Seniors' wallets are squarely in the crosshairs of financial predators. Financial exploitation runs the gamut from the quaint and quotidian to brazen and breathtaking abuse. Telemarketers sell auto-club memberships to seniors who no longer drive. Caregivers who are asked to help with the banking withdraw cash for themselves. Or an adult child who holds power of attorney drains your retirement savings and pressures you to change your will for his benefit.
The numbers are stark: People 60 and older accounted for 27% of fraud complaints last year, up from 22% in 2011 and the highest percentage of any age group, according to the Federal Trade Commission. In a recent survey of 40 consumer protection agencies by the Consumer Federation of America, scams against the elderly ranked as the worst complaint category in 2013. "Financial fraud is skyrocketing," says Doug Shadel, Washington state director for AARP and a former fraud investigator. There are "not enough investigators and prosecutors to handle the unbelievable surge in this activity," he says.
The statistics actually illustrate only a fraction of the problem because most senior financial abuse goes unreported, fraud experts say. Seniors may be reluctant to report they've been scammed because they are embarrassed, afraid they'll be deemed no longer capable of managing their own finances or unwilling to expose a family member who has been stealing their money. And seniors suffering from dementia may not realize they've been exploited.
Among the factors that can make seniors targets for scams: ample retirement savings, social isolation and health conditions that may diminish financial decision-making ability. And in recent years, "interest rates have been so low that seniors living on a fixed income have to take on some risk, and con artists know this" and tout inappropriate products, says Lynne Egan, Montana's deputy securities commissioner.
But an array of new tools and techniques are helping seniors and their advocates shed light on elder financial abuse -- and prevent it from happening in the first place. New research is pinpointing which seniors are most susceptible to financial scams. Regulators and senior advocates are recognizing that professionals in the legal, medical and financial industries should play a role in shielding older adults from financial exploitation. And new types of debit cards and smartphone apps are helping protect seniors against fraud.
The Link Between Fraud and Health
New research on the interplay between financial scams and declining health shows how seniors can potentially safeguard their pocketbooks by paying close attention to their medical conditions and even discussing financial problems with their physicians.
More than one-third of people 71 and older have some form of cognitive impairment or dementia, according to Duke University research. And people with even mild cognitive impairment have far more trouble with basic financial tasks such as paying bills and managing bank statements than those without the condition. Indeed, trouble managing money is often the earliest sign of developing dementia.
Other health problems can also make seniors more susceptible to scams. A recent AARP survey of Internet users found that online fraud victims were more likely than non-victims to have experienced a serious illness or injury in the previous two years. These people have a "weakened immune system," Shadel says. "If you've just had one of those negative life events, be particularly cautious."
Given the links between physical and financial health, investor-education group Investor Protection Trust (IPT) has begun training doctors and pharmacists to spot elder financial abuse. The program, which has trained more than 7,000 doctors in the past three years, teaches physicians to ask older patients questions about financial stress and who is managing their money, says Dr. Robert Roush, an associate professor of geriatric medicine at Baylor College of Medicine, who helped develop the program.
Family members and friends can look for many of the same red flags that IPT is training doctors to evaluate. Growing confusion about how to pay bills and sudden concern about running out of money at the end of each month may be signs that a senior needs help.
If you see signs of cognitive decline, a doctor can evaluate whether the senior should be referred for neuropsychological testing or a functional MRI. If you suspect financial exploitation, report it to your local adult protective services agency; for information, visit the Web site of the federal Eldercare Locator (www.eldercare.gov), or call 800-677-1116.
Just as an illness can make seniors more susceptible to financial fraud, suffering financial exploitation can also affect a senior's physical health, researchers say. In some cases, seniors who have been scammed forgo paying for needed health care. In other cases, the simple knowledge that they've been ripped off seems to spark a physical decline.
Howard Tischler, 60, of Potomac, Md., saw his mother's health decline after a period of financial abuse. His mother, a former accountant and single parent, was "fiercely independent" and had arranged her finances so that she wouldn't become a burden on her three sons when she retired, says Tischler.
But when she was in her late seventies, he began to see signs of financial troubles, including hefty credit card bills. One charge that stood out: $80 a month for an auto-club policy -- for a woman who was legally blind and did not have a driver's license. She fell behind on her long-term-care insurance payments and canceled the policy. And when she asked a friend to help her get the bills paid, the friend began writing herself a check once a week.
When Tischler's mother entered assisted living, she had no resources to pay for it, leaving her dependent on her children. After he told his mother about the financial exploitation, "her health declined rapidly," Tischler says. "It starts small and it grows." After his mother's death in 2011, Tischler started EverSafe, a company focused on safeguarding seniors' finances.
A little planning can go a long way toward protecting your finances in the event of declining health. Tell trusted relatives where to find your financial documents in case you're seriously ill. Set up direct deposit of any income and benefit checks you receive regularly. And if you designate a power of attorney for finances -- an agent who can manage all your finances if you're incapacitated -- build in safeguards to prevent abuse. For example, require that the agent periodically report to a third party, such as a friend or lawyer, or that a third party approve any large gifts of your property.
Such steps -- besides protecting you against predators who operate online, by mail and by phone -- can also help prevent financial abuse by people who are close to you. Family members account for nearly 60% of cases of senior financial exploitation, followed by friends, neighbors and paid home-care aides, according to a recent study in the Journal of General Internal Medicine.