Swedroe: Thwarting Financial Abuse

November 12, 2018


Thoughts of retirement can be dreams of being free of job responsibilities and enjoying travel, leisure activity and having fun. We look forward to having time to do the things we didn’t have time to do. Our thoughts usually do not include fear that someone is going to rip us off. Unfortunately, financial abuse does happen, even to the smartest people.

Most of us do not want to face the fact that, over time, we may lose our mental acuity, creating the potential for financial abuse. However, declining mental sharpness is inevitable for many. That makes us vulnerable to financial abuse. Even if you do not suffer any decline in mental sharpness, there is no guarantee you will be untouched by those seeking to exploit you.

Determined, professional thieves know that many seniors have nest eggs that can be stolen. Educated and powerful people can be taken advantage of and manipulated right along with those who lack these advantages. No one is immune.

Elder expert and author Carolyn Rosenblatt offers the following checklist of warning signs of cognitive impairment (which create the risk of financial abuse):

  1. It appears to trusted others that you are no longer able to process simple concepts.
  2. You appear to be forgetful, with short-term memory loss.
  3. You appear unable to recognize or appreciate the consequences of financial decisions.
  4. You make any decisions that are inconsistent with your long-held goals, investment philosophy or commitments.
  5. You demonstrate erratic behavior.
  6. You refuse to follow appropriate investment advice, which you have generally accepted in the past.
  7. You seem to others to be paranoid about someone taking your money or missing funds that are not missing.
  8. You lose the ability to understand recently completed financial transactions.
  9. You appear in any way to be disoriented, get lost in familiar places, such as finding your way home, or you forget where you are.
  10. You forget to groom, bathe or take basic care of your physical needs.

If you (or a loved one) are experiencing these signs, it’s time to seek help. You do not want to wait until after the damage is done.

Rosenblatt also offers the following 10-point smart retirees’ checklist that generally covers many of the bases of how to help your family and yourself be best prepared for things you need to manage in this phase of life and avoid abuse. The bottom line here is transparency and open communication.

  1. Decide with whom you want to communicate about your future. Set a date and get together.
  2. Have a signed, notarized durable power of attorney.
  3. Have a signed advance health care directive.
  4. Make a list of all bank accounts, passwords, hard drive backup, investment records and financial planning you have done, and provide contact information. Provide written permission to your loved ones to talk with your lawyer, accountant and financial planner.           
  5. Make a list of all insurance policies, including life, disability, health, property,  earthquake, and anything else you own that will protect your heirs.
  6. Make a copy of your mortgage statement, any other loans, financial statements and bank statements. Keep them in one place. Update when changes are made.
  7. List your physicians, care providers and medications. Give written permission  for your loved ones to speak with your doctors.
  8. Put in writing your wishes for burial or disposition of your remains.      
  9. Update your will and/or trust with a local attorney. Laws change and documents need to be up-to-date in your state.
  10. Have a family meeting to give items 2 through 9 to your loved ones and explain them.

If you or your loved ones don’t have such a plan already in place, I hope you take this as a call to action.

Larry Swedroe is the director of research for The BAM Alliance, a community of more than 140 independent registered investment advisors throughout the country.

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