Filing for Bankruptcy At Retirement

Lost in the news that consumer bankruptcy filings continue to rise is one particularly depressing piece of news: These filings among senior citizens are actually rising at a greater rate than they are for the rest of the population. When we picture our retirement years, we see images of spending time with our grandchildren, traveling around the world, or spending long weekends in lakefront cabins. But increasingly, the retirement years of U.S. residents are turning into ones of financial strife. According to the latest numbers, a growing number of retirees are spending at least a portion of their golden years learning the basics of bankruptcy and visiting bankruptcy court.

Little Surprise

Of course, to anyone who’s read the business pages of their local newspapers lately, this isn’t a surprise: Home values are still falling and many senior citizens were relying heavily on their residences to help fund their retirement years. Others raided their IRAs or 401(k) accounts as the economy turned south. Still others have seen the value of their investments plummet as the national economy’s woes only gain momentum. For these senior citizens, the retirement years have transformed from a time of anticipation to one of dread.

The Dismal Numbers

According to a recent story in the Chicago Sun-Times, older Americans have been forced to rely more heavily on their credit cards to pay their bills; they are now struggling with the debt they’ve racked up, even as their retirement years near. The Sun-Times story quotes an economic analyst who says that a staggering 50 percent of Baby Boomers are not prepared financially for their retirement years. The numbers back this up: According to the Consumer Bankruptcy Report, bankruptcy filings by those 65 and older jumped 150 percent from 1991 to 2007. Bankruptcy filings for senior citizens from the ages of 75 to 84 jumped even higher during the same period, rising 433 percent.

Taking Steps Now

Fortunately, there are steps you can take today to avoid a retirement filled with bankruptcy worries. First, try to invest as much as you can each pay period in your company’s 401(k) plan. If you don’t have one of these plans, invest as heavily as you can in a traditional or Roth IRA. This might require you to sacrifice a vacation or other big-ticket item now, but it will pay off in the long run. Secondly, only purchase items that you can afford to pay for in cash; this means to stop relying on your credit cards. If you can’t afford to buy something without the help of credit, simply don’t buy it. Finally, sign up to work with a licensed financial planner. This financial professional can help you chart a path that will best lead you to a financially secure retirement.