DEBT A MOUNTING PROBLEM FOR AMERICAN RETIREES

Retirement is supposed to be a time to relax and enjoy the fruits of a career's worth of work. Unfortunately, the recent recession has taken a huge toll on the investments that many Americans were counting on to fund their retirements.

This means that a lot of Americans may face the prospect of not having enough to live on during retirement. In fact, a recent survey conducted by TD Ameritrade found that nearly three-quarters of all Baby Boomers plan to place significant reliance on their Social Security payments during retirement. However, the average Social Security check is only $1,230 per month, which may not stretch as far as many retirees will need it to.

The problem is even further compounded by the fact that so many seniors are coming into retirement with debt. The federal Survey of Consumer Finances showed that almost 65 percent of Americans over age 64 had mortgage debt in 2010. By contrast, only about 27 percent of seniors still owed money on their mortgages in 1989. During this same period, the average outstanding mortgage debt nearly tripled.

Credit card debt is also an issue for older Americans. A survey conducted by AARP found that more than one-third of respondents used credit cards to fund basic living expenses like food, utilities and housing payments. The average debt load was approximately $8,248.

All of these things can lead to significant financial problems, including bankruptcy. The National Foundation for Credit Counseling says that nearly one-third of its clients who end up filing for bankruptcy are over age 55.

Financial health during retirement

Filing for bankruptcy is not a sign of failure. Economic conditions for retirees are worse now than at almost any other point in recent history. In many cases, bankruptcy can offer a solution to unmanageable debt and a fresh start that allows retirees to focus on enjoying their golden years.

With that said, most people would prefer to avoid getting into a situation where bankruptcy is necessary. While no one can control the economy, there are some steps people can take to help secure their financial health during retirement:

  • Set a budget: Retirement means living on a fixed income. This lifestyle will be easier to adjust to if you set a realistic budget and stick to it. It's also a good idea to avoid carrying a balance on a credit card, since interest charges can add up quickly.
  • Streamline your expenses: Stop paying for things you don't need. If you don't watch much TV, then don't pay for cable. If you hardly ever use your cellphone, don't buy the most expensive plan.
  • Evaluate your insurance: Most people don't need to pay for life insurance once they reach retirement age, so long as they have a good estate plan in place. However, having sufficient home and auto insurance can help protect against unanticipated expenses.
  • Manage travel expenses: Traveling is one of the most fun parts of retirement. It is also one of the most expensive. It's worth taking the time to plan and shop around in order to save money.

If you do get into financial trouble, know that help is out there. An experienced bankruptcy attorney can work with you to review your financial situation and make a plan to get you back on your feet.