Your Retirement and Medical Debt
Even for Americans who have held steady, well-paying jobs throughout their working years, medical debt can still wreck their retirement security.
Below are four things debtors can do to prevent medical debt from destroying their retirement:
- Purchase and keep comprehensive health insurance. This is often easier said than done; but good health insurance is the foundation of protecting yourself from the negative impact of medical debt. If you're underinsured you can end up with massive amounts of medical debt if you have a major health problem. And unfortunately the chances of having a major health challenge increase with age.
- If you face mounting medical debt, don't delay a necessary bankruptcy. The ugly truth about medical debt is that it is often insurmountable without the help of bankruptcy. Medical bills in the tens of thousands and sometimes hundreds of thousands are not designed to be paid by individuals. Unless you are amongst the world's wealthiest individuals you won't be able to put a serious dent in most medical debt. That's why bankruptcy forgives medical debt and other unsecured debts.
- Don't liquidate your retirement account to pay medical debt. This is one of the biggest mistakes that debtors make. The reality is that when you liquidate your retirement account to pay medical debt you are putting yourself deeper in the hole. You will pay a penalty fee and taxes on any retirement account you liquidate before the age of 65. Also, once you liquidate your retirement account and place that money in your bank account, you make it vulnerable to other creditors if they decide to sue you and win a bank levy against your account.
- When planning for your retirement, make sure you plan so that you have enough money to fill the gaps in your medical coverage. Remember, in you retirement years you will need to pay co-pays, deductibles and other out-of-pocket expenses as you take care of your medical needs.