Many of us at one time or another have been in financial tight squeeze. It can happen at any time in life. For a certain demographic – those over 60 – financial troubles can be catastrophic and difficult to overcome.
And sad to say – bankruptcies are on the rise, especially for people 65 and older.
Deborah Thorne is a sociologist at the University of Idaho, Moscow. She has been studying the topic for many years. She was the lead author on a new study about bankruptcy in older Americans.
She said they looked at the rate of bankruptcy in the U.S. population as a whole and found a three-fold increase among people 65 years and older since 1991. And of the people who filed for bankruptcy, there was a five-fold increase among people 65 years and older since 1991.
Thorne said there are several reasons for the increase, including the rising cost of healthcare, a weakening social security system and the replacement of pensions with 401K retirement plans.
She said the shift from pensions to 401K plans has been troubling because many people don't know how to manage their retirement plans. Pensions were managed by professionals. Now, individuals are in more control of their personal finances and many people do not understand the stock market and how to manage risk.
"Our success or our income in retirement years has been offloaded onto the individual," she said,
She said the golden years of retirement were 1981 to 2000 and now those days are gone.
Thorne said during the 1930s the U.S. started to establish some of the social safety net to help seniors. Before that, seniors who had no money and no family willing to take care of them often fell into homelessness or a poor house, where conditions were often not fit for human habitation.
Pensions and social security provided help for retirees but she believes the social safety net is eroding, "it feels like we're headed backward," she said.
Elana Graham is the deputy director of the Southern Nevada Senior Law Program. She said seniors often run into financial trouble because their savings don't go as far as they expect.
"Seniors often anticipate their retirement income, including pension, social security, investments, 401k, etc., will go further than it actually does," she said.
She said expenses that they face are more significant than they realize, especially medical expenses. She said many people don't realize that Medicare only covers a portion of a person's medical expenses.
As a result, people are left paying for supplemental insurance and medications out of their own pocket. Those with chronic conditions like diabetes or Parkinson's disease will likely struggle even more.
It is not just medical expenses that can hurt a person financially. The death of a spouse or a partner or divorce can hurt a person's income.
In addition, older American's end up helping children or grandchildren with school expenses or their own financial shortfalls.
To make matters worse, finding a job can be tough for an older American, especially a job that pays at the level they might have had at one time. And for many people, if their income doesn't increase, they'll be right back into the cycle of debt. Someone can only file for individual bankruptcy every eight years.
Laura Deeter is an attorney with the Las Vegas-based law firm Ghandi, Deeter, Blackham. She deals with bankruptcy and says people who are in the cycle of debt should consider it sooner rather than later.
"Typically, we like to see people before they have completely decimated their assets before they've exhausted their retirement before they've gone through those assets because we do want to ensure that they can keep that retirement, that they can keep their home and that they come through bankruptcy in the best financial position possible."
Under Nevada law, there are several assets, including retirement accounts and houses, that can be preserved through the bankruptcy process.
For some people dealing with financial hardship right now, bankruptcy might be the best decision, but Thorne says the ultimate solution is structural changes to the country's social safety net.
"Unless our policymakers embrace this issue and act on it," she said, "I think it is just appalling how we are turning our backs on our oldest citizens."
RESOURCES:
Legal Aid Center of Southern Nevada: www.lacsn.org or call 702-386-1070.
Southern Nevada Senior Law Program: www.snslp.org or call (702) 229-6596
Helping Hands of Vegas Valley: https://hhovv.org/ or 702-633-7264
AARP Nevada: https://states.aarp.org/contact-aarp-nevada/ or 866-389-5652
Deborah Thorne, sociologist, University of Idaho, Moscow; Laura Deeter, attorney, Ghandi, Deeter, Blackham Law Offices; Elana Graham, deputy director, Southern Nevada Senior Law Program
