“The official figure for elder financial fraud used by a congressional committee is around $3 billion a year, but that’s based solely on reported cases of fraud. Other estimates are 10 times that much.”
Aging baby boomers are a giant target for scammers. A report issued last year from a federal agency, the Consumer Financial Protection Bureau highlighted the growth in banks and brokerage firms that reported suspicious activity in elderly clients’ accounts. The monthly filing of suspicious activity reports tied to elder financial exploitation increased four times from 2013 through 2017, according to a recent article from the Rome-News Tribune titled “Financial abuse steals billions from seniors each year.”
When the victim knew the other person, a family member or an acquaintance, the average loss was around $50,000. When the victim did not have a personal relationship with their scammer, the average loss was around $17,000.
What can you do to protect yourself, now and in the future, from becoming a victim? There are many ways to build a defense that will make it less likely that you or a loved one will become a victim of these scams.
First, don’t put off taking steps to protect yourself, while you are relatively young. Putting safeguards into place now can make you less vulnerable in the future. If you are diagnosed with Alzheimer’s or another form of dementia five or ten years from now, it may be too late.
Create a durable power of attorney as part of your estate plan. This is a trusted person you name as your legal representative or agent, who can manage your financial affairs if need be. While it is true that family members are often the ones who commit financial elder abuse, you’ll need to put your trust in someone. Usually this is an adult child or a relative. Make sure that the POA suits your needs and is properly notarized and witnessed. Don’t count on standard templates covering your unique needs.
Consider the guaranteed income approach to retirement planning. Figuring out how to generate a steady stream of income as you face the cognitive declines that occur in later years might be a challenge. Planning for this in advance will be better.
Social Security is one of the most valuable sources of guaranteed income. If you will receive a pension, try not to do a lump sum payout with the intent to invest the money on your own. That lump sum makes you a rich target for scammers.
Consider rolling over 401(k) accounts into Roth accounts, or simply into one account. If you have one or more workplace retirement plans, consolidating them will make it easier for you or your representative to manage investments and required minimum distributions.
Make sure that you have an estate plan in place, or that your estate plan is current. Over time, families grow and change, financial situations change and the intentions you had ten, twenty or even thirty years ago may not be the same as they are today. An experienced estate planning attorney can ensure that your wishes today are followed, through the use of a will, trust and other estate planning strategies.
Resource: Rome News-Tribune (April 27, 2020) “Financial abuse steals billions from seniors each year.”