While retirement used to be the promised land for senior citizens in America, it may not be a dream come true for everyone. According to financial advisor Dave Ramsey, 97 out of 100 people aged 65 and over are not able to write a check for $600 or more due to lack of funds. On the surface, this may seem surprising, but there are actually a number of different factors contributing to the financial struggles faced by senior citizens. In light of these factors, it is easy to see why so many seniors are filing for bankruptcy relief.
Dave Ramsey reports that 80% of Americans believe that their standard of living will increase at retirement. However, some surveys suggest the opposite. More than 50% of workers over the age of 55 have saved less than $50,000 for retirement. Of those workers, almost 40% have less than $25,000 set aside for their golden years. Those who are actually retired don't fare much better; some statistics indicate that the typical retiree has about $60,000 set aside.
While these numbers may seem like enough to live on, the reality is that having such a small financial cushion sets you up for disaster and leaves you vulnerable to bankruptcy if the slightest obstacle arises. Financial obstacles encountered by many seniors include:
While Medicare is designed to cover the cost of health care for those over the age of 65, the plan may not be comprehensive and may not catch everything. Prescriptions and treatment are cost prohibitive, and buying private insurance is often almost impossible for those who have reached 65 and older. As of 2011, the cost of providing medical care is a major burden on senior citizens, especially if they fall ill. Maintenance care or major illnesses can lead to bankruptcy or cause a senior to rack up credit card debt or loans to pay for treatment.
Some senior citizens believe that they will keep working (and, in fact, need to keep working in order to avoid financial disaster). A plan to work forever is not a good one, though, because as a person ages the chances of him or her becoming ill and unable to work increases. If a senior can no longer work, debts can mount and bankruptcy is a likely result.
Pensions used to be a standard benefit in many jobs, but this is no longer the case. Fewer and fewer companies are offering pensions. Those workers that do get pensions often find that the pension combined with Social Security is still not enough to cover basic living expenses.
Senior citizens who are on a fixed income may use credit cards to pay their basic living expenses. When they can't pay those credit cards, bankruptcy may be the only choice. In fact, a University of Michigan Law School study indicated that as many as two out of three seniors filing for bankruptcy cite credit card debt as one of the primary reasons.
There is another common cause of senior citizen bankruptcy as well: scams. Senior citizens often become easy victims of those who want to prey on them. Scams take on many different forms. Seniors who aren't computer savvy, for example, may be tricked by an email or computer scam asking for their passwords or bank information. Seniors who can no longer read fine print or understand the consequences of a new contract may fall victim to predatory lenders and end up with a mortgage that is almost guaranteed to end in foreclosure. Any number of other scams may also be used to put a senior in jeopardy of bankruptcy, especially if he or she doesn't have a financial safety net.
To learn more about scams targeting seniors, how to avoid these scams, and where to report them if they occur, read Nolo's article Elder Abuse: Financial Scams Against Seniors.