We were going over her budget and it didn’t look good.
She was retired and in her late 60s. Her only income is Social Security. Between the cost of health care, medicine, food and rent there wasn’t really anything left over to handle the thousands of dollars of credit card debt. Credit was the bridge she used to extend her benefit check.
“You need to file for bankruptcy,” I said.
She didn’t say anything for quite some time.
“But I pay my debts, always have,” she finally responded. “Scripture says, the wicked vow and don’t pay.”
For all of her working life, she had sufficient income to cover her expenses. But now there just wasn’t enough. Even if she just paid the minimum due, she would be in her 90s before it was all paid off. The stress of debt was too much to bear. By the time she got over her embarrassment to ask for help, bankruptcy was the only viable option.
Filing for Chapter 7 bankruptcy was devastating to her. Yet, it was what saved her from the increasingly aggressive letters and calls from creditors. Things are still very tight, but she’s making her meager ends meet.
Last week, a lot of news outlets jumped on this detail: Data from the Consumer Bankruptcy Project show that bankruptcy filings by people 65 and older are climbing.
“The social safety net for older Americans has been shrinking for the past couple decades,” according to the paper “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society.” “The risks associated with aging, reduced income and increased health care costs, have been offloaded onto older individuals. At the same time, older Americans are increasingly likely to file consumer bankruptcy, and their representation among those in bankruptcy has never been higher.”
There has been more than a twofold increase in the rate at which older Americans file for bankruptcy protection and almost fivefold jump in the percentage of older persons in the bankruptcy system, according to the research compiled by a group that includes Deborah Thorne at the University of Idaho, Pamela Foohey of the Indiana University Maurer School of Law, Robert Lawless of the University of Illinois College of Law and Katherine Porter of University of California Irvine School of Law.
“The magnitude of growth in older Americans in bankruptcy is so large that the broader trend of an aging U.S. population can explain only a small portion of the effect,” the researchers wrote. “In our data, older Americans report they are struggling with increased financial risks, namely inadequate income and unmanageable costs of health care, as they try to deal with reductions to their social safety net.”
They report that the median senior bankruptcy filer has a negative net worth of $17,390.
Here’s a chilling proclamation from the report: “For an increasing number of older Americans, their golden years are fraught with economic risks . . . Absent significant policy changes that reassume the risks of aging and effectively insure the financial stability of older Americans, our data suggest that the trend of an aging bankruptcy population will continue. For older Americans, bankruptcy is too little too late. By the time they file, their wealth has vanished, and they simply do not have enough years to get back on their feet.”
Last week, I was on NPR’s 1A to talk about this trend. I was joined on the show, hosted by Joshua Johnson, by Thorne, the principal investigator of the Consumer Bankruptcy Project, and by Cindy Hounsell, president of the Women’s Institute for a Secure Retirement (WISER).
“Oh, c'mon: who could have possibly imagined that the systematic theft of Baby Boomers' pensions to artificially inflate stock prices and temporarily increase corporate profits would ever have any adverse effects on actual people?” one listener wrote.
If things aren’t so bad financially and you want to avoid bankruptcy read: Ready to pay off your credit cards? Try the ‘Debt Dash’ method
Retired or not, read: Are you plagued by the serial get-out-of-debt disorder?
Also check out: Should you retire your debt before retiring?
I spent several years of my career reporting on bankruptcy. And this I know: For most, it’s not an easy decision. I never saw people skipping out after a bankruptcy hearing elated that they had their debts wiped out. I saw people ashamed and beaten down, who felt in the end that filing for bankruptcy protection was their last resort.
Have you had to file bankruptcy in your senior years? Why? And have you recovered financially since filing? Send your comments to email@example.com. Please include your name, city and state. Put “Senior Bankruptcy” in the subject line.
Retirement rants and raves
I’m interested in your experiences or concerns about retirement or aging. What do you like about retirement? What came as a surprise?
If you haven’t retired yet, what concerns you financially?
You can rant or rave. This space is yours. It’s a chance for you to express what’s on your mind. Send your comments to firstname.lastname@example.org. Please include your name, city and state. In the subject line put “Retirement Rants and Raves.”
