Personal Finance

Could 'financial vulnerability' be a medical condition?

Making your money last in retirement

There are many ways to mark how we age, from gray hair to a sudden need for reading glasses to, for men, the dilemma of wearing a belt above the belly or below.

Financial decision-making ability is another thing that changes, and now some prominent medical experts want that shift identified as a medical syndrome.

"Even cognitively intact older adults can have 'functional' changes that may render them financially vulnerable," wrote Mark S. Lachs and S. Duke Han from Weill Cornell Medical College, in a recently published article in the Annals of Internal Medicine. They define the condition, which they call age associated financial vulnerability (or AAFV), as "a pattern of financial behavior that places an older adult at substantial risk for a considerable loss of resources such that dramatic changes in quality of life would result," and these patterns would be "inconsistent with previous patterns of financial decision making during younger adult life."

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Elder financial abuse is clearly widespread. In a study led by Janey C. Peterson, an associate professor of clinicalepidemiology in medicine at Weill, almost 5 percent of older adults said they had been financially abused since turning 60 years old, and many experts believe financial fraud is vastly underreported.

Another survey, conducted for the Investor Protection Trust, estimated that more than 7.3 million seniors, or 20 percent of the over-65 population, had been taken advantage of financially with excessive fees, inappropriate investments or outright fraud.

Lachs, who is co-chief of the division of geriatrics and gerontology at Weill, said financial exploitation of the elderly is the most common form of elder abuse.

"This is a condition that is far more prevalent than any of those conditions you screen for in a primary care practice," he said.

But the condition Lachs wants to label as a medical syndrome is not the abuse, but the cognitive state that leaves older people at risk of financial abuse. "There is something about the 'normally aging brain' that renders people vulnerable," he said. "We want policymakers to start thinking about, 'Well, maybe there should be some safeguards.' "

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Lachs and his colleagues are not the only experts to have identified this state of financial vulnerability. Researchers at UCLA have studied people's ability to detect untrustworthiness and concluded that it declines with age. They even identified a part of the brain, one associated with social emotions and intuitive moral judgement, that becomes less active with age.

Earlier efforts have also explored less complicated ways to identify financially vulnerable seniors. For example, the Baylor College of Medicine worked with the Investor Protection Trust to develop a set of questions doctors can go through with older patients to determine if they are at risk.

Lachs views the questionnaire and related efforts as an excellent first step. "Physicians are in a very good place to do this," he said, but there is a hurdle: "the incredible shrinking office visit." In addition, Lachs said, older people's medical visits often take longer, in part because their medical histories may be more complicated, and that can leave doctors feeling they have less time to broach new subjects.

As a result, he is calling for broader efforts in public policy to address the issue of seniors' financial vulnerability. It's not just a matter for families, he argues, but a growing public health cost.

"Being a victim of financial exploitation is a major risk factor for entering entitlement programs," he said. In addition, elder abuse generally is a common cause of nursing home placement, he said, and nursing home care is a major factor in swelling Medicaid budgets.

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Naomi Karp, senior policy analyst in the Office for Older Americans at the Consumer Financial Protection Bureau, or CFPB, is intrigued by the idea of elder financial vulnerability as a medical condition. People "have been really puzzled by how people who seem cognitively intact can fall prey to these scams and exploitations," she said, pointing to the mother of a friend who, shortly after receiving a clean bill of health, fell victim to "a Jamaican lottery-type scam" to the tune of nearly $100,000.

Making elder financial vulnerability a medical syndrome "could help remove the stigma for older adults," she said. "That in itself is a positive. A lot of people don't speak up or tell anyone when they are victimized because they are ashamed."

Flagging financial vulnerability before any financial abuse happens could be preventive and really helpful to people, said Cindy Hounsell, president of the Women's Institute for a Secure Retirement, or WISER. "Nobody wants to talk about any of this," she added, so a diagnosis could start the discussion. "It could force families to do something."

The CFPB already offers various guides for seniors and the people who care for them. The bureau is also researching how banks and other financial institutions can better protect older customers, Karp said.

Lachs, meanwhile, is hopeful that given the number of occurrences of age-related financial vulnerability, both medical professionals and policymakers will soon develop ways to protect older Americans.

"I think 100 years from now, we will look back at the fact that we allowed 90-year-olds to make estate changes and assume complete capacity without any safeguards in the same way we view child labor now," he said.