Bankruptcy during retirement is a major financial fear for many people. The idea of running into money trouble at a time in your life when you might not be able to go back to work is a frightening thought, especially after a lifetime of savings and hard work. Here is a look at the actions people take early in life that might lead to going broke during your golden years.
- Bringing too much debt to retirement: Ideally, you want to have paid of any large source of debt before retirement, but many seniors are still paying off mortgages and even student loans at this time. Since medical expenses are often an unknown factor at this part of life, these debts can eat too much into savings and cause major issues. To better prepare for retirement, do what you can to reduce your debt before cutting off your main source of income.
- Spending savings to avoid an earlier bankruptcy: For many reasons, including a misinformed cultural stigma around bankruptcy, people will put off filing for bankruptcy for far too long. They will go to extreme lengths to avoid filing when truly it might be the best decision. One sad example of this is people who will pull out all their retirement savings to pay emergency expenses, such medical debts. Most people don’t know that if you are in serious financial trouble, it might be wise to file before dipping into retirement savings, since these are protected and exempt from creditors during a bankruptcy. Liquidating your retirement halfway through your career can create major issues later in life.
- Supporting kids too far into life: Merrill Lynch reports that most parents over 55 still provide some kind of financial support to their adult children. This can be ok, but many parents provide this help with the belief that it will help their kids become self-sufficient. If you are continually providing for you adult children, it’s possible that it has started to become a form of enablement. It might be time to help teach your kids independence. Consider redefining expectations and slowly removing yourself from the financial equation.
This is only a few of many ways in which poor financial decisions early in life can potentially cause bankruptcy during retirement. Of course, often these things happen because of medical issues or other factors beyond your control, but taking the time to consider how to improve your retirement plans could be a great step towards a brighter financial future.
Julian, Crowder & Shuster, P.C., are Lewisville bankruptcy lawyers who help their clients tackle issues such as medical debt, consumer debts and other issues, to help them achieve their financial goals.