How can retired people avoid the trap of debt and bankruptcy?

How can retired people avoid the trap of debt and bankruptcy?

Four years ago, Miss Milgray Mendoza* retired as an Economics teacher in a Manila public high school after over 30 years on the job. Now aged 69, she is still teaching part-time for a public university. Although she remains passionate about teaching, it is not her main motivation for going back to work.

Instead, she had to do it because the lump-sum retirement benefit she received from the Government Service Insurance System (GSIS) has already ran out after only three years. (Disclaimer – this writer is one of her former students.)

Ideally, once you retire, the only thing you should be worrying about is how to keep yourself from being bored. After working day forty hours a week for several decades, it’s time to pamper yourself with the help of your earned lump-sum retirement benefit from Social Security System or the GSIS.

However, that is not the case for countless of Filipino retirees. It is no secret that a lot of them ultimately end up losing a huge part of their lump-sum retirement benefits because of unsettled loans through the years (e.g. housing loan availed via PAG-IBIG).

filipino retirees bankruptcy
How can Filipino retirees avoid bankruptcy? (Credits:

There are also those who rely solely on the lump-sum money they get simply because they have very little savings. And, as many people can attest, money runs out rather easily when you don’t have a regular income – or if you got no income at all in the case of retirees. Remember, they have to wait for five years before they begin getting their regular monthly pension.

Ironically, this problem can get worse the longer a retiree lives. The American Academy of Actuaries hit it right on the mark when it noted it in a recent paper that “individuals tend to underestimate how long they will live” and that this can cause financial hardships. While some retirees are fortunate enough to be supported by their children, some aren’t as lucky especially if they are unmarried and living in solitude (as in the case of Miss Mendoza).

Spending your twilight years mired in debt and bankruptcy is a scenario everyone should fear and avoid at all cost. The good thing is there are a lot we can do to make sure it doesn’t happen.

  1. It is already cliche, but nothing secures your future more than saving money. Cutting back on luxuries like buying fancy electronic gadgets or traveling overseas unnecessarily is a good first step. Trent Hamm of The Business Insider put in best in an article provocatively titled ‘Too Many People Are Pretending To Be Rich’:

    A balanced financial life that involves living within your means includes things like saving for retirement… Without that, you’re walking a high wire without a safety net during the later years of your life when you are in declining health.”

  2. Unless it is absolutely needed, securing loans should be avoided especially if you don’t have a clear-cut idea on how to pay for it. A lot of times, it’s really as simple as living within your means.

3. If your main income allows it (or better yet, if you have a sideline), you should consider investing in something. It can be in the stock market, or in mutual funds, or in a small business. Whatever venture you want to dabble in, the important thing is for you to do it. Having a substantial passive income will enable you to invest which in turn will boost your retirement savings.

*Name had been changed to protect privacy

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Mark Pere Madrona

The Filipino Scribe (TFS) is managed by Mark Pere Madrona, a multi-awarded writer and licensed professional teacher from the Philippines. Mr. Madrona earned his master’s degree in history from the University of the Philippines-Diliman last 2020. He obtained his bachelor’s degree in journalism cum laude from the same university back in 2010. His area of interests includes Philippine journalism, history, and politics as well as social media. Know more about him here:

One thought on “How can retired people avoid the trap of debt and bankruptcy?

  1. Sad that this is common in the US as well… retirement is a very scary thing. You should all start saving every penny you can now while you are young!

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