Rise in bankruptcy filings among older Americans

The rate at which Americans 65 and older are filing for bankruptcy has more than tripled since 1991 amid shrinking social safety nets and abandoning pensions, according to a new study.

“Older Americans are more likely than ever to find themselves in bankruptcy court, seeking protection from creditors,” said the study, authored by academics from institutions including the University of Idaho and the University of Idaho. ‘University of Illinois. He also said that among bankrupt Americans, the percentage of seniors “has never been higher.”

The study, titled “Graying of US Bankruptcy: Fallout from Life in a Risk Society,” found that between 2013 and 2016, the average rate at which Americans aged 65 to 74 filed for bankruptcy rose to 3.6. per 1,000. individuals from a rate of 1.2 per 1,000 in 1991.

Of those who file for bankruptcy each year, 12.2% are between the ages of 65 and 74, up from 2.1% in 1991.

The aging of the US population explains “only a small part” of the increase in the rate of bankruptcy among seniors, according to the study. Between 1991 and 2015, the percentage of the adult population made up of people aged 65 and over rose from 17% to 19.3%, a much smaller jump than the growth in senior bankruptcies.

Instead, the study authors cited cuts to safety net programs, including Social Security and Medicare, and the shift to old-fashioned pension plans, which guarantee retirees a fixed income for life, to 401(k)-style plans, which leave it up to workers to decide how much to save and how to invest.

“Financial risks have been transferred to individuals,” the study says.

The age at which full Social Security benefits are available increased, to 67 for those born in 1960 or later, against 65 for those born in 1937 or before.

In addition, retiree incomes have stagnated in recent years, while the percentage of indebted households headed by people aged 55 or over has increased steadily for more than two decades, from 54% in 1992 to 68% in 2016, according to Employee Benefit Research. Institute, a nonprofit, nonpartisan public policy research organization.

The bankruptcy study comes from the Consumer Bankruptcy Project, which collects data — on age, race, education and marital status, among others — from Louisiana bankruptcy attorney court records and questionnaires responded the registrants who chose to participate.

According to the study, the median debt of bankrupt seniors is $101,600, three times the average income of these filers. People age 65 or older who file for bankruptcy have a median net worth of minus $17,390.

The authors predict that as the population continues to age, the trend will increase.

They point out that the outlook for seniors who file for bankruptcy is bleak. “By the time they file, their wealth is gone and they just don’t have enough years to get back on their feet.”

Some economists have disputed the study. In an email, Olivia Mitchell, an economist at the Wharton School at the University of Pennsylvania, said the study was not based on a representative sample over the entire period it covers, which would make it “impossible to determine whether the identified trends are statistically significant.”

Deborah Thorne, co-author and associate professor of sociology at the University of Idaho, said the 2007 and most recent study relied on nationally representative samples, but earlier studies “don’t do not claim to be representative”. She said the authors had found similar results using the methodologies of previous studies, indicating that the paper’s conclusions were valid.

Write to Anne Tergesen at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

About the author