You may have seen recent coverage of a new “study” that found a surge in bankruptcy filings among retirees.
The New York Times
led the charge with “Too Little Too Late: Bankruptcy Booms Among Older Americans
,” and the Wall Street Journal
jumped in with “Bankruptcy Filings Surge Among Older Americans
,” with a tagline that proclaimed: “Authors of recent study cite reductions to social safety net, shift from pensions to 401(k)s.” Which, of course, they had. Indeed some industry publications dutifully picked up the report (entitled “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society
,” and faithfully repeated the conclusions of those same authors.
The “culprits” of this bankruptcy “boom” are, as you might suspect, the usual suspects: “vanishing pensions, soaring medical expenses, inadequate savings” – and “a three-decade shift of financial risk from government and employers to individuals.”
Now, pensions surely have been “disappearing,” but slowly. What’s even slower is for folks like those at the Times
to realize they were never all that common – as the data shows
– and even those workers who had a pension weren’t likely to get the full potential benefit because many didn’t work long enough to vest in those benefits. Moreover, while some workers did spend their working career at a single employer (and some still do, particularly in the public sector), the data show that for the very most part we have long been a nation of relatively short-tenured workers. How short? Well, the median job tenure in the United States – how long workers stay at one job – has hovered around five years for the past three decades.
What that means is that even workers who were “covered” by a pension plan in the private sector often didn’t accumulate enough service to vest in that promised pension benefit. And that’s been true… well, pretty much as long as there have been DB pensions.
Another data point that is touted so routinely it’s rarely questioned – and one the Times piece invokes – is a data point from the Social Security Administration that for a third of Social Security recipients, their monthly check accounts for 90% of their income. However, a study
based on actual IRS data found that just one in eight retirees receive 90% or more of their income from Social Security. Don’t get me wrong – Social Security is clearly a vital and essential component of our nation’s retirement security – but the IRS data indicates that, for most, it isn’t a primary source at present.
As for the issue of bankruptcy that was the focus of this article, we should start by noting that this “study” was based on a pretty small sample of personal bankruptcy cases and questionnaires completed – 895 filers aged 19 to 92. In fact, the Times acknowledges that “the actual number of older people filing for bankruptcy was relatively small” during the period in question – though it reports that “the researchers said it signaled that there were many more people in financial distress.”
And it’s not really surprising that a study “based on data collected through the Consumer Bankruptcy Project (CBP)” would focus (and find) troubling trends in bankruptcy. But what’s really weird here is that that “boom” in Boomer bankruptcies doesn’t even seem to exist in in the data presented in the “study.”
Setting aside for a second the relatively small size of the over age-65 group (a whopping 120 folks) that the authors relied upon, they note what could fairly be described as a “substantial increase” – rising from 0.8 per thousand people to 2.7 per thousand people. But that’s between 1991 and 2001. Since 2001… well, it’s been pretty steady. The Times glosses over this by comparing the 2016 number to… the 1991 number.
Now, that’s not to say that there aren’t individuals out there who, for a variety of unique, personal and perhaps even systematic reasons, don’t find themselves struggling financially in retirement.
But basically, the “boom” in bankruptcies cited in the study happened… 17 years ago.
And as news reporting goes, I’d call that a “bust.”