You might wonder how it is possible for seniors to get into debt when there is an unprecedented large intergenerational wealth transfer expected from the baby boom generation. We have to remember that mortality rates are down such that many people are living longer than expected and some have not budgeted for the possibility of needing funds to live on for a longer period of time. Some simply have earned too little and/or had no pension or group retirement savings plan from employment to build a nest egg for retirement. Some have lived without saving much at all up to retirement. Now on a fixed income, even with some supplement, without taking action to reduce their cost of living, they find making ends meet becomes a problem.
Some seniors may have had unforeseen costs or experiences that they are now paying for. For example, business bankruptcy, lawsuit, divorce, expensive medical care and/or medication not covered under a health plan, and expensive house repairs (e.g., flooding) not covered by insurance can have a devastating effect financially. Some may have lost investments in the stock market or were robbed or are being taken advantage of financially (elder abuse). Elder-care law is a growing field to address all kinds of elder abuse.
Some seniors had high paying jobs and developed lavish spending habits while employed which they can’t seem to readjust from, or did not save for, upon retiring with a fixed income (pension and savings/investments). Many, for example, got into a pattern of giving financial gifts to children and grandchildren at birthdays and Christmas for years that they now cannot afford but find it difficult and uncomfortable to say so.
Sometimes the current financial challenge may have arisen from something that started out innocently. For example, a senior may decide he or she is no longer going to deny buying something always desired which, in the past, may have been possible as a one-time splurge but not as an ongoing matter. Or, a senior may socially join friends in frequent travelling trips or large purchases when it’s not really in their budget long-term.
Seniors, like other adults, may still be spending the way they always have; however, their income level has changed in most cases. It might be easier to understand how someone gets into financial difficulty when you think about all the changes they've had to adjust to over the years. They may have survived multiple economic recessions, war times, disease and illness, natural disasters, the health deterioration and/or death of a loved one, retirement, and divorce or separation. At the same time, seniors are facing the issue that they are moving closer to their impending mortality, planning a bucket list and needing to have enough funds to last them for 20 or more years.