When we think of the word “retirement,” we might picture a golf course or a tennis court. We might envision having plenty of time to walk on the beach, browse through a farmer’s market, or relax with a good book. We might imagine ourselves napping in the shade. But chances are we don’t associate the word “retirement” with personal bankruptcy. 

Yet, sadly, that’s what’s happening  to too many seniors these days, according to this article we recently discovered from NextAvenue. It offers the surprising news that seniors now account for almost one in five personal bankruptcy filings in the U.S., a dramatic increase from 2001 when that figure was closer to one in 20. As the article contends, a combination of longer lifespans, the disappearance of pensions, and easy credit have put seniors at greater financial risk than ever before. Moreover, today’s government policies might make things worse. 

This article was written by Chris Farrell, senior economics contributor for American Public Media’s Marketplace. The report was part of a collaboration between NextAvenue and the Marketplace Morning Report. It paints a sobering picture of a perfect storm of factors putting seniors – and often their heirs – at serious financial risk. 

For Many, Retirement is a Time of Financial Struggle 

Farrell begins his article by evoking the picture-perfect image of retirement: relaxation, pursuit of passions, travel, time with grandkids. It’s all the things that we expect and hope for in our later years.  

But often that dreamy picture proves inaccurate. “Sadly, the experience of the retirement years for too many people is defined by a struggle to pay bills,” he writes. “Some in difficult financial straits eventually seek relief by filing for consumer bankruptcy.”  

He goes on to explain that—according to scholarly research—the number of people age 65 and older filing for bankruptcy has increased significantly, from 4.5 percent of all filers in 2001 to 18.7 percent by 2022. This rate of increase far outstrips the middle-aged and younger adult categories.  

Without Pensions, Social Security Alone Often Proves Inadequate 

“What we’re seeing is a combination of a number of factors,” says Lori Trawinski, senior director of finance and employment at AARP. “One is increased longevity. People are living longer.” 

Along with increased longevity, she also notes the dramatic decline in pensions; most people don’t have an employer-managed pension income anymore. And retirees who rely largely on Social Security to pay bills are also at risk.  

“Social Security payments provide at least 50 percent of the income for four in 10 retirees, according to the Center on Budget and Policy Priorities. For one in seven, the figure is 90 percent of their income,” Farrell writes.  

Trawinski adds, “You look at these combinations of factors, where people are living on a fixed income and they’re living longer, it’s going to stress someone’s budget. I think people will turn to bankruptcy because it’s their last resort.” 

Seniors are Relying on a Shrinking Safety Net 

Farrell explains, “Key to understanding the rise in consumer bankruptcy filings among older adults is that the risks traditionally associated with aging — lower income and higher health care bills — have been off-loaded from robust risk-sharing institutions on to fragile household balance sheets. The government and employer-based social insurance safety net has been shrinking for 40 years.” 

Pamela Foohey, professor at the University of Georgia School of Law, is a major force in researching this topic. She says that this shift away from institutional help has reshaped “what it means to get older, what it means to buy a home, what it means to struggle to have a car, what it means to have kids, what it means to lose your job, what it means to get sick, and how that all ends up in bankruptcy court.” 

Even with Medicare, Medical Bills Can Decimate Retirement Savings 

As the co-author of the forthcoming book, Debt’s Grip: Risk and Consumer Bankruptcy, Foohey can point to two factors that are pushing older adults into bankruptcy. First: the high cost of health care and health insurance.   

“Even with Medicare, older adults face sharply rising medical bills,” Farrell writes. “For instance, more than one in four (28 percent) of older adults on Medicare who said they had medical bill problems said that medical bills and medical debt had exhausted their savings, according to the Commonwealth Fund Biennial Health Insurance Survey, 2022.” 

Job Insecurity: Employers “Don’t Take Care” of Employees 

The second reason Foohey highlights is “the long-term erosion in the implicit contract between workers and employers.”  

Evidence for this can be found in the way senior management has “restructured, downsized and rightsized millions of American workers out of their jobs in recent decades,” as Farrell puts it, all while clamping down on wage gains for those still on the payroll.  

