It is especially sad when older Americans fall prey to financial scams. They often have no means of reclaiming their lost funds, and if they have retired, they have no way to catch up through income increases. They may be forced to sell cherished items, or become dependent on their children or relatives.
Even worse, they may be so embarrassed or ashamed that they never report the crime at all. Family members who would be happy and able to help are left unaware until it is too late to do anything about the situation.
A recent study from Allianz Life Insurance supports this underreporting premise. The Safeguarding Our Seniors study polled over 2000 Americans that were already at retirement age (age 65 and above) or approaching retirement age (ages 40-64). Respondents were asked questions regarding financial abuse of older Americans – covering their observations, experiences, and opinions.
Only 5% of older respondents reported being victims of financial abuse. However, 19% of respondents between ages 40 and 64 revealed that they were aware of an older family member or an older friend that had been financially victimized. Among that 19%, a little over half (55%) noted that the crime went unreported.
The dollar value of the losses is startling. Victims averaged a loss of approximately $30,000, with losses of $100,000 or more occurring in over 10% of these cases. How can this level of theft go unreported?
The collective underreporting may have a lot to do with the source of the financial abuse. Most of us tend to think of unscrupulous telemarketers or door-to-door scammers as the primary source.
The survey confirmed this perception, showing that both elders and their family/friends considered telemarketers as the most likely source (80% and 69% respectively). This was followed by Internet-based scams (68% and 47% respectively), and misleading mail solicitations (52% and 39% respectively).
However, past studies have shown that elder financial abuse is more frequently perpetrated by someone who knows the victim. The Allianz survey confirms this thesis.
With elders who reported financial abuse, strangers were responsible for only 22% of the financial abuse cases. Caregivers, friends and family members were responsible 52% of the time.
It can be extraordinarily difficult for any of us to believe that a trusted friend or family member could take advantage of us in that fashion, and it is likely even more so for older Americans. Denial may set in, or perhaps an irrational hope that the situation may change and the financial abuser will come to his or her senses and make things right.
The best defense is education and pre-emptive action. Allianz has created a course for financial professionals to help them protect clients from financial abuse and online educational materials to help seniors educate themselves about the phenomenon.
The stakes are high, given the overall aging of the population as Baby Boomers enter retirement. Not only will this demographic push the total percentage of Americans aged 65+ to over 20% by 2030; they also currently control an estimated $16+ trillion of the nation’s household investable assets. That makes an extremely tempting target for unscrupulous scam artists.
The bottom line is that if you are approaching retirement or have already retired, it is extremely important that you understand the potential scams that exist. As painful as it is to admit, you have to consider that friends or family could try to scam you as well. Use caution in all your financial dealings, and treat family financial issues with the same critical eye you would give to strangers.