Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

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MrCheapo
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Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by MrCheapo »

So I think a lot of people (including myself) are holding on for a few more years to build up a safety moat "just in case" something bad happens.

But I'm curious if there are any statistics or anecdotal evidence of what causes a retiree to go BK?

In terms of catastrophic/black-swan events: I believe that ObamaCare rules out BK due to medical bills right?
So then what is left in this category of events?

In terms of slow decent into BK what caused it? Bad planning, bad execution or something else?
sailaway
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by sailaway »

MrCheapo wrote: Tue May 18, 2021 5:45 pm In terms of catastrophic/black-swan events: I believe that ObamaCare rules out BK due to medical bills right?
No. Medical bankruptcy has been dramatically reduced, but not eliminated.

One danger I have heard of, anecdotally, is bad spending being the first indication of dementia. The spending affected the nest egg, the memory care wiped it out.
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by lazynovice »

Not bankrupt but needed support from kids- one elderly woman who overspent on clothes, furniture, housewares, etc. Shopping due to boredom and loneliness mostly.

Another elderly man who gave away his money to a caretaker who had a good sob story. Caretaker ended up being prosecuted but the money was gone. Some restitution was made but not all of it.

Several people who have had to have assistance from kids for in-home care in their final months. I don’t know but some of the assistance was probably recovered upon sale of the houses.
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Kenkat
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by Kenkat »

I have not known anyone who actually declared bankruptcy but know of a handful that overspent early in retirement and had to switch to a very austere lifestyle later on “when the money ran out”.
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by surfstar »

So far the above stories likely would have played out the same, with just a higher dollar amount spent/lost/wasted/stolen, if those people had saved more.

Also if I run out of money due to mental/physical health issues, I'd rather have retired early with less money and been able to enjoy a couple-few more years of when I was in good health, instead of having more money at the point of not being able to 'enjoy' the utility of it.

Retirement planning would be much easier if we knew when we were going to die. Don't over/under plan and you did it right. Won't ever know though, unless you spend your last penny with your last breath!
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by abuss368 »

MrCheapo wrote: Tue May 18, 2021 5:45 pm So I think a lot of people (including myself) are holding on for a few more years to build up a safety moat "just in case" something bad happens.

But I'm curious if there are any statistics or anecdotal evidence of what causes a retiree to go BK?

In terms of catastrophic/black-swan events: I believe that ObamaCare rules out BK due to medical bills right?
So then what is left in this category of events?

In terms of slow decent into BK what caused it? Bad planning, bad execution or something else?
I am not aware of anyone who declared bankruptcy in retirement.

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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by Carefreeap »

Effectively.

Mom and Dad did file bankruptcy at ages 58 & 60 in 1996. The stated reason for the bankruptcy was that the landlord of the second real estate office (opened within 6 months of the first one which they had no experience of owning a real estate office :oops: ) would not negotiate an early release of their lease. After BK they divorced.

Fast forward 12 years and Mom dies in 2008 at age 70 with an upside down estate of negative $400,000. About $300k is due to her condo falling in value. She had bought it in 2003 or 2004 and it had increased in value but she kept refinancing pulling cash out. Some of this was due to her being unable to work as a real estate agent after getting two knee replacements but she also had credit card debt of $60k and owed back federal taxes of about $40k. As her executor and successor Trustee, I settled/worked with her creditors and cleaned up the mess. I later sold that condo for about a $300k profit 8 years later.

Dad "retired" at age 60 and took early SS. Never made more than about 6k/yr his entire life. While he never remarried, gf was too smart for that, they did live together for over 20 years. Just over a year ago, after his third fall where he broke bones, the doctor wouldn't release him home. Fortunately he qualified for a Medicaid custodial care and there was space! Otherwise DH and I would have been stuck picking up the tab.

You can say that my parents money troubles were due to medical issues but that really masks chronic money management problems. I first experienced it in 1979 when I was 17 and getting ready to go to college. I had to make a 5 hour round trip to deliever a cashier's check to a Trustee to keep the family home from being foreclosed on. It was purchased in 1963 for $20k. Located in a prime area in San Diego, it's value was probably around $180k in 1979.

And yes, DH and I lent them money, never to be seen again.

