Seniors declaring bankruptcy a worrisome trend?

Bankruptcy is blocking the path to a secure retirement

Declaring bankruptcy is probably at the bottom of every senior’s retirement “bucket list”. But, public records show an increased number of filings for retirement aged Americans.  It also brings into focus the value of The New Reverse Mortgage as part of a well conceived retirement plan.

Enjoy Retirement

Retirement is supposed to be a time to unwind and enjoy “the fruits of our labors” and get away from the “real world”.

Unfortunately the numbers are telling a different story.

The Institute for Financial Literacy reports that older people are making up an increasing proportion of bankruptcy filers. The over-65 group made up 8.3 percent of all filers in 2009, or about 99,600, a rise from 7.8 percent in 2006. About 40% of elder bankruptcies are filed between ages 65 and 74, which suggests a difficulty in adapting to a lifestyle based on a lower fixed income.

Retirement planning is tricky business

Top 5 Reasons for seniors declaring bankruptcy

 

The top five reasons for filing bankruptcy, according to a study entitled, “The (Interconnected) Reasons Elder Americans File Consumer Bankruptcy” conducted by Dr. Deborah Thorne are:

  • Credit cards
  • Illness
  • Income problems
  • Aggressive debt collection
  • Housing problems.

4 other hardships requiring bankruptcy

Other reasons for bankruptcies that were cited by filers and reported by the Institute for Financial Literacy included:

  • Divorce (15.1%)
  • Death of family member (7.5%)
  • Retirement (6.7%) – includes unplanned and unwanted retirement (or unemployment to most of us)
  • Identity theft (1.9%)

There’s seldom a single reason for seniors declaring bankruptcy

Thorne notes in her study that “it appears that there is seldom a single reason for their bankruptcies; instead, elder debtors often file because of the cascading effects of multiple interrelated life crises, each as consequential as the last.

Avoiding bankruptcy by creating your own retirement paycheck

Is credit card use the usual culprit?

Even though credit card debt tops the list of causes it’s usually not in a vacuum. Some assume that these families used consumer credit to live beyond their means. This is surely true of some families, but in many instances credit cards are the last resort for families whose finances are spiraling downward for other reasons, such as unemployment, medical expenses, or the death of a spouse or divorce.

I recently helped a retire couple who had run up more than $30,000 in cred card debt. The charges had been made for living expenses such as everyday living and covering unexpected medical expenses (including long term care) not indiscriminate usage at the local mall. The culprit was an “involuntary retirement” and the resulting prolonged unemployment.

The New Reverse Mortgage can help you solve your healthcare puzzle

The New Reverse Mortgage isn’t for everyone…but it could be!

How do I know if The New Reverse Mortgage is right for me?

If you’re still wondering if a Reverse Mortgage is the right solution for you but you’re not ready to sit down with one of our Reverse Mortgage Experts, then we’ll be happy to mail (or email) you Use Your Home to Stay at Home which is the official federally approved consumer booklet for those considering a reverse mortgage.

Some of this information first appeared in The Retirement Cafe by Dirk Cotton