Now, on the eve of their retirement, many baby boomers may face a tougher financial future than they imagined.
Rising health care costs, the subprime mortgage meltdown and waning retirement income support are leading to a higher rate of baby boomer bankruptcies, both nationally and in Rhode Island.
“I just think that it’s a sad sign of the economic times that we’re seeing – everything is interrelated,” said Jacqueline Grasso, a partner with Audette, Bazar, Cordeiro & Grasso, a law firm in East Providence. “You come into the world with no money, but nobody wants to go out with no money.”
According to a study conducted by the U.S. Courts Administration Office, the rate of bankruptcy filings for those more than 55 years old leaped more than 200 percent between 1994 and 2006.
Grasso said that increase has been directly tied to the economy and factors that might be outside the boomers’ hands.
“Without doing an independent study, I think that I’m seeing baby boomers for a number of reasons,” Grasso said. One, she said, is that many of her clients can’t keep up with co-pays not covered by Medicare.
“I can tell you affirmatively that a lot of baby boomers are filing because of medical issues, because either they can’t afford medical insurance or they have so many prescriptions that are way out of their means of income, so they’re resorting to credit cards,” she said.
Then there’s the mortgage crisis, which is putting a strain on older Rhode Islanders on fixed incomes. Some refinance – Grasso has met with 70-year-olds with a new 30-year mortgage – but still, if boomers don’t have the money to pay it, they could lose their homes. Others are forced into short sales.
When, in October 2005, The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 tightened bankruptcy-filing procedures – meaning stricter penalties for both filers and attorneys – many Rhode Island bankruptcy lawyers dropped that part of their practices.
At that time, attorney Robert Lapointe shifted his focus away from bankruptcy law after 15 years in the field. Rhode Island attorney Mark Morse, who also cut back, said the change limited options for those in financial danger.
“Essentially, it was the post-bankruptcy reform act that led me to the decision to not handle that anymore,” Morse said. “It’s made it more difficult for the individual to file for bankruptcy. It made it more difficult to discharge credit card and other types of debt and it certainly reduced the number of filings in bankruptcy court.”
But while the law led to less bankruptcy papers being filed nationally, boomers numbers went against the grain, according to John Golmant and Tom Ulrich, statisticians for the U.S. Courts Administrative Office.
Americans 55 and older filing for bankruptcy accounted for just 9.6 percent of total filings in 1994. That rose to 14 percent in 2002, and in 2006 boomer bankruptcies accounted for 22.7 percent of the total filings, according to Golmant and Ulrich.
Bankruptcies overall are on the rise again in Rhode Island. For year-over-year statistics up to the end of August, there has been a 92.11-percent increase, from 913 during the first eight months of 2006 to 1,754 during the same 2007 months, according to Rhode Island district statistics.
Those numbers, though, still pale in comparison to historic numbers – 2005 saw a 5,465 peak, and the 10-year average before then was 4,303 filings.
Along with the new problems – subprime mortgages and medical costs – there are always the traditional problems that cause bankruptcy, too, Grasso said. Divorce and gambling debt have always been, and remain, near the top of the list. But, she said, the latter’s effects have probably risen since Connecticut’s Indian casinos came to the region. •
