Financial "Independence Day" is Not a Reality for Some
July 4 marks the U.S. version of Independence Day, a celebration of America's break from colonial England. Click to learn more about Independence Day in other countries.
Naturally, the question arises. How many of us are truly independent when it comes to financial resources? A recently published study, courtesy of the American Association of Retired Persons ("AARP"), suggests that a significant shift is occurring in terms of financial distress for individuals. Entitled "Generations of Struggle," authors Deborah Thorne, Elizabeth Warren and Teresa Sullivan make some worrisome observations:
- "Americans age 55 or older have experienced the sharpest increase in bankruptcy filings.
- The average age for filing bankruptcy has increased.
- The rate of bankruptcy filings among those age 65 or older has more than doubled since 1991."
Factor in another weak element of the three-legged U.S. retirement stool - the huge economic drag due to ballooning post-retirement entitlements - and things look grim indeed. A soon-to-be released documentary entitled "I.O.U.S.A." sounds the bell clear and loud. This 232 year old nation is on the verge of a financial meltdown. Visit YouTube.com to hear what director Patrick Creadon says about the serious message of his movie. The expected impact on the younger generation is undeniable. (Read our April 2, 2007 post entitled "New Fiction Book Advocates Radical Solution to Pension Crisis" for a quick synopsis of Boomsday by Christopher Buckley.)
In "The State of the Union's Finances: A Citizen's Guide to the Financial Condition of the United States Government" (June 2008), the Peter G. Peterson Foundation reports that entitlement spending is on the rise, with a 213% increase in what they call "Implicit Exposures: Future Benefits," between 2000 and 2007 (i.e. $13 trillion to $40.8 trillion). Putting this in context, the "Size of the Individual Burden Imposed by Major Fiscal Exposures" is currently about $400,000 per full-time worker. Refresh the U.S. National Debt Clock site several times to see how quickly the number climbs in just a few seconds. (The reported daily average increase in the U.S. national debt is almost $2 billion.)
So while we all enjoy a hotdog while watching the fireworks, it is worth asking - How independent are we truly, when our collective debt obligations resemble a runaway train?