In last week’s newsletter I asked: Are you still working beyond the so-called retirement age? How’s that working for you?
Carol Marsh from Missouri wrote, “I will be 79 next February, but I work a 40–plus hour week. I plan on working at least one more year, but will probably stay beyond that. Fortunately, I work for an amazing company, who values my experience and skills. I started with them at sixty-seven and just celebrated my eleventh anniversary.”
“After 14 years as an employee and 17 years as an employer, I sold my company in 2005 at age 55 with a three-year non-compete clause, and tried to retire,” wrote Richard Jones from Truckee, Calif. “The first few years were great. I joined an African dance class, and read every book I’d ever wanted to read, and started exercising every day. But by the time I was 57 I was going crazy. So I started taking classes to earn a teaching credential. After several job interviews, I then found that most 35-year-old high school principals would much rather hire 28-year-old women than a 59-year-old man. Even though we survived the 2008 housing meltdown in fair shape, it made me realize how easy it was to lose everything I had worked for, so I started looking for work in the same industry my company had been in. I lucked out, found a 1099 job where I work eight months a year, four to five hours a day. For the next few months, I’m also volunteering for a congressional candidate. My ‘hope’ is to work until I die.”
“I will be 68 at the end of October and I am sill working full time at the same job of the past 12 years,” wrote Lonnie. “Why? Because I earn a good salary, I am not using any of my 401(k) savings; and I continue to contribute 10 percent of my salary to my 401(k) with an employer match of 4 percent. I work for an ESOP [employee stock ownership plan] company, so I get an additional contribution to my account every year of $20,000. I like my work. I have good employer heath insurance coverage, and I am in good health. Why not keep doing what I like, putting money in the till, and having health insurance? When I do retire at, say, 70, I’ll be that much better off financially. Like everyone, I would like to travel and pursue my hobbies. I am even thinking of continuing to work two to three days a week, with the understanding I will take a couple of weeks off periodically to pursue my travel interests.”
Barry Wind of Holland, Pa., wrote, “Not being retired has been wonderful. When I turned 75 I started working out at a new gym. I told the people that they were part of my new 25-year plan! They laughed. I am serious. My paternal grandfather and maternal grandmother lived into their late 90s. My mother died at 89 and my father died at 79. Both of them kept working until their final illnesses. It has been my long-term goal to DANCE at my great-granddaughters' wedding. Since my eldest grandchild is only 16, I have a long way to go. We’ll see how well I do. Right now I am working in my own accounting firm. My wife and I travel, go to the theater, spend time with our family & friends, volunteer our time and money and enjoy the fruits of our labors. I keep on saying that we are spending the grandchildren’s money, so let’s enjoy it. It is nice knowing that I am working because I enjoy it, not because we need the money. I never believed that the good Lord put me on this earth to spend a third of my life playing golf! There has to be more. So I exercise, work, read, volunteer and enjoy. I recognize that the time will come when this phase will be over. Until then, I want to relish the opportunities.”
Owen Dell from Oregon wrote, “I’m still working part-time at 67 and I don’t intend to stop. I don’t really need the money, so it’s all about satisfaction, well-being and service to my community. With a lifetime of practice under my belt, I’m better at what I do than I have ever been, I’m having fun, I’m creating some good in the world, I’m making people happy, and as far as I know dementia hasn’t set in yet. After a high-pressure career, I relocated to a smaller community six years ago and took up my landscape architecture practice with great success. I’m finally having the career I always dreamed about. Why stop now?”
Lois Valerio of Los Angeles wrote, “My husband and I both retired in our 50s (57 and 59, respectively) and could not be happier. We moved from New York to California for the weather and lifestyle. We put our two children through private college with no debt. How did we do it? Hard work and planning. We are both first-generation college graduates, I put myself through college and law school. We worked hard at our careers and advanced. I took 10 years off from my career to raise our kids, but we still put money aside for their education from the time they were born. We bought and sold homes and made money on the sales. We lived within our means with no credit card debt. Our kids are now grown and we are enjoying life while we are still young (66) and healthy. My advice, retire as soon as you are able. There is a lot of life to be lived!”
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