Five Paths to Bankruptcy in Your Golden Years

More and more people are filing bankruptcy – over a million a year – and a growing proportion of those people are retirees and seniors.  This is an especially heartbreaking statistic because seniors have worked their entire lives and the plan is always to retire to a care-free final chapter where they can enjoy the fruits of their lifelong labors without problems.

So why are so many seniors filing for bankruptcy in what should be their reward?  There are five main pathways that lead seniors to bankruptcy – and five lessons we can all learn before we ourselves retire.

1.            Healthcare

One of the main reasons seniors are forced to declare bankruptcy are unexpected healthcare costs.  Medicaid only covers about 80% of all healthcare costs, making what’s known as “gap insurance” essential – but not all seniors invest in this insurance.  Many people enter their old age without long-term care insurance either, meaning that a serious illness can wipe out their savings in no time.

2.            Undersaving

We’re all living longer, with women in the USA creeping towards an average lifespan of 80 years.  Not clearly understanding how much their retirement will cost, and not preparing for inflation and the rising costs of living, leaves many senior running out of money at a time in their lives where working is no longer an option.

3.            Student Loans

$36 billion in student loan debt is held by people over 50.  This can usually be traced back to midlife career changes or earning advanced degrees after a layoff prior to retirement.  Many seniors also borrow in order to send their children or grandchildren to school, leaving them on the hook for someone else’s education.

4.            Scams

As we age, we lose some of our ability to judge people and situations, and can become confused.  Plus, seniors often find themselves in unfamiliar scenarios after a lifetime spent working, and often new advances in technology are confusing for them.  When combined, these reasons make them vulnerable to many scams that cost seniors almost $3 billion annually.

5.            Predatory Lending

Predatory lending should probably be categorized under “scams” but is, in fact, perfectly legal.  Seniors who find themselves in declining financial situations may grasp at straws to keep the lights on, often agreeing to large balloon payments, adjustable rates, and other legal but unethical practices.  A properly planned retirement is essential to avoid these temptations.