I wince when folks come onto Bogleheads and post about lending family members money or co-signing a loan for parents. While every situation is unique, I just sadly shake my head and say to myself, if they haven't learned by now, they never will.
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by cheese_breath »

Kenkat wrote: Tue May 18, 2021 6:12 pm I have not known anyone who actually declared bankruptcy but know of a handful that overspent early in retirement and had to switch to a very austere lifestyle later on “when the money ran out”.
Ditto. Spent extravagantly and lived above his means.
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by frugalecon »

I know someone who is approaching 70 who has been mostly unemployed since he turned 62. He spent all of what were tbh meager savings, and has been living hand to mouth since. He had run up about $50,000 in credit card bills last he told me his situation, and he was considering BK. His main problems were that he didn't save for retirement during his work life, and he became unwilling to compromise his preferences or principles in the workplace, effectively rendering him unemployable. These aren't problems that are particularly relevant for the BH crowd.

I wouldn't want his life, but he appears to be fairly content, working on writing projects that bring him a lot of satisfaction and living simply in a rent-controlled apartment, with a modest SS benefit and help from various programs for low-income seniors and occasional gifts from friends to tide him over the rough patches. I expect that he will eventually end up in a Medicaid nursing facility if he survives to the point where he can't care for himself, but he really doesn't spend any time worrying about that. He is often fatalistic that "I will worry about tomorrow tomorrow."
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by frugalecon »

Not sure why there was a double post.
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by fortunefavored »

David Jay wrote: Tue May 18, 2021 6:16 pm I am really concerned about you, my friend. Starting a thread about future bankruptcy when you have a $3.2M retirement portfolio, plus another million dollars in rental property. And living expenses of $70K or $80K. As I told you on the other thread, 2.5% is a perpetual withdrawal rate, where you do not even deplete your capital.

I wish there was a way I could wave a magic wand and overcome your fears with the logic of your financial situation.
I agree. I feel ya MrCheapo, I see a lot of similar feelings to money that I have.. my parents were immigrants and went bankrupt several times, I now have 100x as much money as they ever saw in their lives.. but I still have those thoughts.

If all the Bogleheads logic in the world can't convince you, maybe some professional therapy would help.
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by HoosierJim »

MrCheapo wrote: Tue May 18, 2021 5:45 pm In terms of catastrophic/black-swan events: I believe that ObamaCare rules out BK due to medical bills right?
No, you are still subject to surprise billing. (until 1/1/2022 - subject to your state laws)

Our ACA coverage for the plans available in our zip code has NO out of network coverage. So if i mistakenly go to a out-of-network hospital (or my anesthesiologist happens to not have a contract with my insurance even at a IN-network hospital), I have to pay - often time 10x the reasonable fees. The new law passed last year but takes effect 1/1/2021.
Last edited by HoosierJim on Tue May 18, 2021 7:29 pm, edited 1 time in total.
runner3081
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by runner3081 »

My grandpa went into medical BK about 20ish years ago. He was going without health insurance when his wife was diagnosed with breast cancer. The treatments cleaned them out - no insurance meant it was into the low 7-figures. That was roughly 20 years into retirement (he went out early from public service job due to an injury).

He filed for BK, played games for a while with "who can take the money from the bank first" (him or creditors). He probably isn't the most ethical guy, but yeah... :)

He was fortunate, had multiple government pensions that continued to pay and there was no impact. Took 3-4 years and he pulled out of it. 15ish years later, now, he is doing great and there is zero impact. Owns a different house and enjoys his hobbies.

Without that pension, things might have been different.
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by quantAndHold »

Yes. A good friend, former C-level exec for a Fortune 500. Seven figure loss in a palimony suit in early retirement, followed almost immediately by medical expenses from being hit by a drunk driver, then more medical expenses a couple of years later from a second drunk driver. The first drunk driver permanently disabled her so going back to work wasn’t an option. Bankruptcy, foreclosure, flat broke, living entirely off of her social security.

My life is comfortable, and I’ve planned and saved the best I can, and I try not to to worry about it. But failure is always an option.
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by LilyFleur »

quantAndHold wrote: Tue May 18, 2021 7:38 pm Yes. A good friend, former C-level exec for a Fortune 500. Seven figure loss in a palimony suit in early retirement, followed almost immediately by medical expenses from being hit by a drunk driver, then more medical expenses a couple of years later from a second drunk driver. The first drunk driver permanently disabled her so going back to work wasn’t an option. Bankruptcy, foreclosure, flat broke, living entirely off of her social security.

