People reach their peak decision-making abilities sometime in their 50s, and then decline slowly until after age 70, when the decline starts to take off more dramatically. This helps explain why sweepstakes frauds, Nigerian investment schemes and other scams target seniors and retirees.
What can you do to protect yourself—or your parents—from fraud and bad financial decisions? An article in NerdWallet suggests that parents and children can start by drafting powers of attorney, one for health care decisions and the other for financial decisions. This lists who the retirees want to speak for them in case they become incapacitated.
You can also simply the financial lives of aging parents, by consolidating the checking accounts at one bank, and the investments at a single advisor or brokerage account. If there are many credit cards, cut up all but two: one for daily purchases and one for automatic bill payment.
The adult children should also make a habit of communicating with their aging parents. Scam artists do their best work when their victims are isolated, without family and friends looking for signs of exploitation. A weekly visit might help you spot the variable annuity salesman who’s getting too friendly.
Some places to learn about the more creative elder fraud schemes include StopFraud.gov, AARP’s Fraud Watch Network and the IRS, which offers consumers alerts and an annual list of the “Dirty Dozen” top tax-related scams. Adult children can discuss common frauds, such as telephone imposters pretending to be IRS agents or Microsoft tech support.
Meanwhile, many financial institutions offer text or email alerts to notify their customers (and their advisors) of unusual account activity. People over 65 can have these automatically forwarded to an adult child who functions as an extra pair of eyes on what’s going on in the account.
For many older retirees, there comes a point when the financial issues become too complex and overwhelming. That’s the time to have a trusted successor or advisor take over the management of finances. The best advice here is: don’t resist giving up the day-to-day financial minutia. Experts report that most older Americans don’t recognize their gradual impairment, and often try to hang onto financial control beyond their capacity—and then hide the fact that they fell for a scam out of embarrassment until the next one comes along.
About the Author: Bob Veres has been a commentator, author and consultant in the financial services industry for more than 20 years. Over his 20-year career in the financial services world, Mr. Veres has worked as editor of Financial Planning magazine; as a contributing editor to the Journal of Financial Planning; as a columnist and editor-at-large of Dow Jones Investment Advisor magazine; and as editor of Morningstar’s advisor web site: MorningstarAdvisor.com.
Mr. Veres has been named one of the most influential people in the financial planning profession by Investment Advisor magazine and Financial Planning magazine, was granted the NAPFA Special Achievement Award by the National Association of Personal Financial Advisors, and most recently the Heart of Financial Planning Distinguished Service Award from the Denver-based Financial Planning Association.
Our financial decision-making abilities peak in our 50s and can decline pretty rapidly after age 70, researchers tell us. That’s how otherwise smart older people fall for sweepstakes frauds, Nigerian investment schemes and the grandparent scam, where con artists pretend to be grandchildren in a financial jam.