Baby Boomers Going Bankrupt on the Rise

Hate to be the bearer of bad news, but it turns out many baby boomers are going bust.

An increasing number of baby boomers— who have more debt than previous generations — are filing for bankruptcy, reported Patti Waldmeir for The Financial Times, citing a 2018 report called “Graying of US Bankruptcy.”

To be more specific, the number of older Americans filing for bankruptcy has surged by up to 300% in the last 25 years. The average senior files for bankruptcy more than $17,390 in debt.

Why is that the case? Here are a few reasons:

  • Rising medical costs definitely plays a role. In fact, 66.5% of all bankruptcies, regardless of age, are related to medical issues, either because of expensive medical bills or time away from work, reported Lorie Konish for CNBC, citing a study by the American Journal of Public Health.
  • Unlike their frugal parents who lived through the Depression, baby boomers are more inclined to get into credit card debt. Many still have student loan debt.
  • Pensions are disappearing and boomers, who are living longer, often have scant savings to fall back on.
  • According to the study, many boomers experience a decline in income.
  • Delayed full Social Security benefits and increased out-of-pocket spending with Medicare add to the problem.

Unfortunately, bankruptcy is not a cure-all since many baby boomers don’t have enough years to get back on their feet financially. “Bankruptcy is not and never has been a panacea, especially for older people,” the study points out adding that those who were older and filed Chapter 7 were significantly more likely to continue to experience financial struggles post-bankruptcy.

Although bankruptcy can’t always be prevented, there are some steps boomers can take to avoid this outcome.

Obviously, it’s important to pay off debt and save more while you’re still working. To accomplish this, you may need to put off retirement. The good news is that studies of healthy aging suggest that working longer can have a number of positive physical and psychological effects. Experts say that engaging in productive and social activities at work can help maintain meaning and a sense of purpose in life.

Already retired? Lots of retirees have embraced a second career, usually part-time, to supplement social security benefits. Why not look for ways to create new opportunities and seek experiences that broaden your horizon while making some extra money?

If needed, stop financially supporting adult children. About 40% of people in their early 20s get financial help from their parents, to the tune of $3,000 per year on average. If this describes you and it’s causing a financial strain, meet with your kids to discuss how to scale back. Do not co-sign loans for your children or grandchildren either – especially student loans – which leaves you on the hook if they don’t service the debt.

Pay off your mortgage before retiring. Many mortgages allow you to make additional payments toward the principal. Consider downsizing and simplifying your life to help achieve this goal.

Take control of your spending. Limit eating out. Get rid of cable and watch your favorite shows online. Avoid pricey hobbies. Look for free community events like concerts in the park. Cut up credit cards. Quit expensive habits like smoking and drinking. Rediscover the library. In other words, be tough with yourself now so your Golden Years aren’t tarnished with debt and bankruptcy.

 

juliegorges

Julie A. Gorges is the author of two young adult novels, Just Call Me Goody Two Shoes and Time to Cast Away and co-author of Residential Steel Design and Construction published by McGraw Hill. In addition, hundreds of her articles and short stories have been published in national and regional magazines, and she received three journalism awards from the Washington Newspaper Publishers Association while working as a newspaper reporter. Julie currently lives in southern California with her husband, Scott, and has two grown children and three grandchildren.

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15 Responses

  1. Cat Michaels says:

    Yikes! A huge concern to mostly everyone I know, many working to 70+ to make ends meet. Now if we could do something about the rising cost of insurance and RX drugs……..

  2. It’s a concern over here too. I dare say everywhere. One of the main reasons we agreed to hubby working for 3 years in PNG was to pay off the mortgage before retirement. It’s tough being away from each other, just have to keep an eye on the end goal.

  3. Mackenzie Flohr says:

    Wow. How scary because it is a situation I already see myself in. I got scammed out $6,000 in my 20s and never was able to climb out of it. I didn’t declare bankruptcy, however, my credit score took a dump. I still can’t get credit cards and my saving is pretty much zilch. I keep hoping that things will get better, but every time I think I’m getting ahead, something else happens, and I’m right back where I started. *sigh*

    • juliegorges says:

      So sorry to hear this, Mackenzie! From my research, you are certainly not alone facing financial issues. I appreciate you sharing your story and wish you success in future years. Don’t give up!

  4. Julie says:

    Goodness, something to think about. Liked all your budgeting suggestions at the end which don’t sound too difficult.

  5. My, have things changed since the days when people worked all their lives and were able to retire and enjoy themselves. I’m thinking back in my grandparent’s days and how it was so different for them.
    You gave some wonderful suggestions here, Julie.
    Great article.

    • juliegorges says:

      Thanks, Rosie. One of the things that has changed is that our grandparents did not live as long back then. Today, with longer life expediencies, it’s harder to save the money needed to cover those extra years. Thus, another reason boomers need to work longer. It’s a complicated situation and I can only hope my suggestions might help a bit.

  6. Chris Gorges says:

    Its not looking to good for my generation either. Costs keep raising while wages fail to keep up.

  7. Gary Francis says:

    Budgeting is a lesson we all need to learn from a young age. I’ve made sure my own kids have a basic understanding, although of course it’s up to them to put it into action…

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