My life is comfortable, and I’ve planned and saved the best I can, and I try not to to worry about it. But failure is always an option.
Palimony? OMG, I didn't know there was such a thing. I thought I was safe if I didn't remarry. Palimony is a live-in relationship, right?
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by Marseille07 »

David Jay wrote: Tue May 18, 2021 6:16 pm I am really concerned about you, my friend. Starting a thread about future bankruptcy when you have a $3.2M retirement portfolio, plus another million dollars in rental property. And living expenses of $70K or $80K. As I told you on the other thread, 2.5% is a perpetual withdrawal rate, where you do not even deplete your capital.

I wish there was a way I could wave a magic wand and overcome your fears with the logic of your financial situation.
I think the problem is, they're underestimating their expenses. I recommended them to go over the expenses carefully, with lots of padding. Alas, they stuck with the 70K number because they're spending 70K today and their kids would leave home, or something along those lines.

They really need to sit down and evaluate all planned expenses in retirement. They probably still have enough, but I don't think their SWR will be 2.5%.
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by EdNorton »

Yes, I started at BK a few years ago, in charge of whoppers now.
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by sawhorse »

sailaway wrote: Tue May 18, 2021 5:53 pm One danger I have heard of, anecdotally, is bad spending being the first indication of dementia. The spending affected the nest egg, the memory care wiped it out.
Definitely. A co-worker's mother in law developed dementia in her mid 80's and went on crazy spending sprees and gambling sprees. She had been very careful with money her entire life.

A friend of mine works as a social worker for the elderly, and she said she's handled cases of an elderly person being scammed out of everything. More than once, the scammer was their child.
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by David Jay »

I genuinely wish for your peace of mind.
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by Watty »

My recollection of the details are exceedingly vague, and I probably never really heard them anyway but back when I was in college in the late 1970's when inflation was in the double digits here were a few relatives and neighbors that had non COLA pensions that were greatly devalued and they were in a real bad situation.

I don't know if any of them actually declared bankruptcy. Being young and in school I was pretty oblivious to what was going on.
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by LadyGeek »

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Freetime76
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by Freetime76 »

Sure, love is blind.
2nd marriage near to retirement... new spouse was great fun, but sadly developed a gambling addition.
Beautiful home went to foreclosure for taxes, massive downsize, kids already had the family business.

Life happens.

Just wondering, have you read ‘Enough’ (J Bogle)?
sawhorse
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by sawhorse »

Here is an article on the prevalence of bankruptcy in elders and the complex reasons for it.

https://www.forbes.com/sites/teresaghil ... uptcy-why/
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by littlebird »

Yes. About 20 years ago here in AZ a ponzi-type scheme (don’t remember the mechanics) perpetrated by the Baptist Foundation of Arizona was uncovered. Many elderly people in my senior community were victims. Some had invested their entire “nest-egg” with this church affiliated organization. Some went to work at minimum wage jobs afterward. A few declared bankruptcy.
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Taylor Larimore
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by Taylor Larimore »

MrCheapo wrote: Tue May 18, 2021 5:45 pm So I think a lot of people (including myself) are holding on for a few more years to build up a safety moat "just in case" something bad happens.

But I'm curious if there are any statistics or anecdotal evidence of what causes a retiree to go BK?

In terms of catastrophic/black-swan events: I believe that ObamaCare rules out BK due to medical bills right?
So then what is left in this category of events?

In terms of slow decent into BK what caused it? Bad planning, bad execution or something else?
Mr. Chepo:

I have personal "anecdotal evidence" of what happens in bankruptcy:

My grandfather was a very wealthy financier in New York. When the depression came in 1929, my father's restaurant failed and we moved into my grandparents 4-story waterfront mansion in Miami. I was 6 years old.

A few years later my grandfather's company failed and he went bankrupt. We were forced to move from his Miami mansion (he had 3) to a small walk-up apartment. Fortunately, my dad was able to get a job as the manager of the Miami Beach Rod and Reel Club at $25/week to pay the rent.

This is what can happen in bankruptcy.

Best wishes.
Taylor
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quantAndHold
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by quantAndHold »

LilyFleur wrote: Tue May 18, 2021 7:48 pm
quantAndHold wrote: Tue May 18, 2021 7:38 pm Yes. A good friend, former C-level exec for a Fortune 500. Seven figure loss in a palimony suit in early retirement, followed almost immediately by medical expenses from being hit by a drunk driver, then more medical expenses a couple of years later from a second drunk driver. The first drunk driver permanently disabled her so going back to work wasn’t an option. Bankruptcy, foreclosure, flat broke, living entirely off of her social security.

