Avoid Bankruptcy in Your Retirement Years

Avoid Bankruptcy in Your Retirement Years

For many born into American society over the past century, “the game of life” came with instructions that read, in part: go to college, find an excellent job with robust long-term benefits, and retire when you reach the golden age of 65. These were the rules you followed, the path to avoid an impoverished retirement. This approach was not a choice or dependent on luck, but an expectation for all who followed the instructions.

Despite following these “rules,” many have entered retirement without noticing that the game has changed. They have found themselves stuck with the burden of crushing monthly debt, rising healthcare costs and shrinking government security benefits. Some seniors are considering bankruptcy to financially reorganize and save what is left of their golden years.

There are several obstacles to the well-being of older Americans, particularly those who experience poor health or economic insecurity. Living on a limited income can make it difficult to manage finances and create a cushion for emergencies. Unexpected costs can quickly plunge seniors into unmanageable debt, as their ability to generate disposable income is diminished. Many seniors find themselves in so much debt that they explore bankruptcy protection to save themselves from financial ruin.

What are the major causes of this turn of events, and how can those approaching retirement avoid the pitfalls that plague the current class of seniors?

The first step in finding a solution to any problem is admitting it exists, but perhaps the most useful measure is sifting through the information available to unearth some facts that may help in avoiding this fate yourself.

There are two specific areas that you and your family can focus on, as you develop a plan to address this growing problem, while you still have the means to do so.

The National Council on Aging reports that debt has become the single most significant stressor on the financial stability of many senior households. Resources are plentiful as technology improves longevity, and resources, such as food and supplies, are easily ordered and delivered. What is in short supply is the monthly income to purchase such supplies or to pay what the insurance companies do not. Do-it-yourself retirement plans, the loss of worker protectionism through by labor unions, wage stagnation, and dwindling Social Security benefits with increased retirement ages have all contributed as well.

The solution lies in preparing for these shortcomings well in advance of retirement and being proactive in straightening out your financial household, while you still have the income to do so.

Medical debt

As Medicare benefits decrease and Social Security resources stagnate, medical debt poses perhaps the most overwhelming threat to economic security.

  • More than 84% of Americans aged 65+ are dealing with at least one chronic health concern, and most are affected by more health issues as they continue to grow older.
  • A study in the Journal of General Internal Medicine revealed that out-of-pocket medical expenditures in the five years before an individual’s death totaled more than $38,000, leaving 1 in 4 seniors approaching bankruptcy.

Purchasing additional coverage that will augment standard Medicare coverage is an excellent way to address this issue. Making sure you have plans and coverage for long-term disability is another option to add some stability and ensure you don’t add debt during retirement because of lack of coverage.

Credit card debt

Since the beginning of the new millennium, credit card debt held by senior households has increased dramatically, leaving many stuck with a monthly deficit. In 2001, 24% of seniors held high-interest credit card debt, and by 2016, more than 34% felt the burden of unmanageable monthly minimum payments.

In order to address credit card debt in time to avoid this fate, one must be disciplined. Begin paying down your credit debt over ten years and do not stray from the path. Avoid low-interest transfer deals that offer a low initial rate with a follow-up rate that is all but impossible to pay.

No matter what you do, doing something is better than doing nothing. Sitting down and creating a strategy that works for you is more important than it ever has been. Do not trust your retirement to fate. Be proactive, while at the same time maintaining a life that pleases both you and your wallet.

At Ambassador Advisors, we can help you identify issues in your retirement and estate plans years before any problem arises. Sit with us, and we will be there throughout to help ensure your plans are reliable and your future secure.

Federal Reserve Board. “2016 Survey of Consumer Finances.” Accessed August 2019.

United States Census Bureau. “American FactFinder.” Accessed July 2015. Senior Debt Facts | NCOA.

Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc.(APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purposes of avoiding penalties that may be imposed by law. Each tax payer should seek tax, legal or accounting advice from a tax professional based on his/her individual circumstances.

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