As far as senior U.S. citizens are concerned, retirement in today’s world is not the same anymore. The scenario has witnessed a drastic change, and things have gone awry. The balance sheets are not looking bright at all, and it’s a dreadful situation for the elderly population.
A lot of payments have to be made, and paying through credit cards is taking a toll on their pockets, thus leading the majority of them to file for bankruptcy. People aged 65 and above are incurring a higher level of debt these days and are facing severe financial crisis. Reports from 2018 reveal that 1 in 7 of them is going bankrupt. So, what’s causing this mayhem? Read on and find out.
Seniors Are In Real Trouble
Back in 1991, only 2% of bankruptcy filers comprised people who were 65 years of age and above. However, by 2016, a tremendous change in the statistics has been noticed — that 2% had by then risen to 12%. According to the reports that were extracted, around 800,000 families filed for bankruptcy that very year. During the same period, the percentage of senior citizens grew from 17 to 19.3. This trend was considered to have been caused by a number of conflicting social and economic factors in the United States that made survival a lot harder for the adult population. Higher medical costs, coupled with minimal personal savings and zero pensions, have made the situation more complicated.
Debts Piling Up Is A Big Matter Of Concern
The rapid and steep increase in the number of senior citizens getting drowned in debt seems to have occurred at a crucial time when the financial gap between the wealthy and the poor or middle-class Americans became evident. Several studies have pointed out to this disparity in recent times. Since the time recession hit America in 2008, the wealthy upper-class population has gone through a recovery phase. However, the situation was not the same for middle-income and lower-income households. As they aged, they found themselves in a retirement phase that was completely riddled with debts. This was caused by a number of factors like the sudden disappearance of beneficial pension schemes, the decline of certain trade unions, inflation in the health-care sector, and many more.
The Rising Healthcare Costs Add To The Woes
After the Great Depression wreaked havoc in the country, the United States planned to build a financial safety net for those who have already taken retirement or are on the verge of retiring. This safety net was based on Social Security payments to augment retirement savings and, of course, Medicare to meet the health care expenditures. Sadly enough, this golden period soon ended with the turn of a new century. Seniors who opt for payments through Social Security before they turn 70 have to pay a heavy price and there is no way out, it seems. A majority of the companies nowadays have opted for 401(k) retirement plans that have a fluctuating tendency, especially in accordance with the stock market. This behavior tends to impose heavy risks on the retirees. Rising health costs have become an added burden.
Low Economic Stability Is The Prime Reason
Retirement has become a sort of a mirage that’s constantly eluding people. For many, being 60 is now almost equivalent to being 30, and that implies that they need to toil harder in order to have better retirement savings to face the dark days. Lower economic stability seems to be the primary reason why such a situation has arrived. To get benefits out of your 401(k) plan, contributing to it on a regular basis for approximately 40 years is required. This entirely depends on your self-management capabilities. Hence, retirees living in the golden age of a defined benefit plan is nothing but a myth. As per statistics, 60% of seniors do not possess any kind of personal savings or a retirement account. Another shocking truth is that around 25% of American households have an annual income of $25,000 or even less than that.
This is how the entire scenario has shaped up. Things are really alarming at this point in time. More and more families filing for bankruptcy is not a positive sign for the economy and this needs to be sorted out as soon as possible. The political parties, left and right, are taking stock of the situation and, hopefully, they will soon take some positive steps to improve the situation of the seniors.