Too little, too late.

Ever wonder why you see so many older people working in warehouse stores and driving school buses? It’s because they don’t make enough in retirement to support themselves. Most worked all of their lives and did what they were supposed to do. Yet, circumstances put them in situations where they were not able to pay the bills.

All of those “wouldas, couldas, shouldas.”

As a young adult, you can move, change jobs, jettison the spouse, shift careers, or bet the farm. Unanticipated consequences happen to all of us, and if you make a costly mistake, you’ll have enough working years left to recover the money you’ve lost. Filing for bankruptcy offers you a fresh start, a clean slate, and a second chance to get it right.

Not so for folks in their late 50s and 60s, who are much less able to weather the storms. They manage the unexpected by tapping into retirement funds. When there is a stumble—often not a big thing—they find themselves with nothing left to draw on. Ultimately, the hounding of debt collectors pushes them to seek relief through bankruptcy. By the time they file, their wealth has vanished. Welcome to Walmart and Home Depot.

Bankruptcy by the numbers.

The “golden years” of retirement might not be so golden, after all. A recent study from the Consumer Bankruptcy Project showed that bankruptcy filings are down for young and middle-aged adults (see figure). The rate for people 65 and older, however, has tripled since 1991. This group also accounts for a far greater share of all filers.

Source: New York Times, August 5, 2018

Although the actual number of older people filing was relatively small—about 100,000 annually during the period of the study—the researchers signal this as the tip of the iceberg. The next generation nearing retirement age is filing for bankruptcy in even greater numbers, they said.

Broke, busted, disgusted.

Boomers are retiring at the rate of 10,000 a day (see: The silver tsunami). But the signs of potential trouble have been building for years. Driving the surge, the study suggests, is a three-decade shift of financial risk from government and employers to individuals. Today, employees bear much greater responsibility for retirement planning and oversight.

Factors cited by survey respondents as contributing to their filing for bankruptcy:

Declining incomes. Age discrimination is the law of the jungle. If you can be replaced with a younger model, an overseas worker, or a machine, you’ll be working for peanuts. A little more than two-thirds cited a drop in income as a major factor.
Shrinking social safety net. Longer waits for full Social Security benefits, vanishing employer-provided pensions, and increased out-of-pocket spending on health care take a huge bite. About three in five said medical expenses played a leading role.
Crushing personal debt. Just over one third cited debt incurred to help a family member, such as an older parent or co-signing student loans for their children. Nearly three-quarters put some blame on abusive tactics used by debt collectors.
Lack of savings. A Pew Charitable Trust Survey (2015) found that the majority of households can replace less than one month of their income through liquid savings. Those at the bottom of the income ladder? Nine days and they’re tapped out.
Life happens. Circumstances like a late-life divorce, death of a spouse, or having to raise grand-kids can wipe out aspirations and savings. Credit reports can get ruined, wages garnished, and court judgments can place liens against property.

Baby Boomers have belatedly discovered their financial vulnerability. Parents, if you find yourselves working not by choice but simply to survive, if you are getting older yet poorer, and if “Fancy Feast” is an entrée at your dinner table, don’t sacrifice your retirement to support your adult children. It won’t make you bad parents.

NeXters, remember that those who are old were once young. Listen to tribal elders and learn from their experiences. It’s no fun being old. It’s less fun being poor. It is hell being old and poor. When it’s your turn to retire, your parents and the government will not be there to save you.