“Employers, in some ways, don’t take care of their employees as much,” says Foohey. “You don’t have a job for life or for 20 years, which means that that kind of movement of people and the changing in jobs leads to a lot of a lot of risk and uncertainty as to what’s going to happen in your life. Those periods of unemployment people use up their savings, and little nest eggs slowly are kind of drawn down, and the ability to consistently save has gone away.” 

Easy Credit, Current Government Priorities Paint a Bleak Picture 

Borrowing more and often has never been easier, says Farrell, and this is another element leaving senior adults of modest means on a financial knifepoint.  

“Disturbingly, nothing currently on the horizon suggests the situation will get better. A good case can be made that the current Trump Administration budget priorities will raise the risk of falling into financial straits,” he explains, in a section written before the passage of the bill through Congress. He concludes: “[…] The lack of spending support is clear.” 

(For more on the impact of federal policies on seniors, see our companion article this week on the Blog describing how seniors are likely to be affected by the recently-passed legislation called “One Big Beautiful Bill.”) 

Today’s Pressure on Seniors May Impact the Next Generation 

“I also am worried about what’s going to happen in the future,” says Foohey. “I’m talking about seniors, and there’s another 10 years of people behind them who have been living through the same economic and social situations, who will soon be 60 and then 70, and will enter their retirement years with potentially even less, with the same health care costs and the same job problems. I don’t know: What’s going to happen to them?” 

Farrell concludes his article with these challenging words: “Odds are that the next generation of indebted older adults will be even more financially vulnerable to unexpected setbacks than their parents. That’s a financial inheritance nobody wants.” 

Rajiv’s Urgent Prescription: Get a Financial Dashboard 

We asked Rajiv Nagaich about this story. His response: developing sound financial discipline early on is imperative, and a financial dashboard is a critical tool to build a strong financial future. 

“This article paints a pretty bleak picture,” Rajiv acknowledges. “It reminds us that retirement is a marathon, not a sprint. No matter what, seniors need to find ways to make sure they don’t outlive their money – because when that happens, they’re virtually certain to become a burden to those they love, and no one wants that.” 

However, Rajiv is quick to add that, even with modest resources, retirement can still be a time of security and contentment, provided you know how to make those resources last. “That’s why a financial dashboard is absolutely needed,” he emphasizes. “It allows you to evaluate your financial decisions and helps you make the right ones. You’ll be able to see how the choices you make today will impact your life five, ten, fifteen years from now.” 

The bottom line, Rajiv says, is simple: having the knowledge to make smart choices today will help you live within your means. “It’s not that a [financial] dashboard magically makes more money appear,” he states – “but you’ll finally have the tool you need to live well with the money you to have, and that can make all the difference.” 

Contact us and ask about creating a financial dashboard. We’ll refer you to a trusted financial professional who can guide you. 

Rajiv Nagaich – Your Retirement Planning Coach and Guide 

The long-awaited book by Rajiv Nagaich, called Your Retirement: Dream or Disaster, has been released and is now available to the public. Retirement: Dream or Disaster joins Rajiv’s ground-breaking DVD series and workbook, Master Your Future, as a powerful planning tool in your retirement toolbox. As a friend of AgingOptions, we know you’ll want to get your copy and spread the word.  

You’ve heard Rajiv say it repeatedly: 70 percent of retirement plans will fail. If you know someone whose retirement turned into a nightmare when they were forced into a nursing home, went broke paying for care, or became a burden to their families – and you want to make sure it doesn’t happen to you – then this book is must-read. 

Through stories, examples, and personal insights, Rajiv takes us along on his journey of expanding awareness about a problem that few are willing to talk about, yet it’s one that results in millions of Americans sleepwalking their way into their worst nightmares about aging. Rajiv lays bare the shortcomings of traditional retirement planning advice, exposes the biases many professionals have about what is best for older adults, and much more. 

Rajiv then offers a solution: LifePlanning, his groundbreaking approach to retirement planning. Rajiv explains the essential planning steps and, most importantly, how to develop the framework for these elements to work in concert toward your most deeply held retirement goals.  

Your retirement can be the exciting and fulfilling life you’ve always wanted it to be. Start by reading and sharing Rajiv’s important message. And remember, Age On, everyone! 

(originally reported at www.nextavenue.org)