How to protect your parents from financial fraud
(MoneyWatch) Investment fraud and financial abuse targeting older Americans are major problems today, according to a recent survey by the Investor Protection Trust and Investor Protection Institute. According to advocacy organizations, the top three ways in which seniors are exploited are:
- Theft or diversion of funds or property by family members
- Theft of diversion of funds or property by caregivers
- Financial scams perpetrated by strangers
The IPT and IPI jointly surveyed a total of 756 experts with such cases, including state securities regulators, financial planners, health care professionals, social workers, adult protective service employees, law enforcement officers, elder-law attorneys and academics. Their consensus on the best way to prevent financial abuse -- educational campaigns and counseling tailored to the financial needs of older Americans and their families or caregivers. These experts also suggested that the best way to get this information across is through programs delivered by:
- Local professionals, such as caregivers, adult protective services workers, law enforcement agencies and health care professional
- Senior centers and other facilities that cater to older Americans
- Senior-oriented local and national organizations
How serious is elder abuse? According to a bulletin from the National Adult Protective Services Association, 1 out of 9 U.S. seniors reported being abused, neglected or exploited in the past 12 months. Victims are three times more likely to die than those not subjected to abuse and four times more likely to go into a nursing home. They also use healthcare services at a higher rate than the general population.
Many of my readers are baby boomers who are facing these issues with their parents, and I applaud those of you who are doing all you can do to protect your loved ones in need. (And perhaps you've even contemplated that you might eventually face some of the same issues a few decades down the line.)
So what can you do both for your parents now and for yourself down the road? Both my wife and I have dealt with these type of issues with our parents. Based on our experience, we can offer the following suggestions:
- Raise awareness of these issues with your parent(s) by finding one of the programs listed above by experts as effective for prevention. Make it easy for your parents to attend (An approach like, "C'mon, Mom, let's go together to that helpful program offered by the local senior center" can be effective.) Turn it into an opportunity to do something social with your parents.
- As much as possible, put your parents' finances on auto-pilot, with automatic deposit of Social Security, pension, annuity and investment income into checking accounts. Similarly, pay as many of their bills as possible electronically.
- Find a financially savvy, younger "guardian angel" who will frequently visit or check in with your parents and will supervise any substantial financial transaction. This person will often be a family member, although this step can be a double-edged sword, given the prevalence of abuse by family members cited by the survey. If you don't have any trustworthy family members living close by, see if you can find a trustworthy friend who lives close by.
- When your mom or dad is less capable of handling investments, consider using a portion of their retirement savings to buy a low-cost, immediate-fixed or inflation-adjusted annuity from a reputable insurance company. This will guarantee a reliable lifetime income that your parents can't lose due to fraud or mistakes. Please note that I've carefully chosen my words to describe the type of annuity I think you should consider. I know that there are deferred variable annuities sold by unscrupulous salespeople who victimize the elderly, but the type I'm suggesting is most often sold by reputable companies.
If your parent(s) worked for a large, reputable company and have their savings with a 401(k) plan -- consider keeping it there. Often you'll get the best investment deals by keeping your money with your employer's plan. These plans are strictly regulated, and employers operate these plan for the exclusive benefit of their employees.
Another red flag is when a senior is isolated and their hunger for companionship makes them vulnerable to exploitation. This is one important reason why a careful choice of living quarters deserves special attention. Try to arrange for daily contact with people who care about you and your parents.
There's a special place in heaven for people who take care of their parents at this vulnerable time. I also think there's a special place in a hotter location for those who exploit and abuse the elderly. Instead of hoping for that, though, let's all take steps to shut down the abusers in the first place.
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