If you’re like most Americans, you’ve made detailed plans to work and save until you retire, ensuring a comfortable and secure retirement. However,
your plans can be cut short by a job elimination or company downsizing and you may be left with a smaller benefit package and fewer opportunities to invest and save. Many people are forced into retirement before their old debts have been paid off causing an unexpected budget dilemma, especially when recent estimates show that Americans over 50 are carrying an average of $8,250 in credit card debt. So what’s fair game when you reach retirement age, your job opportunities have been depleted and the bill collectors start calling?
Status of Seniors In Retirement
Only 30 percent of households are prepared for retirement at the age of 62, the earliest that Social Security can be collected, according to the Center for Retirement Research. They also report that a majority of those between the ages of 50 and 70 plan to work after they retire, with almost 10 percent planning to work full time. With so many leaving their careers with large amounts of debt in hand, more retirees are finding it necessary to work in whatever field they can find employment.
The danger for seniors who find themselves forced out of the work force before they’re fully prepared is that they’ll spend more on credit for general living expenses, including groceries, utilities and mortgages and risk falling behind on making payments. While many people are able to stay on track with a lower income, those who can’t make the transition may find that their creditors have reported their delinquencies to the major credit reporting agencies; or even worse, they’ve sold the bad debt to a collection agency or filed a lawsuit in an attempt to collect the outstanding balances. As a result, their credit score will take a dive and any legal judgments could mean that even limited wages may be garnished and a lien may be placed on their property or entire estate.
Your Benefits Are Safe – With a Few Exceptions
People who depend on their Social Security benefits often wonder if their checks are vulnerable to garnishment. The law protects payments made by the government program, except in a few situations – unpaid taxes and child support. They cannot be seized through a levy against your wages, property or other legal efforts, no matter why you receive SS checks, i.e., disability, survivor’s death benefit, retirement, etc.
To give added support to protect SS benefits, the U.S. Treasury and four other federal agencies jointly issued a final decision requiring banks and other depository institutions to automatically protect up to two month’s worth of depositors’ social security and other federal benefits against depletion, effective June 28, 2013.
Another Risk to Your Social Security
If you rely on your Social Security checks and use direct deposit, you’ll need to be aware of one way they may be vulnerable. If a civil court judge issues an order to freeze your bank accounts, any money in the frozen account will be unavailable to you until the court proceedings are over. While it’s true that your Social Security funds are exempt from collection restitution, it will take some time to straighten out the situation of having your personal savings mingled with your Social Security deposits.
One way to safeguard your benefits is by having your SSI payments deposited into a separate bank account solely for this purpose. Another option is to apply for a pre-paid debit card specifically designed for Social Security and Supplemental Security Income recipients who want to avoid using a bank.
Don’t be fooled by a debt collector who pressures you to pay up with whatever resources you may have and tries to convince you to use your SS check to cover the debt. It’s not your legal responsibility to use your SS benefits, according to the law.