With the aging of the Baby Boomers and longer lifespans, the United States will soon have the largest population of retirees in the nation’s history. According to the Pew Research Center, ten thousand Americans turn 65 each day, and by 2030, it’s estimated that seniors aged 65 and over will account for 18% of the U.S. population.
The demographic realities of an aging population present new opportunities and new challenges. Among the most serious challenges is elder financial abuse and exploitation.
How serious is the problem? Data from various sources suggest that financial exploitation of seniors is a significant trend-and as the population of retirees continues to grow, that problem will only grow more acute.
- Estimates of precisely how much is lost to senior financial fraud are tough to nail down and vary widely. A 2011 Study of Financial Elder Abuse by Metlife estimates seniors lose at least $2.9 billion per year in cases that are reported by newspapers and other media outlets. Other sources suggest the number may be much higher-a 2015 report by Truelink Financialestimated losses due to elder financial abuse at more than $36 billion, and many advocates believe $36 billion underestimates the problem.
- Why the wide discrepancy in the numbers? Attribute that to the fact that many seniors are hesitant to report they’ve been victimized (or in many cases, may not be aware they were victimized due to cognitive decline). According to the National Adult Protective Services Association, only 1 in 44 instances of senior financial abuse is reported. The hesitance to report losses may stem from shame or embarrassment at having been ripped off; it may stem from a fear of losing their independence; or it may be the perpetrator was a family member or loved one who they don’t want to see face legal consequences.
- Importantly, in far too many cases, it’s not criminals or fast-talking con artists who are exploiting seniors. In fact, in a 2016 study conducted by New York State found that 67% of verified cases of financial exploitation was committed by family members alone.
- Women and more isolated older seniors are at much greater risk. The Metlife study found that women were “nearly twice as likely to be victims of elder financial abuse as men.” Moreover, most victims were between the ages of 80 and 89 and lived alone.
The statistics are illuminating, but they don’t go far enough to illustrate the real human toll of senior financial abuse. Consider the wide-ranging after-effects of financial exploitation:
- First and foremost, substantial financial losses can be devastating to seniors on fixed incomes, since they are unable to make up the loss through additional income or savings. That can lead to a drastically reduced living standard: for example, the TrueLink study estimates that 954,000 victims of senior financial abuse are forced to skip meals as a result of their losses.
- The financial losses can also reduce victimized seniors’ health care options, if they elect to forego needed care or treatment due to reduced savings or income.
- The emotional and psychological damage can also be significant. Seniors who faced financial losses after placing their trust in someone else are likely to become more withdrawn and isolated-making them even more vulnerable.
- Particularly in cases in which a family member or friend is the perpetrator, the abuse can lead to fracturing of family and community ties.
- Perhaps most dire, early returns in some very recent research indicates an increased mortality rate in victims of financial exploitation.
Countering this alarming trend is a national priority. This week Project Invested will examine the challenges of elder financial abuse in a series of articles that explore the scope of the problem-and what we can do to reduce the number of seniors victimized by this pernicious and destructive form of abuse.
On October 20-21, 2016, the Securities Industry and Financial Markets Association (SIFMA) and the Financial Industry Regulatory Authority (FINRA) will co-host the Senior Investor Protection Conference in Washington, D.C. This joint conference will help share information about how to protect some of the most vulnerable members of the investing public.