My life is comfortable, and I’ve planned and saved the best I can, and I try not to to worry about it. But failure is always an option.
Palimony? OMG, I didn't know there was such a thing. I thought I was safe if I didn't remarry. Palimony is a live-in relationship, right?
Yep. They had been living together for ten or fifteen years, I can’t remember exactly. My friend was the main breadwinner. Partner left, then sued. And won.
Yes, I’m really that pedantic.
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by LilyFleur »

quantAndHold wrote: Tue May 18, 2021 8:53 pm
LilyFleur wrote: Tue May 18, 2021 7:48 pm
quantAndHold wrote: Tue May 18, 2021 7:38 pm Yes. A good friend, former C-level exec for a Fortune 500. Seven figure loss in a palimony suit in early retirement, followed almost immediately by medical expenses from being hit by a drunk driver, then more medical expenses a couple of years later from a second drunk driver. The first drunk driver permanently disabled her so going back to work wasn’t an option. Bankruptcy, foreclosure, flat broke, living entirely off of her social security.

My life is comfortable, and I’ve planned and saved the best I can, and I try not to to worry about it. But failure is always an option.
Palimony? OMG, I didn't know there was such a thing. I thought I was safe if I didn't remarry. Palimony is a live-in relationship, right?
Yep. They had been living together for ten or fifteen years, I can’t remember exactly. My friend was the main breadwinner. Partner left, then sued. And won.
That is longer than a lot of marriages. Certainly longer than any relationship I've had in the ten years since my divorce. I don't do 24/7; I think I'm too independent and set in my ways. I like choosing what I watch on TV, when I wash the dishes, when I stay up until 3 a.m. doing art, when/where I want to go on vacation, and so on. 8-)
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by hirlaw »

From a retired guy who practiced bankruptcy law for many years, maybe I can provide a bit of insight. Here are a few post-retirement causes of bankruptcy ;

Medical expenses.

Bad (or fraudulent) investments. For example, someone in retirement, spends too much investing in a risky venture, such as an oil drilling partnership, a restaurant or a real estate venture. Some co-signed or guaranteed a loan by their children in starting a business or buying a home. If the child defaults, the guarantor is on the hook. There were many individuals, some retired, who speculated in real estate leading up to the “financial crisis” of 2008. Many of those ended up in bankruptcy.

Business Disputes. For example, many business owners sell their business when retiring and count on the lump sum or installment payments for retirement. The large majority of these sales go without a hitch. Sometimes, the business flounders after the sale and the buyer claims fraud, misrepresentation, etc. These can be very expensive lawsuits.

Messy divorce

IRS Taxes (many times from tax years prior to the retirement)

Bad Stuff Happens: I had sad story of a C-Suite client about to retire who, driving to work early in the morning (still dark), hit and killed two kids walking to school. The potential liability was way over his liability insurance limits (and no, the plaintiffs and their attorneys were not satisfied with just looking to the insurance).
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by JoMoney »

I have a family member that went bankrupt in retirement. I wasn't privy to all the details, but from the little I did know it appeared to be a lot of consumer credit debt and a home mortgage that was deeply in the red after the 2008-2009 financial collapse.
All of their income is/was from a pension and social security, which wasn't impacted at all. They wound up with credit cards again shortly after the bankruptcy and got another mortgage on a home a few years ago. I might be a bit cynical about it, but I expect they'll probably wind up filing for bankruptcy again at some point a few years down the road.
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MrCheapo
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by MrCheapo »

Thank you very much for sharing your expert opinion.

Regarding medical expenses, how does that happen? I thought ObamaCare got rid of all the loopholes (pre-existing conditions, limits etc.).
hirlaw wrote: Tue May 18, 2021 9:08 pm From a retired guy who practiced bankruptcy law for many years, maybe I can provide a bit of insight. Here are a few post-retirement causes of bankruptcy ;

Medical expenses.

Bad (or fraudulent) investments. For example, someone in retirement, spends too much investing in a risky venture, such as an oil drilling partnership, a restaurant or a real estate venture. Some co-signed or guaranteed a loan by their children in starting a business or buying a home. If the child defaults, the guarantor is on the hook. There were many individuals, some retired, who speculated in real estate leading up to the “financial crisis” of 2008. Many of those ended up in bankruptcy.

