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. The steady decline of reasoning 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? We often suggest that our clients review their estate plans by making sure they have their powers of attorney, one for health care decisions and the other for financial decisions, in place. Powers of Attorney lists who the retirees want to speak for them in the event they become incapacitated.
You can also consolidate financial accounts for aging parents in order to simplify their financial situation. For example, consolidating their checking accounts at one bank, and their investments at a single advisor or brokerage account are good first steps for consolidating financial accounts. If you or your parents have 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. Our best advice 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 on to 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.