New data from the Employee Benefit Research Institute shows that for retirees 75 and older, debt has actually increased. In fact, nearly a fifth of all bankruptcies in the United States come from those older than 55. With the economy in a prolonged weakened state, many baby boomers are short on retirement savings and still find themselves in debt. Taxes, medical expenses, and miscellaneous costs continue to rise while income remains the same or even diminishes.
So is filing for bankruptcy after retirement a good strategy for all senior citizens? Just like anything else in life there is no “one-size fits all” answer, but there are several tips to consider if you are driven to bankruptcy.
Money Management In Bankruptcy
Senior citizens living on fixed incomes should certainly consider filing for bankruptcy if they’re already in debt and their cost of living continues to rise. Filing for bankruptcy may be the only option to help reduce personal debt and allow you to live without new credit. When considering filing for a bankruptcy, retirees should remember these money management tips:
- Protect 401(k) and IRA accounts. While Chapter 7 and Chapter 13 both protect your retirement assets, you may be draining your own retirement account trying to pay off your debt. If your debt is overwhelming, then part of your money management planning should be to consider whether or not you could live on your retirement assets while paying off debts. If not, bankruptcy might be a good option.
- Most seniors don’t have to worry about credit scores. One of the biggest fears about filing for bankruptcy is the ruining of a credit score. Retirees must remember, though, that a good credit score is only needed for a major purchase such as a house or a car and that many of them likely won’t be making such a major purchase again.
- Consider vacation, travel, and new credit in your money management options. The biggest downside to filing for bankruptcy is the lack of credit. If you enjoy vacationing or traveling, it may be very difficult to do so without credit.
Regardless of whether or not you decide filing for bankruptcy is for you, just remember to keep these basic money management principles in mind to ensure that your retirement funds are secure!