Bankruptcies boom, highlighting need to build wealth early

Older Americans are filing for bankruptcy at a rate more than triple that in 1991 amid reductions in the social safety net (Social Security and Medicare) and a shift away from pensions, according to the study “Graying of U.S. Bankruptcy:  Fallout from Life in a Risk Society.”  As reported in the Wall Street Journal, on average, 3.6 out of every 1,000 individuals between the ages of 65 and 70 years old are filing for bankruptcy, up from 1.2 per 1,000 in 1991.

With risk shifting to individuals via individual retirement plans, retirees are more dependent on the wealth they have accumulated over the years. The amount of help we can expect in retirement from Social Security and Medicaid is diminishing as well. At the current rate of depletion, the trustees of Social Security and Medicare are projecting that Social Security recipients will receive about three-quarters of their scheduled benefits after 2034 (see Social Security to tap into trust fund for first time in 36 years).

With no wealth, fewer funds coming in, and less time to rebuild, bankruptcy in later years can be devastating. The earlier you start to save, the better off you and your family be.

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Photo by Melinda Gimpel on Unsplash