How to Protect Your Parents From Being Ripped Off
A new survey reports that 20 percent of Americans over the age of 65 say they have been taken advantage of financially, either from being talked into inappropriate investments, being charged unreasonably high fees for financial services or outright fraud. That's more than 7 million elderly Americans reporting they've been financially ripped off.
While disturbing, that's far from surprising. The elderly have always been prime targets for financial abuse. But what alarmed me is how adult children seem to be a bit unrealistic, or in denial, over their need to step in and proactively help their elderly parents avoid this age-old problem.
According to the non-profit Investor Protection Trust, which commissioned the survey, 15 percent of adult children said their parents had been taken advantage of, when in fact 20 percent of the elderly said they have been victimized. Granted, that's not a huge difference, but it's a hint of a bit of a disconnect.
And that's not surprising given that 71 percent of parents over the age of 65 said they handle their finances themselves with less than one in four reporting they get any help from relatives with their money decisions.
But what really struck me was the fact that 80 percent of adult kids said their parents would tell them if something bad happened. Really? That seems a tad optimistic to me. I think regret and guilt about not wanting to bother their kids with their worries would keep many parents from sharing the info. And more importantly, even if 100 percent of elderly parents told their kids they had been ripped off, that's still a failure. Isn't the idea to protect your parents from having that happen in the first place? For their sake, and also for yours. The harsh reality is that if your parents are severely taken advantage of, it raises the odds you will need to step in and help out financially, potentially throwing off your own retirement plans.
Starting the conversation
Suffice to say many families find it excruciatingly hard to open up an inter-generational financial conversation. Introducing new family dynamics is never easy, especially when it involves money. But to remain silent leaves the door wide open for costly mistakes that can wreak financial and emotional havoc. The last thing you want is for a parent to spend their later years feeling regret or anger for financial missteps.
You can make it a lot easier for everyone if you start the conversations today, while your parents are fully capable of running matters. This isn't a matter of taking over for them, or doing "better" than they can. If your elderly parents are indeed on top of all of it, great. Maybe you can learn a thing or two from them. But the goal is to open the lines of communication so they will be open to coming to you for advice and guidance before making a costly mistake. And let's all be realistic, there will likely be a time when an elderly parent may indeed need, or greatly appreciate, having you take over the finances. Diving into it cold turkey is not going to be easy. Easing into it now, with their help, seems like a more logical approach.
Not sure how to broach the topic? Check out this MoneyWatch article: 12 Questions Every Child Should Ask a Parent. It's a great guide to starting the conversations.