Business Disputes. For example, many business owners sell their business when retiring and count on the lump sum or installment payments for retirement. The large majority of these sales go without a hitch. Sometimes, the business flounders after the sale and the buyer claims fraud, misrepresentation, etc. These can be very expensive lawsuits.

Messy divorce

IRS Taxes (many times from tax years prior to the retirement)

Bad Stuff Happens: I had sad story of a C-Suite client about to retire who, driving to work early in the morning (still dark), hit and killed two kids walking to school. The potential liability was way over his liability insurance limits (and no, the plaintiffs and their attorneys were not satisfied with just looking to the insurance).
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by sawhorse »

MrCheapo wrote: Tue May 18, 2021 9:59 pm Thank you very much for sharing your expert opinion.

Regarding medical expenses, how does that happen? I thought ObamaCare got rid of all the loopholes (pre-existing conditions, limits etc.).
I can't speak about how it happens with bankruptcy in retirement, but due to severe chronic health problems, I have incurred up to $45k a year in medical expenses not covered by insurance. Medical equipment, non-covered treatments and drugs, home nursing care, traveling to other states and other countries for care, etc.

Also look up surprise billing. There have been a bunch of proposed laws to curb the practice. I don't know about the status of those proposals.
Last edited by sawhorse on Tue May 18, 2021 10:51 pm, edited 1 time in total.
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by junior »

MrCheapo wrote: Tue May 18, 2021 9:59 pm Thank you very much for sharing your expert opinion.

Regarding medical expenses, how does that happen? I thought ObamaCare got rid of all the loopholes (pre-existing conditions, limits etc.).
Doctors are not required to accept insurance.

There was a thread on this site with a doctor who doesn't take insurance sharing his money making pitch where the doctor uses their position as an authority figure to shame the patient for asking how much a procedure will cost at which point the doctor will tell them unless they pay for the doctor's second home or whatever the patient clearly "doesn't care about their health."
Last edited by junior on Tue May 18, 2021 11:14 pm, edited 1 time in total.
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Re: Do You Know Anyone Who Went BK in Retirement - Why?

Post by Grt2bOutdoors »

Taylor Larimore wrote: Tue May 18, 2021 8:40 pm
MrCheapo wrote: Tue May 18, 2021 5:45 pm So I think a lot of people (including myself) are holding on for a few more years to build up a safety moat "just in case" something bad happens.

But I'm curious if there are any statistics or anecdotal evidence of what causes a retiree to go BK?

In terms of catastrophic/black-swan events: I believe that ObamaCare rules out BK due to medical bills right?
So then what is left in this category of events?

In terms of slow decent into BK what caused it? Bad planning, bad execution or something else?
Mr. Chepo:

I have personal "anecdotal evidence" of what happens in bankruptcy:

My grandfather was a very wealthy financier in New York. When the depression came in 1929, my father's restaurant failed and we moved into my grandparents 4-story waterfront mansion in Miami. I was 6 years old.

A few years later my grandfather's company failed and he went bankrupt. We were forced to move from his Miami mansion (he had 3) to a small walk-up apartment. Fortunately, my dad was able to get a job as the manager of the Miami Beach Rod and Reel Club at $25/week to pay the rent.

This is what can happen in bankruptcy.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: “Why would an intelligent investor hold any bonds at all? Because the long-run is a series of short-runs, and during many short periods, bonds have provided higher returns than stocks. -- And perhaps more important, reducing the volatility of your portfolio can give you downside protection during large market declines."
Taylor - you are an infinite source of wisdom. You are a true gem.
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by bwalling »

MrCheapo wrote: Tue May 18, 2021 9:59 pm Thank you very much for sharing your expert opinion.

Regarding medical expenses, how does that happen? I thought ObamaCare got rid of all the loopholes (pre-existing conditions, limits etc.).
If you have insurance, you try to stay with "in network" providers. However, you can't really control that. You can go to an "in network" hospital, but guess what? The hospital largely only employs administrative staff, not clinical staff. The clinical staff are all outsourced to other medical groups, who are not required to accept the insurance that the hospital accepts. The ER physician probably works for Emcare, not the hospital. Emcare, the largest employer of ER physicians doesn't accept UnitedHealth, the largest insurer. The radiologist, the company that owns the MRI machine and employs the radiation tech, the anesthesiologist, etc, etc can all be out of network at an in network hospital.
rascott
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by rascott »

bwalling wrote: Wed May 19, 2021 7:32 am
MrCheapo wrote: Tue May 18, 2021 9:59 pm Thank you very much for sharing your expert opinion.

