Older Americans Dealing with Rising Debt, Falling Income Amid Pandemic

Older Americans Dealing with Rising Debt, Falling Income Amid Pandemic

April 22, 2021

ABI Bankruptcy Brief

Older Americans Dealing with Rising Debt, Falling Income Amid Pandemic

According to the Employee Benefit Research Institute, the share of households headed by someone 55 or older with debt — from credit cards, mortgages, medical bills and student loans — increased to 68.4 percent in 2019, from 53.8 percent in 1992. Bankruptcy rates among older adults are also rising. The COVID-19 pandemic may be adding to their woes, the New York Times reported. A survey at the end of 2020 by Clever, an online service that connects home buyers and sellers with real estate agents, found that on average, retirees had doubled their non-mortgage debt in 2020 — to $19,200. Francesca Ortegren, the data science and research product manager for Clever, said that business cutbacks had forced many older adults to retire earlier than planned. Others left work for health reasons or to care for family members, she said. “They had expected to have more time to save money,” Dr. Ortegren said. “They are putting their expenses on their credit cards and are carrying balances month to month.” Also driving this rising debt load are soaring medical costs, the steep decline in pensions, growing housing expenses and low interest rates on savings. To make ends meet, many older adults are known to skip meals and cut pills to stretch prescriptions, according to a survey by the National Council on Aging.​​​

Weekly Jobless Claims Hit New Pandemic Low of 547,000

Initial jobless claims for the week ending April 17 fell to a seasonally adjusted 547,000, a 39,000 drop from the previous week and the lowest level since pandemic lockdowns began last March, The Hill reported. The continued drop in weekly claims is a sign of an improving labor market but also indicates how tough conditions remain. The weekly figure is over double the pre-pandemic level. An emergency pandemic unemployment program for the self-employed and gig economy workers saw an uptick in filings, while the most recent estimate for overall continued claims rose by nearly half a million to 17.4 million. That data, however, lags by two weeks.​​​

Many Left Behind in this Recovery Have Something in Common: No College Degree

Hiring has rebounded quickly for Americans with college degrees. In recent months, there has even been a noticeable surge in people with two-year associate’s degrees getting back into the workforce. But Americans with only a high school diploma or less remain deep in crisis mode, even as employers claim they are having trouble finding workers, the Washington Post reported. Nearly 4 million adult workers without college degrees have not found work again after losing their jobs in the pandemic. Only 199,000 adult workers with a bachelor’s degree or higher are in the same situation. (About 2.4 million adults over 25 with associate’s degrees had a job in February 2020 and have not returned to work a year later.) Economists are especially concerned about the sharply divergent situation for college-educated workers versus non-college-educated workers since October. Even as more and more restaurants, hotels and other service sector businesses have reopened, hiring has continued to backslide for non-college-educated workers. In March, for example, the overall economy added back 916,000 jobs. Only 7,000 went to workers with high school diplomas but no college degree.​​​

During Pandemic, Landlords Find Relying on One Office Tenant Can Backfire

With the U.S. office market in its worst crisis in a decade, some landlords are discovering the risks of putting all their tenant eggs in one basket, the Wall Street Journal reported. Office landlords often consider leasing an entire building to one company an efficient way to collect steady rent checks. Now a small but growing number of landlords are in danger of losing their properties as their only or primary tenant declines to renew a lease, leaving the landlord at the mercy of a historically bad office-rental market. Office owner defaults are still a rarity, largely because most tenants sign long-term leases and continue paying even when their employees are working from home. Only 2.2% of office buildings with securitized loans were delinquent on their mortgages in March, up from 1.9% a year earlier, according to Trepp. Yet even if a single or major tenant renews these days, they usually do so at steep discounts. And in cases where no default appears imminent, losing a big tenant still creates challenges. Losing a big tenant can also lead to a steep drop in a building’s valuation. An office building in Houston, for example, lost its two main tenants in 2016 and 2019 and saw its valuation cut to $25 million, down from $121 million, as a result, according to Trepp. It also makes banks more reluctant to refinance mortgages, which can be a problem when loans come due. (Subscription required.)​​​

