to broke. Tiny pension and SS is all they have. Their adult sons are paying for AL for aunt. Otherwise, I don’t know what they would do.
It is definitely a challenge. Once upon a time, many people had defined benefit pensions that actually paid as promised. Many pensions have gone bankrupt and paid a tiny fraction of what they promised for the folks who had them and counted on them for their old age security.
Senior subsidized housing has huge waiting lists and many people never clear them. People are living a long time in poor health.
Also, people tried to live below their means and folks were not borrowing 6 figures to send their kids to college. Once kids graduated from college they would get jobs. Now many kids are having a tough time getting a full-time job with benefits and some are boomeranging home.
Medical costs and especially medication costs have skyrocketed. Incomes don’t keep up with increased costs—COLA adjustments to SS have been very modest and definitely NOT kept pace with medical costs.
Looks like things are unlikely to improve anytime soon. All we can do is save and encourage our loved ones (especially our kids) to save and NOT take on big debt.
Medical bills and lack of pensions are probably the number one causes. It’s really quite sad. Most folks don’t have the money nor the knowledge to properly save, toss in a market crash and it’s a recipe for disaster.
So many people who were in their 50s-60s in 2008 when the recession hit , have never recovered. They lost most of their savings, jobs and homes. It’s tough that lose a job at 50 plus. Many times no one wants to hire you and definitely not at the same salary.
I think SRs supporting and paying big loans for their offspring is big as well. I don’t know how common that was before but I see and hear about it a lot now.
I do recall discussion of saving when I was younger (I am 61) and we started saving as soon as we could. I feel bad though for those who lived paycheck to paycheck and did not have the money to save as well as for those who had a medical crisis, lost big in the recession or lost jobs after 50. Between the lack of a safety net and age discrimination in the employment world this is only going to get worse.
We seriously need to think about where this county is heading.
I have a friend who might be in this situation soon, mainly because she and her former spouse were underemployed most of their lives and her former spouse has hundreds of thousands of dollars in his own student loan debt. He is 66, she is 60. She has been unemployed for more than a year and has health problems.
I just finished reading the article online. This article, and some of the people mentioned in it, bring up mortgage payments. It seems like a way to improve their finances would be to sell the house and instead rent an apartment, which most likely would cost less with less upkeep. The profit from the home sale would help them financially.
I feel sorry for those who couldn’t save or who had a crisis eat up their savings. I have very little sympathy for those who didn’t save because they wanted to spend their money NOW on various toys. They knew. They could have. They chose not to care. I know some in both camps.
There are various reasons and I wish we (as a nation) could sort them out to help those who truly could use some help.
Having decent health care coverage would be a great first step for pretty much everyone.
We were hit with the double whammy of the crash wiping out savings, and having to pay taxes on restricted shares/options that had lost 90%+ of their value by the time the taxes were due, combined with massive health care bills despite having pretty good insurance. If we hadn’t had a HELOC to draw down, robbing Peter to pay Paul, bankruptcy might have been the only option. I do have sympathy for people in similar situations.
OTOH, I briefly worked in collections for a major bank decades ago and it was an eye opener. People feeling entitled to indulge themselves is no recent development. We have distant relatives who keep their finances separate. One spouse declared bankruptcy eight or nine years ago while the other continued to pay for big vacations, spa treatments, a new car, etc. I have no idea how or why that worked. They just bought a new house, with a mortgage, despite being recently retired.
best advice that we can give out now college grads is to max out their 401k, starting immediately.
“best advice that we can give out now college grads is to max out their 401k, starting immediately.”
And live below their means which is the best way to accumulate wealth no matter your income level. Easy access to credit and lack of delayed gratification has been the financial downfall for many and reflects a shift for our generation over previous generations. That combined with a shift from pensions to self-managed 401Ks has been a double whammy for those without the personality and skill set to manage their money. Yes, bad luck and misfortune can come into play but that isn’t always the case. I bet most of us know real life examples of this.
Thank God my Mom was adamant and never stopped talking about how I needed to start saving the max into 401ks as early as possible (23). However, I have been self employed for the last 10 years and have not been saving as aggressively as I should into IRAs, plus you can only put in a small amount yearly. If I didn’t have that first 30 years into the 401ks, which transferred to a Self Directed IRA, I would be another one of these statistics.
DS worked in collections for a while. He had stories of people with a hundred thousand in credit card debt! Then on the other side of the spectrum I know people in their 90s with a million dollars who plead poor me.
Unless the house is worth less than the debt on it.
And in many places, it’s getting very expensive to rent.
@oldmom4896 yes renting is becoming unaffordable in many places. It promoted me to buy a rental property in town where my youngest attends college. The campus housing was overpriced and so were nearby rents.
We’re fortunate that house-sale prices in our area have risen/are rising. A house around the corner got above ask two months ago.
We’ll sell next year and will walk away with $six-figures in cash, move out of state, and rent for less than our monthly mortgage payment. Definitely downsizing from a 4-bedroom, 2.5-bathroom, Colonial house to a planned two-bedroom, two bathroom apartment.
Many, many young workers don’t have access to a 401k, and the paltry amount they can put into an IRA is never going to fully fund a retirement, even if they start early. So while it’s good advice to fully fund a 401K, it’s not going to solve the problem until a much larger percentage of young workers have access to a 401K.
This.
The focus of the article was bankruptcy, but the problem extends far beyond those who seek BK protection. Unfortunately we have huge numbers of Americans who have lived at or beyond their means their entire lives, for whom “retirement” will never be possible.