Holiday Gatherings Can Be A Financial Safety Check-In

By Kelly LaVigne

Getting together with family is certainly one the best parts of the holiday season. The chance to spend time reminiscing about the past and looking forward to what the new year will bring is a big part of what makes holiday gatherings so special.

But connecting with family around the holidays can also be valuable for more practical reasons, especially when it comes to checking in on the health – both physical and financial – of elderly loved ones.

In addition to the medical challenges that come with aging, older Americans are increasingly susceptible to financial fraud that can severely limit their ability to enjoy their golden years. In fact, according to a recent report from the FBI’s Internet Crime Complaint Center, in 2020, 28% of the $4.1 billion stolen from Americans through online scams came out of the pockets of those over the age of 60. That amounts to about $1 billion scammed out of seniors in 2020, an increase of about $300 million for the same demographic the year before.

It’s unfortunate that many potential victims don’t seem to be getting the message about the significant financial risks that come with aging.

According to the 2021 Retirement Risk Readiness Study from Allianz Life, despite being at the highest risk of experiencing elder financial abuse, retirees reported having the least concern that they will become a victim of financial fraud and scams. Fewer than a quarter (24%) of retirees reported being worried they may become a victim of financial fraud, compared with 42% of preretirees and 46% of near-retirees.

The study surveyed three categories of Americans to get different perspectives on retirement: preretirees (those 10 years or more from retirement), near-retirees (those within 10 years of retirement) and those who are already retired. Our research found that current retirees are actually the least worried of any group about these financial risks that can come with aging and fraud. This includes not only fraud and scams that target seniors, but also some of the major life changes that accompany aging and can impact finances, such as health care risks and cognitive decline. In fact, only 42% of retirees reported being worried that these risks will prevent them from being able to manage finances on their own, versus 57% of pre- and near-retirees.

Added Risks With Aging Population

These statistics are concerning enough, but the added impact elder financial abuse can have on caregivers greatly expands the scope of the issue. While the study found that abuse victims suffered more than $64,000 in average losses, caregivers experienced a nearly equal amount at an average of just over $57,000. Given the fact that more than 80% of respondents reported that they have either provided support as a caregiver or expect to at some point in the future as the population ages, the fallout from elder financial abuse has the potential to affect an extremely high number of Americans.

Although there is never a perfect time to address the taboo topic of finances with family members, it is important that these discussions happen on a regular basis – even if that means taking a quick break from more festive holiday conversations to do so. The following are a few tips you can share with your clients on things they can do to help protect their loved ones from elder financial abuse.

Start small but listen for big changes. Most people are reluctant to dive right into the intimate details of their finances, but a high-level financial health check, focusing on any new developments, may uncover potential problems. Some red flags to watch for include:

Sudden, excessive preoccupation with policy/contract values.
New beneficiary changes made without explanation.
Talk of liquidating assets in spite of penalties (e.g., cashing out an annuity).
Nervousness or agitation when discussing financial matters.
Unusually large, frequent or urgent withdrawals.

Become familiar with current scams. When discussing the impact of fraud and scams, it’s often more effective to have the conversation using current examples. You can learn more about illegal schemes that are most prevalent in your area with the Better Business Bureau’s Scam Tracker.

Build relationships with a network of financial professionals. It’s best to not put all of the financial responsibility squarely on either the elderly family member or their caregiver. If possible, develop a network of financial professionals – including a licensed financial advisor and attorney – who can help watch for suspicious activity. These professionals should also be consulted before signing any complex documents, including insurance contracts/policies.
Develop a financial plan that addresses specific aging-related issues. It’s important to plan ahead, which means having a financial plan in place to help cover rising healthcare costs, expenses tied to an unexpected illness or injury, and costs around potential long-term care or assisted living expenses. This could mean considering as part of your client’s overall portfolio a retirement income solution like an annuity to help cover these costs. Another option is a fixed index universal life insurance policy for death benefit protection as well as living benefits with accumulation potential that allows for a loan or withdrawal against any available cash value accumulation in the policy to help cover unexpected expenses.

By connecting with clients now and encouraging them to be proactive in discussing aging risks with their elderly family members, you can demonstrate the added value you bring to your relationship. Working with them to create a plan to help mitigate these risks not only benefits any at-risk senior, but also protects your client from the significant financial impact that all too often falls on caregivers and the extended family.

Kelly LaVigne is senior director, advanced markets, with Allianz Life. He may be contacted at [email protected].