Bankruptcies on the Rise for Baby Boomers

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I recently saw an article in the USA Today titled, “For Many Over 55, Debt Defers Dreams.” Many baby boomers thought they were on easy street as the stock market continued to grow higher and higher in 2006. Suddenly we hit the great recession and life no longer had a silver lining.

As a young man, I often picture the baby boomer generation with mini-yachts and hefty investment accounts. Apparently my mental picture is a little too rosie since 17% of the bankruptcies filed last year were from baby boomers!

What is causing all of these middle-aged people to file for bankruptcy?

(1) Retirement – Apparently there were some folks that retired, but were not financially ready.

(2) Credit Cards – Many blamed their bankrupcies on credit card debt. Isn’t this crazy? When I think of reclace swiping, I picture a 19 year old with a big screen TV in the cart. I definitely do not picture a 60 year old with over $20,000 in credit card debt. But, when jobs are lost and emergency funds are not in place, this is what happens.

(3) Assisting their children – This one blows my mind! When I was a young teenager, I was expected to get a job so that I could afford to buy a car, not to mention the gas, insurance, and car repairs. It was a great lesson and I greatly valued all of my possessions because I worked hard for them!

Today, teenagers are not looking for jobs. Do you know why? Their parents give them cars and pay for all the expenses! Who needs to get a job when there’s nothing to pay for. I could go on and on, but for your sake, I will stop now….

In summary, apparently parents are giving their children money even when they have none. I imagine most of these children aren’t really children anymore. They’re most likely mid-20’s and need to be booted out of the house.

(4) Medical Bills – This is a killer no matter what age you are. If an accident happens and medical attention is necessary, there will be large bills. One must be certain that they have good insurance and a proper emergency fund to avoid this one.

Make sure you learn from these mistakes

Not all people that go bankrupt are “bad people”; they may have just had a large unplanned expense that set them back farther then they ever expected. In order to avoid bankruptcy, make sure to set up your initial emergency fund, utilize the debt snowball method to get out of debt, set up an emergency fund that covers at least 3 months of expenses, and begin putting 15% toward your retirement investments (these can include business investments in my book – rental properties are a good example).

Does the Baby Boomer Bankruptcy surprise you? Do you know of anyone that went bankrupt in their 50s or 60s?

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Money Retirement

Derek

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

14 Comments

  1. I saw that headline too, and I too find it surprising.

    I have teenagers myself, and I am shocked with the amount of money some of these can throw around. I can count on less than one hand the number of teens I know that work (my own 16 year old included, but he will work this summer now that he can drive.) These parents have no consequences for these kids at all. Xbox till all hours of the morning, bad grades, doesn’t matter. Little Jimmy should still be able to drive to school and ‘have it all’.

    I think I went off topic there…

    Anyway, I know many people that will have to put off retirement because their portfolios took a huge hit. The only boomer-bankruptcy I know of stemmed from a combination of nasty divorce and home renovation/home equity loans.

    • You go off topic like me! I’m glad I’m not the only one that has a hard time watching all of these parents hand things to their children. They’re really doing their kids a disservice when it comes to the real world!

  2. Sometimes the priorities aren’t right. Fund your retirement first and then your kids tuition! Someone will lend your kid money for his/her education, no will give you a cent for your retirement!

    On assisting kids, I’ll quote Warren Buffet: I’ll leave my kid enough to do anything but not enough to do nothing.

    Buffet is one of the richest men on earth!

    • I like that quote by Warren Buffett! It’s true too – when he passes away, 99% of his money is going to various charities and only 1% will go to his kids. Don’t feel sorry for the kids though… that’s still 500 million dollars that they’ll be able to divide.

  3. I think when Baby Boomers start to have problems, it shows what the future is like. This over spend, over mortgage, culture, is a dangerous cycle to get in. Just wait for the 20-somethings (like me) grow up, and am stuck in the same rut… Trying to stay away form that, and live debt free.

    • I’m with you twentysomethingmoney! I’m trying to steer clear of debt and I’m striving to live life severely different than the average person. Good luck to you!

  4. Medical bills… one medical emergency can wipe you out, no matter how well-prepared you are. I hope I stay relatively healthy, and the rest I can only save as much as I can and hope for the best.

    • I hear ya Well Heeled Blog. Medical bills never seem like they’ll be in your future, but who knows when something can go wrong? You may need to stay in the hospital for a week and rack up an enormous bill! We can only hope to stay healthy.

    • that’s right – no one knows what the future holds – we plan – but – you never know!

      I had my friends daughter was dianogsed with cancer – poor thing battled from the age of 11 ot 18 – when she passed (just last nov) – they had to sell their home – ya just never know!

  5. I don’t know any people who’ve declared bankruptcy in the late 50s but I know plenty of people in the age range who are struggling and bankruptcy wouldn’t help. I think the best advice you’ve mentioned is to learn from these mistakes.

    • I hope that when I have to make those tough parental decisions, I will not just hand my child everything. He/she is going to work for it and understand how valuable each possession really is! That way, I will not lose my shirt to bankruptcy, and my child will grow up successful instead of become a leech!

      • we can only hope that is how our lives play out! In all actually – one never knows what is coming around the corner! For I owned 2 homes in which I did not plan to, there I was…..and bankruptcy – Oh I know so many baby boomers who had alot of $$ and lost it all in the market – one had several real estate and lost – another had stocks lost – etc,. etc

        I must say it is inspiring to read that you kids are making good decisions and hopeful for your future – and finances…come on economy – come back were all waiting! giggles

        • We’re trying to make the best decisions that we can. Luckily I have a wonderful wife that puts up with all of my crazy plans. Hopefully I won’t drive her batty! 🙂

  6. No, it doesn’t surprise me because of their spending habits. My generation was just before the Baby Boomers and we are a rather cautious generation. We had things in place for retirement plus my husband still does part time work. Yes, parents are still helping their children…it is hard to watch your child hurt at any age.


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