If you’re nearing retirement, you may want to start thinking now about how to protect yourself once you grow too old to safely manage your personal finances.
According to a March 2016 study from the nonprofit group Investor Protection Trust, financial exploitation and abuse is a serious problem for older Americans — especially those suffering from dementia or other physical or cognitive problems that diminish their ability to reason and think clearly.
Of consumers 65 and older, 17 percent say that they’ve been “taken advantage of financially” — either through financial scams or bad investments or by being charged excessively for services, according to the study. Their children agree: Up to 20 percent of children of consumers over the age of 65 say their parents have been financially exploited.
“Elder abuse affects older adults across all socioeconomic groups and care settings,” wrote the White House in a December 2015 report on aging. “Due to diminished capacity, older adults with cognitive impairment are at greater risk of abuse. Additionally, African American, Latino, low-income and socially isolated older adults are victimized disproportionately. About two-thirds of elder abuse victims are women. Elder abuse erodes the health, financial stability and quality of life of older adults.”
Consumers aren’t alone, though, in fighting back against financial exploitation and abuse.
According to a March 2016 advisory from the Consumer Financial Protection Bureau, your local bank or credit union could be a powerful ally in helping protect you from financial mismanagement or abuse once your mental faculties start to wane. Trustworthy family members can also help combat financial theft or fraud — especially if you can trust them to monitor your financial records regularly.
Before you grow too old to spot a potential scam or protect yourself from financial theft, it’s a good idea to lay the groundwork now for managing your money — just in case you wind up suffering from dementia or other age-related problems. For example:
- Shop around for a more age-sensitive bank. The Consumer Financial Protection Bureau recently issued an advisory urging banks and credit unions to beef up their employee training on elder abuse and implement stronger fraud checks to help protect their oldest customers. “When seniors fall prey to a scam by a stranger or to theft by a family member, they may be too embarrassed or too frail to report it,” said CFPB director Richard Cordray in a statement. “Banks and credit unions are uniquely positioned to look out for older Americans and take action to protect them.” Already, a number of banks and credit unions have implemented internal protections and training programs to help employees spot suspicious activity. Ask your local bank or credit union what it’s doing to help protect elderly consumers.
- Consider safer plastic. Getting duped into overspending can cost you a lot more in the long run if you use a credit card rather than a debit or prepaid card that limits how much you can spend. If your memory is waning or you rely on caregivers to help you with your finances, consider using a prepaid card or a debit card rather than credit for your everyday purchases. You can also limit your caregiver’s spending by giving them a prepaid card to use on your behalf. Just be sure you check the fees ahead of time. Some cards, such as the True Link debit card for older adults, are designed for seniors and have features to help guard against misuse, but also charges relatively high fees.
- Enlist help. The Consumer Financial Protection Bureau recommends giving a trustworthy friend or relative access to your financial statements (but not your accounts) so they can scan the statements for suspicious activity. You may also want to consider setting up a “convenience” or “agency” account, says the CFPB, so a caregiver can help you with important financial tasks, such as paying bills. In addition, think carefully about who you trust to handle your finances and consider giving them the power of attorney to make decisions on your behalf.
Finally, continue educating yourself about common scams that are going around so you’re less likely to be duped. The Federal Trade Commission and the Better Business Bureau regularly post alerts about ongoing scams. The AARP also maintains a helpful resource alerting consumers of regional cons.
In addition, collect information ahead of time that might be useful for you or your caregivers after you retire. The Consumer Financial Protection Bureau has published a number of resource guides for older consumers and their caregivers. The Justice Department has also put together a comprehensive list of resources for seeking help and protecting your finances as you age.