More Seniors Are Retiring in the Red

A man plays slot machines at the Chippewa Reservation Casino in Wisconsin. Ed Kashi / Corbis

Facing mounting medical expenses and insufficient savings, a growing number of seniors are falling into credit-card debt and spending their golden years in the red. Over the past decade, that's led to a spike in bankruptcies among older Americans, according to a recent study by John Pottow, a law professor at the University of Michigan. He found that people ages 55 and over now account for more than 20 percent of all bankruptcies in the United States, compared with roughly 12 percent in 2001.

Part of the problem: many more people today are retiring before they pay off their debt, as compared with prior generations. A recent study by CESI Debt Solutions, a nonprofit personal-finance firm, found that 56 percent of retirees had outstanding debts when they left the workforce. Yet nearly all among that group refused to delay retirement to pay down those debts. Only 4 percent of respondents said they would pay down debt by cashing in their 401(k) or IRA.

Pottow also found that older debtors have 50 percent more credit-card debt than their younger counterparts. And according to the CESI survey, 75 percent of respondents cited medical or funeral expenses as the cause. "Retirement is supposed to be all about enjoying the time you've been saving up for," says Neil Ellington, executive vice president of CESI. "The reality is many people couldn't save enough."

Mont writes about retirement issues for