As stocks go up and unemployment comes down, an increasing number of older Americans find themselves dodging bill collectors and spiraling into debt. Many warn of severe economic repercussions if this continues. But there’s more—large swaths of downwardly mobile seniors who thought of themselves as middle class is also a recipe for political chaos. Economist Teresa Ghilarducci, an expert on retirement security and Director of the Schwartz Center for Economic Policy Analysis at The New School, explains what’s happening and what’s at stake if we don’t fix it.
Lynn Parramore: A new report shows that American seniors are filing for bankruptcy at three times the rate that they did in 1991. But headlines say the economy is humming. Why are older people so broke?
Teresa Ghilarducci: The rise of the elder bankruptcy rate is no surprise, even if unemployment is low and stock values are up. Poor elders have terrible job prospects and very few households hold significant amounts of stock, bonds, and other financial assets. The erosion of retirement income security started decades ago.
LP: Can you explain what happened?
TG: In 1983, Congress and the President [Reagan] decided to restore Social Security solvency by cutting benefits and raising revenues equally. The FICA tax [Federal Insurance Contributions Act tax] was raised slightly and benefits were cut by raising the age people can collect full benefits from 65 to 70.
– Naked Capitalism