Safety Net??

America’s Shrinking Social Safety Net Leaves Retirees Out in the Cold

Retirement is supposed to be a time of rest and comfort. Maybe travel, if you’re so inclined. Instead, for an increasing number of Americans, retirement is becoming a time of dire financial straits and even bankruptcy.

According to a new study, the rate of people between the ages of 65 and 74 filing for bankruptcy has tripled between 1991, when there were 1.2 bankruptcy filers per 1,000 people in that age range filing for bankruptcy, compared to 3.6 filers per 1,000 in the same age group in 2016.

And it’s not like this indicates a larger trend in the rest of the population. In 1991, 2.1% of all bankruptcy filers were 65 or older. In 2016 12.2% of filers fell in that same age group.

While the actual number of filers remains fairly small (approximately 100,000 filers per year), it’s worth noting that there are many more people in dire financial straits. The ones who file for bankruptcy are the ones who have hit rock bottom, which means there are many more that are managing to stay afloat, but just barely.

Unfortunately, it doesn’t look like the problem is slowing down. In fact, it’s getting worse. The next generation is also filing for bankruptcy in greater numbers than their predecessors as they approach retirement, while the average age of filers continues to rise.

A big part of the problem is the shifting of financial risk from the government and employers onto individuals, which has been ongoing for the past three decades. As the social safety net continues to shrink, individuals are increasingly left to fend for themselves in retirement.

Longer wait times for full Social Security benefits, 401(k) plans replacing pensions, and more out-of-pocket costs for healthcare are also factors, as is the general decline in incomes, both before and during retirement.

Most older Americans rely on Medicare to cover their medical costs, but with increases premiums continuing to climb and coverage continuing to decrease, patients are required to cover more and more of their own medical expenses, making it difficult (if not impossible) to cover the rest of their living expenses. By 2013 the average Medicare recipient was spending 41% of their Social Security check on medical expenses.

More older Americans are also going into retirement with debt and often with more debt than previous generations.

Many of them said their finances had taken a hit when they had decided to help those around them. Whether helping to pay for the care of a parent or the education of a child (or both), the fact remains that more people have less money left over to save for their own retirement.

Bankruptcy attorneys who say they never used to see parents with student loan debt say they are seeing it more and more frequently. Parents are co-signing their children’s student loans, which commonly go as high as $100,000 and even higher, and can’t be discharged in bankruptcy. It creates an impossibly heavy financial burden which becomes even more impossible to bear when parents are living on limited, fixed incomes.

As a result, more older Americans are filing for bankruptcy – the last surviving bit of safety net. Squeezed between a rock and a hard place, they are left with nowhere else to turn.

Living paycheck to paycheck (or Social Security check to Social Security check) is one thing, although even that is often not enough for most retirees. Even when it is enough, it doesn’t take much to throw them off balance. An injury or a bad cold can bring unexpected medical expenses that retirees often struggle to pay without any additional income. Those already working in retirement have a hard enough time finding and holding down just one job. Trying to find and hold down a second job is almost impossible. Even when they do manage to find jobs, they’re usually working for less money than they ever made prior to retiring.

Although bankruptcy is still an option, it’s usually not enough. While it offers a blank financial slate, the fact remains that the older Americans filing for bankruptcy don’t have enough years left to get back on their feet.

This is why implementing a retirement plan early and following through on it is so important. Even if you’re living on a limited income, we can help you find the opportunities for savings so you can make the most of your retirement.