In an increasingly digital world, the specter of financial fraud looms large, especially for older adults. My experience with an 81-year-old client offers a stark illustration.
While assisting "Emma" (not her real name) with email issues, I witnessed her vulnerability to scams firsthand. Despite my repeated warnings over the years, she had readily shared personal information with unknown senders, believing she was being conscientious or supporting noble causes.
This behavior soon led her into a fraudulent scheme, where she nearly lost $4,500 to a scammer masquerading as a computer services provider. This incident was not the first Emma had experienced, but it was the most brazen.
Emma's story is not unique. It reflects a growing trend of elder fraud, which is both sophisticated and damaging.
Elder fraud is becoming common — and expensive
Elder fraud is an escalating problem in the United States, with scammers becoming increasingly cunning. They prey on older people, often exploiting their loneliness, social isolation and sometimes declining cognitive abilities.
These individuals are most vulnerable, as it turns out. A recent study from the University of Michigan suggests that older adults who report feeling lonely or isolated are more susceptible to fraud than those who report feeling satisfied with their lives and social circles. Meanwhile, the National Library of Medicine has published research linking cognitive decline to a greater predisposition to scams.
Yet, these criminals aren't just targeting the very old; individuals much younger than 80 are also at risk. In 2022 alone, more than 88,000 adults over 60 fell victim to financial scams, according to the most recent FBI Elder Fraud Report.
Women are more likely to be victims of elder fraud, according to the Women's Institute for a Secure Retirement, because there are more women than men over age 65, and older women are more likely than older men to live alone and to live in poverty.
Americans 60 and older lost $3.1 billion to cyber fraud in 2022, FBI data shows, with an average loss of $35,101 per victim. More than 5,000 older adults lost more than $100,000 apiece.
Recognizing the signs of fraud
Elder fraud schemes are diverse, ranging from email phishing to impersonation scams, each designed to deceive and manipulate their targets into handing over sensitive personal and financial information. As fraud tactics become more sophisticated, avoiding them can be challenging for those who don't recognize the warning signs, which often include:
- Suspicious emails. Scam email addresses often have misspellings or odd characters and prompt the receiver to click on links. These links may lead to phishing sites that mimic a legitimate website and trick the user into entering sensitive information or could initiate the download of malware, adware, or scareware onto the user's computer.
- Vague email signatures. Email signatures from scammers are usually simple, sometimes just a first and last name. Legitimate businesses provide detailed, verifiable contact information, including company name, address, website URL, and phone numbers.
- Urgency and threats. Phishing attempts typically convey a false sense of urgency or threaten dire consequences to coerce action.
- Requests for personal information. Scammers want personal information to hack into a person's financial accounts. No legitimate business will ask for credit card numbers, log-in credentials, or Social Security numbers over the phone or via email.
- Out-of-character behavior. Some scammers pretend to be family members or friends who urgently need funds — a feat made easier with the dawn of artificial intelligence.
Proactive measures to protect a loved one
For older adults, especially those in isolation or experiencing cognitive decline, habitual caution may not suffice. Establishing a support network of trusted individuals who can step in when financial decisions become confusing is crucial. Consider the following proactive measures:
- Early planning. Begin organizing a support network around age 70, particularly for those without extensive family networks or who have a history of cognitive decline. For example, another of my clients preemptively engaged a professional in-home care management team to address her lack of local family support.
- Security audits by adult children. Adult children can help by auditing spam filters, setting up password managers, and automating bill payments.
- Legal preparations. Establishing critical legal documents and setting up trusts can safeguard against the inevitable challenges posed by cognitive decline. For example, a durable power of attorney for finances designates a trusted individual to manage the financial affairs of someone experiencing diminished capacity, while a successor trustee can manage and distribute trust assets on their behalf according to the trust agreement. These legal tools are essential for maintaining financial autonomy and security, even when direct management becomes impractical or impossible.
Facing the digital challenge
Research from TransUnion reveals that the volume of suspected digital fraud attempts globally increased by 80% from 2019 to 2022, mainly due to an increasing reliance on digital transactions during the Covid-19 pandemic. As our financial activities become more intertwined with digital platforms, the opportunities for scammers will likely grow exponentially.
Although financial institutions are becoming more adept at detecting and preventing fraud, awareness and vigilance remain key in the ongoing battle against elder fraud. By recognizing the signs of scams, establishing protective legal and personal measures, and fostering a supportive community, we can help safeguard the financial well-being and independence of our older loved ones.
— By Cathy Curtis, certified financial planner and founder and CEO of Curtis Financial Planning. She is a member of the CNBC Financial Advisor Council.
