We all want to enjoy our golden years, but the sad news in Los Angeles and across the country is that the number of seniors filing for bankruptcy is increasing. Twenty percent of bankruptcies are filed by people who are age 55 and older. That’s twice as many as there were in 1994.

Perhaps this should not be a surprise, since 32% of people ages 53 to 62 have nothing set aside for their retirement.

There are many reasons that seniors file for bankruptcy, but the most common are medical expenses and credit card debt. Here are some ways to plan ahead for the future — whether you’re a senior who is struggling with debt now, or someone looking to ensure they are debt-free as they inch toward retirement.

Seniors and Medical Bills

Over 25% of Americans are in over their heads with medical expenses. Most of us think if we have insurance, we’re safe, but 10 million Americans with year-round health insurance coverage find it impossible to pay off their medical bills each year. In fact, in 2015, the Kaiser Family Foundation found that medical bills caused 1 million people to declare bankruptcy (though that figure varies by the source).

As we get older, our medical expenses escalate just as our incomes decline. A 2015 study by the Employee Benefit Research Institute found that a married couple who had some expenses for prescription drugs needed $392,000 in order to have a 90% likelihood of being able to cover their healthcare expenses in retirement. And that doesn’t even include long-term care expenses.

Many people think that Medicare will take care of them in their old age, but there are a lot of expenses that Medicare doesn’t cover, such as eye and dental care and long-term care, which is breathtakingly expensive. For example, a semi-private room in a nursing home costs $225 per day on average. And of course, seniors must pay their often-high deductibles before insurance even kicks in.

Seniors and Credit Card Debt

One reason seniors are increasingly filing bankruptcy is soaring credit card debt. Many seniors have previously accrued credit card debt when they retire, and on a lesser income, they find themselves getting further and further behind on their payments. Many others simply did not plan well for retirement, or just never made enough money to save for retirement.

A recent Demos National Survey on Credit Card Debt found a new trend that middle-income people ages 50 and older are now carrying more credit card debt than younger Americans. This can be devastating as people approach retirement. Retirees on fixed incomes may be hurt particularly badly when the economy sours, and about a third turn to credit cards to make ends meet, using them for basics such as food and gasoline. One third of those over age 50 say they have used credit cards to finance daily expenses. Seniors also often get into credit card trouble by trying to give financial help to their children or grandchildren, an expense they can ill afford.

Increasingly high medical expenses have a big impact on the credit card debt of seniors. Half of people over age 50 say they have paid for medical debt with credit cards.

Financial Planning for Seniors

It may be easier said than done, but one of the best things to do as a senior or someone who is considering retiring early is to plan ahead for medical expenses and other emergencies we may face down the road. Life is about expecting the unexpected, but many of us so often choose to ignore that simple fact. We may live simple and healthy lives but suddenly come down with an illness later on that couldn’t have been predicted.

Plan a budget, and stick to it. Plan for retirement. Keep an emergency fund that covers at least six months of expenses — as we age, it may be better to include multiple emergency funds for different reasons (car, medical bills, losing a job), or at least double that six-month amount to one year.

Opening a health savings account (HSA) also can be beneficial. HSAs work with pre-tax dollars to help you with medical bills and expenses, particularly those items not covered by Medicare, like important preventatives such as eye exams or regular dental cleanings. The money from HSAs can be withdrawn tax-free. Familiarize yourself with what your health insurance plan and Medicare will cover, and what you will have to cover yourself.

Already in Debt and a Senior? Get Help Today

If you’re already in debt as a California senior, there are a few things you can do to ease your financial situation.

Negotiate a payment plan with doctors, hospitals, and other medical providers to whom you owe debt. Don’t get a medical credit card, because you may just end up digging a deeper hole.
Pay off high-interest debt first. Later, you can use a credit card to supercharge your credit score.
Rein in your budget until your bills are paid. Check out some of our popular budget-planning articles to get started: How to Keep Your Budget on Track, Can I Retire Early in LA?, and Thinking of Using Retirement Accounts to Pay Debt? Don’t Do It!
Contact the bank who issues your credit card and see if you can negotiate a plan where you don’t have to pay interest and penalties as you try to catch up. Ask what other help they can give you. Do this before your account goes to debt collection.
Consult with a nonprofit credit counselor.
Consider whether or not a reverse mortgage is right for your situation.
Speak with a financial advisor and/or an experienced bankruptcy attorney. He or she may be able to best guide you on what steps will most benefit you.

The bottom line is, prepare early, and prepare often. Go into retirement with your eyes wide open. Hope for the best regarding your health, but plan for the worst. And if you do have to file for bankruptcy, do so with a qualified bankruptcy attorney.

Our attorneys at Borowitz & Clark have helped thousands of Californians get out of debt and move on with their lives. Contact us today for a free consultation.