With the steady disappearance of corporate pensions, the Great Recession (and the market dip after 9/11), inadequate savings and the rise in healthcare costs, a troubling trend has emerged among Baby Boomers: bankruptcy.
A research report titled, “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society,” by professors from four major U.S. universities, provides data showing that the bankruptcy filing rate among Americans aged 65 and older has almost tripled since 1991; for individuals 75 and up, that figure has increased nearly 10 times in the same time frame. The report states that “inadequate income and unmanageable costs of health care” are major factors, especially as the social safety net continues to shrink.
There is a stark difference between those retirees who file for bankruptcy and those who do not. The median senior bankruptcy filer has a negative wealth (when household debt exceeds its assets) of $17,390. In comparison, their non-bankrupt peers have a wealth of more than $250,000 in assets. The study suggests that the surge in senior bankruptcy filings has been fueled by a shift in who bears responsibility for financing retirement.
With workplace retirement plans and guaranteed retirement benefits from employers harder to come by for many employees, it is increasingly important for consumers to improve their financial literacy and become more educated about their options for retirement savings.
Take charge of your retirement savings through self-direction
The factors leading to senior bankruptcy are also motivating many investors to become more educated about self-direction as a retirement wealth-building strategy. Self-directed IRAs enable individuals to include many alternative assets within their retirement plans (such as real estate, precious metals and private equity)—investments they already understand and feel they have more control over their return. From younger Millennial workers with a long savings time horizon to older Generation Xers who still have time to catch up, educated investors can build a more diverse retirement portfolio with self-directed retirement plans. In addition to IRAs, individuals may also self-direct a health savings account (HSA), Coverdell Education Savings Account (ESA) and in certain situations, other qualified plans such as 401(k)s.
Education is key
Next Generation offers many ways to enhance your retirement knowledge at any stage of your planning process, with our helpful videos and white papers. We also have a library of monthly newsletters to skim any time and we invite you to check out the events page of our website for the latest opportunities to connect.