Regarding medical expenses, how does that happen? I thought ObamaCare got rid of all the loopholes (pre-existing conditions, limits etc.).
If you have insurance, you try to stay with "in network" providers. However, you can't really control that. You can go to an "in network" hospital, but guess what? The hospital largely only employs administrative staff, not clinical staff. The clinical staff are all outsourced to other medical groups, who are not required to accept the insurance that the hospital accepts. The ER physician probably works for Emcare, not the hospital. Emcare, the largest employer of ER physicians doesn't accept UnitedHealth, the largest insurer. The radiologist, the company that owns the MRI machine and employs the radiation tech, the anesthesiologist, etc, etc can all be out of network at an in network hospital.

As mentioned above, it appears the law is changing regarding these surprise balance billing techniques Jan 1, 2022.
runninginvestor
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by runninginvestor »

rascott wrote: Wed May 19, 2021 7:37 am
bwalling wrote: Wed May 19, 2021 7:32 am
MrCheapo wrote: Tue May 18, 2021 9:59 pm Thank you very much for sharing your expert opinion.

Regarding medical expenses, how does that happen? I thought ObamaCare got rid of all the loopholes (pre-existing conditions, limits etc.).
If you have insurance, you try to stay with "in network" providers. However, you can't really control that. You can go to an "in network" hospital, but guess what? The hospital largely only employs administrative staff, not clinical staff. The clinical staff are all outsourced to other medical groups, who are not required to accept the insurance that the hospital accepts. The ER physician probably works for Emcare, not the hospital. Emcare, the largest employer of ER physicians doesn't accept UnitedHealth, the largest insurer. The radiologist, the company that owns the MRI machine and employs the radiation tech, the anesthesiologist, etc, etc can all be out of network at an in network hospital.

As mentioned above, it appears the law is changing regarding these surprise balance billing techniques Jan 1, 2022.
A decent readable summary of what was passed: (No Surprises Act)
https://www.kff.org/private-insurance/f ... t-in-2022/

One of the main differences between this bill that was passed, and surprise billing that is typically passed and states, is the federal bill encompasses self-funded plans as well (think of most megacorps).

As far as medical debt in retirement, I'm curious about that too. I would imagine that nursing home / assisted living services are included in that bucket that causes bankruptcy? Since those are often not covered under Medicare, and if they are, they have limits. Prescription drug coverage under Medicare is probably a big hit for some people.
fortunefavored
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by fortunefavored »

Many expensive treatments are also simply not covered. If your doctor says you have a 50% chance of living 5 extra years by spending $100,000 per dose on an expensive cancer drug, and you have the money, would you? Or flying yourself to the Mayo Clinic and renting an apartment for 6 months to go through an experimental treatment?

(I probably wouldn't.. but many people would.)
Carefreeap
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by Carefreeap »

runninginvestor wrote: Wed May 19, 2021 7:54 am

As far as medical debt in retirement, I'm curious about that too. I would imagine that nursing home / assisted living services are included in that bucket that causes bankruptcy? Since those are often not covered under Medicare, and if they are, they have limits. Prescription drug coverage under Medicare is probably a big hit for some people.
But if you impoverish yourself you will be eligible for Medicaid custodial care...for Nursing home care. Every state is different but basically you are left with $2000 in assets + your house is an exempt asset until you die and then Medicaid is authorized to do a "claw back".

As I said upthread we were lucky that the facility where my dad spent his skilled nursing care had a Medicaid bed for him. I had heard rumors that there were 2 year waiting lists in San Diego County. At $7k/mth that would have been a big chunk of change. We could afford that kind of hit but I think it would have put strain on our marriage and truth be told I think I would have deeply resented the situation.
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Not Law
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by Not Law »

Most retirement accounts survive a bankruptcy, so rather than impoverishing one's self, filing bankruptcy to avoid paying dischargeable debts makes good financial sense.
UpperNwGuy
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by UpperNwGuy »

MrCheapo wrote: Tue May 18, 2021 5:45 pm So I think a lot of people (including myself) are holding on for a few more years to build up a safety moat "just in case" something bad happens.