Chicago Is the Latest U.S. City to Consider Guaranteed Income for the Poor

Chicago is the latest U.S. city to consider offering guaranteed income to poor residents as it seeks to even out the economic recovery for those who suffered a disproportionate hit from the COVID-19 shutdown, Bloomberg News reported. City Alderman Gilbert Villegas proposed a pilot program yesterday to provide $500 a month for a year to 5,000 low-income residents. The money — issued on debit cards — would act as a form of “disaster relief” spent in the local economy for rent, food, clothing and other necessities, Villegas said. If approved, the city would pay for the program with $30 million of its $1.9 billion in American Rescue Plan funds. Chicago, the third-largest U.S. city with almost 2.7 million residents, joins cities coast to coast in contemplating guaranteed income payments as a tool to help lower-income residents and those from Black and brown communities that are enduring the harshest impacts of COVID-19. Los Angeles Mayor Eric Garcetti has proposed a $24 million program in next year’s budget for 2,000 low-income families in the second-largest U.S. city. Villegas said he’s studied similar proposals in several California cities, including Stockton and St. Paul, Minnesota. Chicago’s program would be open to applicants with income at or below 300% of the federal poverty level who can demonstrate that they lost jobs or hours, lacked child care or faced some other financial adversity due to COVID-19. Recipients may voluntarily share transactions to help the city study the effectiveness of the pilot program. Research from the first half of a two-year program in Stockton, Calif., that gave $500 a month to 125 families found that recipients went on to find full-time jobs at more than twice the rate of non-recipients, according to a release from Mayors for a Guaranteed Income. They also suffered less stress and anxiety, the Mayors’ group said. Stockton in 2012 became the largest city in the U.S. at the time to file for municipal bankruptcy after racking up unsustainable bond and pension debt. Villegas said Chicago’s one-year pilot program could be funded by federal aid but could continue in future years through a combination of philanthropic and city revenue. The proposal has been referred to the city council’s Committee on Rules, which adds uncertainty for its trajectory. Villegas said he will keep pushing for it with other council members and community groups.​​​

Private-Equity Firms Regain Taste for Giant Buyouts

Leveraged buyout bids measuring in the double-digit billions, a relative rarity since the financial crisis, have been showing signs of a comeback lately, the Wall Street Journal reported. Earlier this month, private-equity firm CVC Capital Partners submitted a proposal worth more than $20 billion for Japan’s Toshiba Corp., setting off a potential auction. Meanwhile, Stonepeak Infrastructure Partners and Sweden’s EQT AB have teamed up for a bid on Royal KPN KKPNY that could value the Dutch telecommunications company at more than $15 billion. And medical-supply giant Medline Industries Inc. has hired Goldman Sachs Group Inc. to help it explore a sale, likely to one or more private-equity firms, the Journal reported. Such a deal could value the family-owned company at as much as $30 billion. It is far from guaranteed that any of these transactions will be completed — and, indeed, on Tuesday Toshiba rebuffed the CVC proposal, but the fact that they are even under consideration is noteworthy. Between 2005 and 2007, private-equity firms inked 18 deals worth $10 billion or more, according to Dealogic. Since then, they have struck only 10, mindful that many of the pre-crisis deals didn’t work out as planned. (Subscription required.)​​​

An Incredible Annual Spring Meeting Concludes Tonight, but Don’t Hesitate to “Rewind” Any of the Sessions!

ABI’s Annual Spring Meeting concludes this evening with the passing of the gavel to new ABI President Robert P. Reynolds of Reynolds, Reynolds & Little, LLC (Tuscaloosa, Ala.), but if you missed any of the hard-hitting sessions, replays are available through the innovative virtual platform. If you have registered for ASM, you can access the replays through May 31! Not registered? Click here.

Thank you again to all of our speakers, sponsors and, especially, our attendees, who made the Annual Spring Meeting an incredible experience for all!​​​

Sign up Today to Receive Rochelle’s Daily Wire by E-mail!
Have you signed up for Rochelle’s Daily Wire in the ABI Newsroom? Receive Bill Rochelle’s exclusive perspectives and analyses of important case decisions via e-mail!

Tap into Rochelle’s Daily Wire via the ABI Newsroom and Twitter!


New on ABI’s Bankruptcy Blog Exchange: 'Our Dance Card Is Filling Up': More Banks Mulling M&A

Merger-and-acquisition talks are heating up among banks of all sizes, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

© 2021 American Bankruptcy Institute
All Rights Reserved.
66 Canal Center Plaza, Suite 600
Alexandria, VA 22314