Elder financial abuse is getting more attention as people realize the significant impact it is having on older Americans’ financial security. Yet there is still a lot that the financial services community needs to learn about this complicated issue.
Namely, it’s that elders aren’t the only ones being impacted by financial abuse.
When we launched the findings of our 2016 “Safeguarding Our Seniors” study in November, we emphasized that both the incidence and financial impact of elder financial abuse may be worse than previously thought. Originally commissioned in 2014, “Safeguarding Our Seniors” found that about 20 percent of family and friends reported knowing an elder who experienced financial abuse.
The 2016 study focused on family and friends in active elder caregiving roles, or those who could be in those roles soon. It found that more than one-third of active caregivers said the elder they care for has experienced financial abuse or exploitation with a financial loss. Furthermore, respondents revealed that elder financial abuse is not an isolated occurrence, with a full 40 percent of all active and potential caregivers confirming that their elder has experienced financial abuse more than once.
In terms of financial impact, respondents noted the average financial loss to victims was $36,000. This amount was 20 percent higher than estimated in the 2014 study, with nearly half of respondents saying the effect on the elder victim was “major loss” or “financial ruin.” Equally troubling, nearly 90 percent of active and potential caregivers said they also experienced a financial impact from the abuse, with the average cost to them also reaching $36,000. This was a direct result of having to compensate for their elder’s loss.
This is the part of the story that deserves a closer look — the effect that elder financial abuse is having on caregivers and the additional support necessary for this growing segment of our society.
Financial Strain on Caregivers
Even for those who do it professionally, caregiving is a taxing occupation fraught with numerous challenges. When you consider that many who provide this service are simply friends and family of the elder accepting the additional burden out of the goodness of their hearts, the caregiving role takes on increased importance.
In fact, when asked how they feel about their current caregiving situation, a full three-quarters of caregivers said providing care for their elder is almost like a full-time job. As America’s population ages, there will be more people fulfilling this position, meaning more people will be susceptible to the myriad difficulties that accompany the task.
Unfortunately, financial strain is at the top of this list of difficulties. The “Safeguarding Our Seniors” study found that the average caregiver provides more than $7,000 per year in both cash and noncash (driving to appointments, delivering meals, social engagement, etc.) support. They also are spending more than 10 hours a week providing noncash support, and fewer than half of current caregivers receive some form of financial assistance for that support.
These statistics are troubling enough on their own, but they are exacerbated when the elder in question has been a victim of financial abuse. The costs to caregivers are a staggering 56 percent higher — totaling almost $8,400 per year — for those caring for financial abuse victims. Furthermore, in cases where the elder is a financial abuse victim, the need for those elders to receive some sort of financial assistance from their caregiver is more than double that of situations where financial abuse has not occurred.
Detriment to Retirement Planning
It should come as no surprise that caregivers are concerned about this trend and the effect it will have on their own retirement years. Two-thirds of active caregivers said the cost of providing care for their elder is having a significant effect on their finances and that they worry about having enough money to retire because of what they are spending on caregiving.
Once again, when elder financial abuse is part of the picture, that anxiety is even greater. Nearly 80 percent of caregivers responsible for an elder who is a financial abuse victim indicated concern about the effect caregiving is having on both their current finances and their retirement savings.
In addition, this financial stress has created a moral gray area that many caregivers are constantly struggling to reconcile. Although the majority (81 percent) of current caregivers agree that it’s all right to accept some of the elder’s money to cover expenses, if offered, significantly fewer (66 percent) agree that it’s all right for a caretaker to reimburse themselves for any expenses without informing the elder every time.
Advocating the Role of the Financial Professional
It’s clear that elder financial abuse is a complex, multilayered problem and one where many people could benefit from the wisdom of professional assistance. Although seven in 10 caregivers are currently talking to their elder about financial abuse and scams, many caregivers believe these discussions are challenging. These caregivers said they are hesitant to have frequent conversations on the topic for a variety of reasons, including believing that it’s none of their business, believing that the elder is capable of managing their own finances, or believing that such discussion makes the elder uncomfortable.
So what’s the best way to address this issue? The majority of caregivers agree that open and honest conversations about finances are most effective in preventing their elder from becoming a victim, which in turn would help minimize the financial impact on caregivers themselves.
The majority of active and potential caregivers (58 percent) also agree that the participation of a professional third party could help make these conversations easier, especially if past elder financial abuse is involved. More than three-quarters of people caring for victims of past financial abuse would welcome the assistance of third-party professionals versus fewer than half of caregivers (43 percent) where the elder was not a victim.
It is hoped that elder financial abuse is already on your radar as a discussion topic worthy of attention, but this topic may extend to more of your clients than you previously thought. Take the time to connect with clients and discuss how caregiving factors into their lives, whether they are currently looking after a loved one or if they have the potential to become involved in caregiving in the near future. A proactive approach to addressing caregiving and the prospect of elder financial abuse can make a significant difference in clients’ approach to managing their finances now and saving for the future.