If you have never heard the term “gray bankruptcy,” it refers to bankruptcies filed by people aged 65 or older. Unfortunately, per the New York Times, the number of gray bankruptcies has increased dramatically over the past 28 years. In 1991, only 2.1% of bankruptcies represented gray bankruptcies. By 2018, that percentage had risen to 12.2%.
Financial analysts attribute this drastic rise in gray bankruptcy to the following five main causes:
- Most seniors have to wait longer to receive Social Security.
- Seniors must pay ever more for their health care.
- Medicare coverage gaps continue to grow.
- More seniors must rely on their credit cards in order to pay their bills.
- Consequently, the savings rate and accumulation have dramatically decreased.
Few people would argue that health care costs are out of control today. Seniors who rely on Social Security as their only income source often find themselves spending as much as 41% of their income on health care alone. Some seniors must make the untenable choice: should I buy my prescription medications or should I buy groceries?
Needless to say, if you have insufficient income to pay your bills, you certainly cannot put any money into a savings account. A recent study brought to light that senior households have a median lifetime savings of only $60,000. More distressing yet, if your senior household falls within the bottom 25% of such households, you likely have $3,000 or less in lifetime savings.
Given the above statistics, the unfortunate rise in gray bankruptcies becomes understandable. Bankruptcy may well represent the only viable option that a lot of seniors have.