Elder financial abuse is a widespread problem in the U.S., and with more and more Americans reaching retirement age, opportunities for both scammers and family and friends to take advantage of them abound.
Consider that 53% of respondents in a new survey said elder financial abuse was likely to undermine their ability to live a long, financially secure life. Sixty-five percent said the same thing about a close relative or friend.
Also consider that 47% of survey respondents 65 or older reported that they manage their finances entirely on their own.
This means that many seniors are vulnerable to financial abuse, whether by strangers or financial exploitation carried out by family or friends, according AIG Life & Retirement, which commissioned the study.
Morning Consult conducted the online survey in June among a national sample of 2,200 adults. It is part of the AIG Plan for 100 series.
The survey uncovered other worrying trends. Not only do many seniors handle their own money, but 25% invite a family member or someone they trust into conversations regarding their money, compared with 21% of all adults.
A durable power of attorney is one protection against senior financial abuse, but 84% of all adults and 66% of seniors don’t have or don’t know whether they have one in place.
Four in five respondents claimed that if they should fall victim to elder financial abuse, they would feel comfortable telling friends or family or a financial professional.
In fact, the overwhelming majority of cases go unreported, according to the study. It found that 31% of Americans would not know how to report an elder financial abuse incident.
“We all want to age with grace, maintain independence for as long as possible, and have the freedom to manage our money accordingly,” Kevin Hogan, CEO of AIG Life & Retirement, said in a statement.
“But with 10,000 Americans turning 65 every day, the number of people living with Alzheimer’s and dementia is reaching unprecedented highs — leaving many vulnerable to manipulation and deceit. Longer lives and longer retirements often require a collaborative effort to help seniors protect themselves and ensure their savings can last a lifetime.”
AIG cited academic research showing that as we age, our confidence in our financial abilities stays constant, while our financial literacy drops off dramatically. In other words, even if we feel perfectly capable of going it alone, we may be slowly losing the faculty to continue to make prudent financial decisions.
Financial scams conducted by strangers are a big component of elder financial abuse, catching seniors unawares on the phone or through the internet to manipulate them into sending money.
Asked what they knew about financial scams, a majority of senior respondents were unaware of some of the most common ones.
For example, 60% hadn’t heard of pigeon drop scams whereby victims are told that a large sum of money was found and would be shared with them upon receipt of an upfront payment.
Fifty-seven percent weren’t aware of romance scams, where a victim involved in an online romance is asked for money, or invoice scams, where a victim is contacted by someone claiming to be a fee collector for a company, such as a utility.
And 52% didn’t know about prepaid credit card/debit card scams whereby the victim is asked to make payments, often multiple ones, to a utility or other company to address a debt.
Notwithstanding their lack of awareness of common financial scams, seniors and Americans generally appear to get that they have to protect themselves. According to the survey, many are safeguarding their personal information and wealth in various ways:
- Not responding to phone calls, texts or emails urgently seeking personal information — 92% of seniors, 80% overall
- Not clicking on email links from unknown senders — 89% of seniors, 78% overall
- Reviewing their credit report — 65% of seniors, 57% overall
- Setting up alerts from their financial institution — 63% of seniors, 56% overall
- Providing personal financial information only upon initiating the phone call — 60% of seniors, 42% overall
With many good habits in place, 86% of seniors in the survey believed that they had the right protections to prevent senior financial abuse.
“Seniors have adopted valuable defense mechanisms to shield themselves from strangers looking to take their hard-earned savings,” Michele Kryger, head of AIG’s elder and vulnerable client care unit, said in the statement.
“But when the financial abuser is someone who knows you — a friend, caretaker or even family — then you need an additional line of defense: a financial professional who can help safeguard your interests.”
AIG noted that seniors are more likely to be taken advantage of by family than by strangers, citing research from the National Center on Elder Abuse.
The survey found, however, that 81% of seniors did not believe anyone close to them would take advantage of them financially, compared with 74% of all adults.
Reducing Senior Financial Abuse
Only 16% of respondents said they had a financial advisor to help manage their finances — and potentially protect against financial abuse. Two-thirds of those who did considered the advisor a trusted contact.
AIG said a trusted contact was an individual designated by the account holder whom a financial institution can contact if it is concerned about the account holder’s mental health or suspects financial abuse may be occurring.
Working with a financial advisor also increased the chances of making smart choices, AIG said. Survey respondents with an advisor were more than twice as likely to have a durable power of attorney, and 90% said they involved their spouse or significant other in conversations with their financial professional.
AIG said seniors and their family, financial advisors, financial services companies and the government all could act to thwart financial abuse.
Forty-six percent of respondents said family members had the most responsibility to protect seniors from financial abuse. They can plan ahead by having family conversations about a loved one’s wishes long before cognitive decline or an unforeseen incident occurs.
Nearly all respondents said they expected financial services companies to have safeguards in place to protect seniors from financial abuse.
Seventy-seven percent of survey participants said the government can protect seniors from financial abuse by raising awareness. Fifty-five percent said it could give financial institutions more flexibility to protect their clients from senior financial abuse, and 49% pushed for increasing funding for agencies to protect seniors.
Four in five respondents said they expected their financial advisor or financial account representative to inform them when they suspect financial abuse. A big majority said they would feel comfortable talking to an advisor if they fell victim to elder financial abuse.
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