Tag: Senior’s Right To Know

Bankruptcy Soars Among the Elderly

elderly bankruptcy: Bankruptcy Soars Among the Elderly
Financial concerns have always been a part of the retirement landscape, but two recent studies indicate a precipitous situation for many seniors, with bankruptcy rates for the over-65 population surpassing those at any other time in history.

Some of the most significant data came from a study compiled by four professors in partnership with the Consumer Bankruptcy Project, which collected bankruptcy data from 1991 to 2016. The study’s authors went beyond the unmistakable trends from the numbers to pinpoint the sociological causes for those patterns. Among the most compelling findings of the CBP report:

• The number of people between the ages of 65 and 74 who filed for bankruptcy increased more than 200 percent in that 25-year period. As a result of that jump, the number of seniors within the U.S. bankruptcy system has increased fivefold. One in seven bankruptcy filers in 2016 was over the age of 65.

• As a result of inadequate income during retirement coupled with skyrocketing health care costs, the median senior filing for bankruptcy enters bankruptcy with negative wealth of $17,390, as compared to more than $250,000 for seniors who have not filed.

• More than 62 percent of the respondents in the CBP study identified increasing medical expenses as a “catalyst” for their bankruptcy filings.

“With few exceptions, the road to bankruptcy is long,” the report said. “Combined, more than six out of ten older debtors struggled for at least two years to repay their debts before they turned to bankruptcy for help. Struggling for several years to repay one’s debts is an unfortunate way to spend one’s retirement years.”

Other considerations that the study respondents reported as key factors in their late-in-life financial struggles were shifting Social Security eligibility and the shaky status of many pension plans. The research detected a growing gap between the haves and have-nots among the over-65 population, mirroring a similar chasm between the higher and lower income groups in the population at large.

The second significant study examining the financial challenges of seniors was conducted by the Urban Institute, and it focused on the future distribution of retirement income, as well as the minimum wage and wage inequality. The section of the study related to retirees concluded that the top fifth of U.S. earners between the ages of 67 and 75 will see a steady increase in their income in the next seven decades, whereas the bottom fifth will see a drop twice as dramatic as the increase seen by the top fifth.

“People who experience high wage inequality during their working years are likely to experience high retirement income inequality, because Social Security benefits are tied to lifetime earnings, and people’s ability to save for retirement depends on how much they earn,” stated the report’s summary.

Using solid data, these studies prove statistically what many seniors understand anecdotally—that retirement years often present difficult financial challenges even for those who prepare. Many seniors are unaware of life settlements, which can provide a valuable source of income for those who need extra help with health care or other expenses. To find out if you might qualify for a life settlement, start with Magna’s life settlement qualifier.

Rhode Island: One Step Closer to Requiring Life Settlement Disclosure

Rhode Island Life Settlement - Magna Life Settlements

Knowledge is power for seniors focused on the optimal management of their finances, and a recent movement of state disclosure laws will increase consumer understanding of their life settlement options.

Studies show that consumers who sell their life insurance policies receive four to seven times more money than they would receive from surrendering policies, yet the Life Insurance Settlement Association reports that 90 percent of policies are allowed to lapse without any benefit going to the holder or beneficiary. One contributing factor in this situation is the tendency for some life insurance carriers to stay quiet about the rights of their policy holders.

With an eye on their bottom line, some insurance carriers go to great lengths to keep life settlement information out of their customers’ hands, even penalizing insurance agents who disclose the full menu of options to their clients. But this industry “gag order” is being removed, one state at a time, by lawmakers advocating for their constituents’ right to information.

On May 23, Rhode Island came a step closer to becoming the ninth state to require consumer disclosure of life settlement options when its bill passed the House of Representatives Corporations Committee. The law, which requires insurance companies to notify policy holders older than 60 who have chronic or terminal illnesses that they have the option of selling their life insurance policy, will take effect on October 1 if passed by the full legislature.

Kentucky, Maine, Georgia, Florida, New Hampshire, Oregon, Washington, and Wisconsin have all passed similar consumer-disclosure laws since 2016, and a bill has been introduced in Texas. Several lawsuits have also been filed by individuals against their insurers in an effort to hold life insurance carriers accountable for their failure to give policy holders full access to information about their life insurance.

A class action lawsuit filed against Lincoln Financial in California, which was settled before reaching summary judgment, alleged that Lincoln Financial engaged in a “common and systemic practice” of “failing to inform and/or concealing from its insureds the option of a life settlement in connection with their life insurance policies.” According to the filing, Lincoln “purposely omits this information from Plaintiffs and Class members because it knows that other options, such as surrendering the policy (in whole or in part) or letting it lapse, will generate greater profits to Defendant than a life settlement would.”

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