Seniors face financial risks and issues that could worsen as their monetary safety net grows smaller and their debt-to-income ratio grows larger. According to the Federal Reserve Bank of New York, total debt for seniors 70 and older has increased by at least 543% since 1999.
With the rising cost of living, it is easy to fall behind on a mortgage or revolving debts while on a retirement budget. When a senior begins thinking about transitioning into steady retirement, reconsidering his or her household budget often becomes a priority.
Signs of a struggling household
The Employee Benefit Research Institute determined that families fall into the “struggling” category when household debts grow to more than 40% of their income. From 2007 to 2016, household debt grew by at least 23%. As reported by CNBC, an increase in medical and educational expenses contributed to many baby boomers not having the financial means to retire comfortably.
By 2019, the amount of debt held by seniors in their 60s increased by 471%. The outstanding balance owed by Americans in the over-60 age group reached $2.14 trillion; without a significant surge of income, that balance may not show much of a decrease.
The option of bankruptcy
Older individuals may face age discrimination when seeking a new position or second job to help earn more income. While searching for better-paying work, mortgage, loan and credit card payments may fall behind. A few outstanding payments could soon require an overwhelming balloon payment to bring an account up to date.
Without the income needed to make on-time payments, accounts may stay in arrears until creditors can no longer hold it. They may then sell the remaining balance off to a debt-purchase company to begin overly aggressive collection efforts. Harassment through repeat phone calls and the threat of legal actions are part of the reason why seniors represent one out of every seven bankruptcy petitioners.
Some individuals nearing retirement struggle to continue working to pay down their debts. Others, however, seek options to reorganize their budgets so they may live comfortably within their retirement means.