But I'm curious if there are any statistics or anecdotal evidence of what causes a retiree to go BK?

In terms of catastrophic/black-swan events: I believe that ObamaCare rules out BK due to medical bills right?
So then what is left in this category of events?

In terms of slow decent into BK what caused it? Bad planning, bad execution or something else?
I can think of three obvious reasons:
1. Retiring without a large enough nest egg.
2. Unexpected high medical bills.
3. Excessive credit card debt.
miket29
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by miket29 »

While I don't know if this will lead to any bankruptcies, yesterday in the NYTimes was an article about a private-placement real estate deal in which investors have at this point lost all their money (they are suing to recover).
According to the lawsuits and investors, more than 200 lawyers, accountants, doctors, retirees and others each invested $100,000 to $500,000 in the deal in 2019. At least half of them are now suing the property management firm that promoted the deal, as well as a hedge fund that provided additional financing and later took control of the building before selling it off. The investors are seeking to recoup much of the $75 million they put in.
https://www.nytimes.com/2021/05/18/busi ... -fund.html
And there were the Madoff investors, many of whom lost everything.
Tanelorn
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by Tanelorn »

There was an old thread in this. Business failures, concentrated stock positions (that blew up), and high price lifestyles were often the culprits. Worth a read for the details.

viewtopic.php?t=275270
DetroitRick
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by DetroitRick »

Only two personal first-hand examples:
1)Next-door neighbor and friend filed bankruptcy when in her late 60's. After becoming widowed, unusually large and frequent consumer discretionary spending was the primary cause.
2)My mother-in-law (80's) is trending toward outliving her assets (but not actual bankruptcy I suppose, because no debt). Choice of 22-hour-per-day in-home care for many years (she has been bedridden long term) will be the cause.

Of course, high medical bills can always be a risk. And they typically get higher with age. That's the one area where I personally plan against - and then don't really worry about. I feel like most of the other risk factors remain under my control at this stage of life - limited debt, savings reserves, proper investments, fairly conservative spending, and risk-appropriate insurance coverage.

But I understand and sympathize on many of the underlying causes that hit folks and can cause this, even for those that plan, build income, and save. I've seen a few friends driven to the brink by mid-career job losses or business failures in down markets too - those particulars did not go bankrupt though. And then there are so many affected by crushing student loans in recent years.
tim1999
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by tim1999 »

I know of one such "retirement BK" situation personally, involving a widow who got bored being home alone all day after her husband passed, became addicted to high-denomination slot machine gambling, and was not lucky. She was spending upwards of 40+ hours a week in the local casino.

-She did a large cash out refi on her almost-paid off house and gambled it all.
-She liquidated substantially all of her retirement accounts and gambled it all.
-She ran up upwards of six figures in credit card debt to pay her living expenses.
-She failed to pay the IRS much of the tax owed on her substantial retirement account liquidation over several years.
-In the last month or two of her gambling career, she stiffed the casino on about $50k in credit markers she had obtained from them.
-Even before the gambling, she was a lifelong shopper/hoarder and spent everything she earned. The retirement accounts she liquidated had been her husband's.

I don't know the exact details of the bankruptcy filing, other than that it occurred and went through the process, as I was distancing myself from her at that point.

Today she lives with her son (the bank got her house) and basically never leaves the house. She is now on the lifetime self-exclusion from gambling lists in every state that has one.
Last edited by tim1999 on Wed May 19, 2021 2:45 pm, edited 2 times in total.
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TomatoTomahto
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by TomatoTomahto »

UpperNwGuy wrote: Wed May 19, 2021 12:40 pm I can think of three obvious reasons:
1. Retiring without a large enough nest egg.
2. Unexpected high medical bills.
3. Excessive credit card debt.
I guess it falls under your #1, but I worry every time I read about some 30’s couple with a couple of kids who want to retire next year. Often they are priced for perfection.
Last edited by TomatoTomahto on Wed May 19, 2021 1:44 pm, edited 1 time in total.
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alpenglow
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by alpenglow »

If my in-laws don't go bankrupt in retirement, I'll be very surprised. FIL still working and may work until death. MIL would immediately have to go bankrupt at that point. Currently mid-60's and negative NW due to overspending and floating CC debt at ridiculous rates. :(
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willthrill81
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by willthrill81 »

hirlaw wrote: Tue May 18, 2021 9:08 pm From a retired guy who practiced bankruptcy law for many years, maybe I can provide a bit of insight. Here are a few post-retirement causes of bankruptcy ;

Medical expenses.

