Picture an older widow who feels isolated by her living situation and has suffered some cognitive decline. She has inherited money from her late husband, though she is new to managing her finances. Is she vulnerable to elder financial abuse?
You bet. But she probably doesn't think so.
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That is the conclusion of a new analysis of survey data on seniors and their finances by Allianz Life, whose clients for insurance, annuities and other financial services include seniors. The company queried over 1,200 seniors and more than 1,000 people ages 40 to 64 about seniors' finances and found that among the seniors, 89 percent were confident they could handle their money on their own. At the same time, 22 percent of the younger group said they were not confident in their own ability to recognize elder financial abuse, or were not sure.
Some 18 percent of family or friends of elderly people are worried about them falling victim to financial abuse, but only 11 percent of the elderly worry. The elderly are also more confident that they have the resources to protect themselves from financial fraud: 82 percent believe that, compared with 58 percent of their family members and friends.
The confidence of the seniors may make them even more vulnerable to financial scams or financial abuse by friends or family members, said Walter White, president and CEO of Allianz Life.
"Everything we understand about the prevalence of the issue would suggest that confidence is misplaced," he said.
Elder financial abuse has been studied less intensively than other forms of elder abuse, but a growing body of research indicates that it is woefully common: A study published in the American Journal of Public Health found that roughly 1 in 20 older adults was currently experiencing financial abuse by a family member. And while family members are frequently the perpetrators of the abuse, others, like paid caregivers and scam artists, can abuse as well.
Older Americans may also have significant assets. According to the National Committee for the Prevention of Elder Abuse, people over age 50 control 70 percent of the nation's wealth. That means they are at risk of losing large amounts to fraud, and sure enough, an earlier analysis by Allianz Life found that the average loss to fraud by seniors was $30,000, and more than 10 percent of seniors who fell victim to financial fraud lost $100,000 or more.
That kind of loss can devastate a person's finances, and elder financial abuse is often a major reason why seniors wind up in nursing homes and assisted living facilities on public assistance. Dr. Mark Lachs, co-chief of the division of geriatrics and gerontology at Weill Medical College, has studied the issue and found that an older person who falls victim to abuse, including financial exploitation, is four times more likely to be placed in a nursing home, after adjusting for other known risk factors for nursing home placement.
Elder abuse of any kind is "a major risk factor for nursing home placement," he said. And as for elder financial abuse, he added, "you never see someone being physically abused without financial abuse. Almost never."
Despite all this, victims often do not report elder financial abuse. They may feel their abusers have some legitimate claim on their money, or they are ashamed or worried about losing their independence. And now, Allianz Life is showing that overconfidence may also be at play.
Elder financial abuse is likely to increase over time, White said, if only because America is graying.
"Because the [elderly] population is growing so exponentially, there are going to be more incidents, no question," he said.
But on the flip side, he sees more awareness of the problem among policymakers, ordinary people and the financial services community. For medical professionals, the National Adult Protective Services Association and the Investor Protection Trust, among others, have developed a pocket guide listing red flags and suggested questions to ask about financial vulnerability. Other professionals can find checklists as well.
White said many professionals believe privacy considerations impede their ability to report potential abuse, and "we are trying to chip away at that." Allianz Life is also "looking at" adding a line on insurance policy enrollment forms where applicants can list a backup person the agent can consult if it seems necessary, he said.