Tuesday, 19 March 2019

It’s getting harder for seniors to stay solvent

A new paper issued by the Consumer Bankruptcy Project, “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society,” indicates that seniors 65 and older are filing for bankruptcy at alarmingly high rates in comparison to prior periods.

I am not surprised. Retirees are going into retirement with much higher debt overall, and specifically much higher mortgage debt. For example, in 1995 only 22 percent of 65 year-old’s had mortgage debt; now 38 percent do. The average mortgage debt in 1995 was $27,300; now it is $73,000. Those are scary numbers.

The proportion of retirees who have defined-benefit pension plans has decreased substantially. Today’s retirees are more dependent on defined-contribution plans, such as 401(k)s. With a defined contribution plan, the retiree must manage the portfolio himself or pay a financial planner. Most retirees don’t have the financial expertise to manage their own portfolio. Our educational system is totally inadequate when it comes to teaching us how to effectively manage a portfolio.

Another important factor is age of retirement. Many employees would like to work longer before retiring, but most corporations offer early retirement incentives so they can pay younger workers at lower salaries. When an early retiree looks for other work, he/she faces age discrimination, with practically no recourse, despite anti-discrimination laws.

Source: http://www.chicagotribune.com/business/sns-201808291333–tms–savingsgctnzy-a20180829-20180829-story.html

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