Bad (or fraudulent) investments. For example, someone in retirement, spends too much investing in a risky venture, such as an oil drilling partnership, a restaurant or a real estate venture. Some co-signed or guaranteed a loan by their children in starting a business or buying a home. If the child defaults, the guarantor is on the hook. There were many individuals, some retired, who speculated in real estate leading up to the “financial crisis” of 2008. Many of those ended up in bankruptcy.

Business Disputes. For example, many business owners sell their business when retiring and count on the lump sum or installment payments for retirement. The large majority of these sales go without a hitch. Sometimes, the business flounders after the sale and the buyer claims fraud, misrepresentation, etc. These can be very expensive lawsuits.

Messy divorce

IRS Taxes (many times from tax years prior to the retirement)

Bad Stuff Happens: I had sad story of a C-Suite client about to retire who, driving to work early in the morning (still dark), hit and killed two kids walking to school. The potential liability was way over his liability insurance limits (and no, the plaintiffs and their attorneys were not satisfied with just looking to the insurance).
Thank you for your 'in the trenches' insights.

I find it interesting that you didn't mention 'poor performance of index funds' as one of the reasons for bankruptcy in retirement.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
delamer
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by delamer »

miket29 wrote: Wed May 19, 2021 12:48 pm While I don't know if this will lead to any bankruptcies, yesterday in the NYTimes was an article about a private-placement real estate deal in which investors have at this point lost all their money (they are suing to recover).
According to the lawsuits and investors, more than 200 lawyers, accountants, doctors, retirees and others each invested $100,000 to $500,000 in the deal in 2019. At least half of them are now suing the property management firm that promoted the deal, as well as a hedge fund that provided additional financing and later took control of the building before selling it off. The investors are seeking to recoup much of the $75 million they put in.
https://www.nytimes.com/2021/05/18/busi ... -fund.html
And there were the Madoff investors, many of whom lost everything.
Not to minimize what the Madoff investors went through, but there has been a substantial recovery of assets: https://www.justice.gov/opa/pr/justice- ... doff-ponzi
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wolf359
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by wolf359 »

junior wrote: Tue May 18, 2021 10:47 pm
MrCheapo wrote: Tue May 18, 2021 9:59 pm Thank you very much for sharing your expert opinion.

Regarding medical expenses, how does that happen? I thought ObamaCare got rid of all the loopholes (pre-existing conditions, limits etc.).
Doctors are not required to accept insurance.

There was a thread on this site with a doctor who doesn't take insurance sharing his money making pitch where the doctor uses their position as an authority figure to shame the patient for asking how much a procedure will cost at which point the doctor will tell them unless they pay for the doctor's second home or whatever the patient clearly "doesn't care about their health."
Individuals are not required to buy insurance. (They're pay a penalty for not having insurance, but Trump repealed the penalty in 2019.) Others use a health care ministry instead of insurance, which CAN discriminate on pre-existing conditions, and isn't quite the same thing.

Some individuals cannot afford to buy health insurance. Some states have not passed the Medicare Expansion for low income people.
dbr
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Re: Do You Know Anyone Who Went BK in Retirement - Why? [Bankrupt]

Post by dbr »

Sure, a person I know closely got rid of half a million dollars on cocaine and now has a net worth of zero. Along the way they lost their spouse, their house, and their car.

Another person I know well lost out on the joint resources of a marriage due to divorce and the follow up was a gambling habit that got rid of the rest. After the divorce the ex spouse lost their job and eventually died at a relatively early age. Their parent exhausted what estate there would have been in old age care. There were two children to provide for.

I know another person who basically never had assets but remains at zero due to mental illness and disability. That person's spouse died when their child was an infant and they did not find a way to remarry.

Each of these people is currently living on combinations of Social Security, pensions, and public support. Public support is more obtainable in cases of disability. Person one above is also mentally ill and marginally demented but does have living support through Medicaid. Person three gets significant low income and disability benefits. Person two is lucky to be healthy and have enough SS and pension to get by, but no public support. They regret a bit that they should have worked longer for larger SS and pension benefits, but times were not good for them. All three of these people are in fact adequately supported, reasonably healthy under the circumstances, fed, and not homeless. They are very fine people who probably deserved better, even the addictions notwithstanding.
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