You know that you can expect to be at an increased risk of health issues as you age. However, what you might not realize is that aging puts you at a greater risk of another issue: financial exploitation.
In fact, the rate at which adults over the age of 60 can expect to experience financial exploitation—1 in 20—is higher than the incidence of many age-related diseases, according to research published in The Journals of Gerontology. And that’s likely an underestimate of the problem because, according to the report, “many older adults are unaware or unwilling to report exploitation.”
What puts you in even greater danger of being exploited as you age is believing that you aren’t vulnerable. “If you think it won’t happen to you, you’re already at risk,” says Dr. Nathan Spreng, co-author of the report and professor of neurology and neurosurgery at McGill University.
To reduce your risk of being exploited financially as you age, start by understanding why you become more vulnerable. Then, take steps to put protections in place before the threat of exploitation increases.
What to expect as you age
As your body changes as you age, so does your brain. It gets slightly smaller every year, Spreng says.
The prefrontal cortex, in particular, is impacted by this shrinking. This is the area that is at the front of the brain and is involved in several functions, including integrating information from multiple sources, advanced forms of reasoning, and the ability to control impulsive responses (inhibitory control). It’s the last part of the brain to mature. “And, regrettably, these regions are also the first to go as we get older,” Spreng says.
As a result, the ability to process and remember information is impacted. That’s why it can be common, for example, to get up and go to the refrigerator then forget what you wanted to get from the refrigerator. “A lot of the memory errors and failures that we have in middle age and late adulthood are actually quite normal, and they're not a signal of dementia,” Spreng says.
You can cope with these frustrating lapses in memory by being patient and using tools to support your memory processes, such as writing things down, having reminders, and relying on external forces to refresh your memory, Spreng says. You also can slow down this natural decline by exercising regularly, eating healthfully, and maintaining an active social life. In fact, staying social (not doing crossword puzzles) is one of the best ways to stay sharp because it challenges the brain, Spreng says.
How handling financial tasks is impacted by aging
Unfortunately, the ability to manage your finances and to make financial decisions is impacted by this natural cognitive decline that comes with aging. For example, tracking spending, balancing a checkbook, managing cash, and staying on top of multiple accounts can become more challenging. It’s easier to make mistakes and let things slip by as it becomes more difficult to integrate all the information that is needed to maintain your finances, Spreng says.
Plus, if you’re relying on technology to help you manage your finances, it can be difficult to adapt to changes in technology as you age because the ability to learn new things declines. Then, you can find that the systems you set up to stay on top of money matters become a challenge to use.
However, the biggest threat to your finances are changes to structures of the brain that reduce the red flag signals that are sent up to help you avoid potentially negative situations. “The volume of that signal goes down as we get older,” Spreng says. “So it just gets a little bit harder to hear and respond to that intrinsic alarm system that something might be wrong and is off.”
As a result, it becomes harder to recognize risky financial situations and to detect when others are trying to take advantage of you. That’s when your risk of being exploited increases.
How your finances are impacted by Alzheimer’s and dementia
Aging alone can impact your ability to manage and safeguard your finances. When Alzheimer’s disease or other types of dementia come into play, the impact on financial ability can be much more significant. It’s a reality that many adults need to be prepared for as they age because Streng says that more than 50% of adults older than 85 can expect to develop Alzheimer’s disease.
“[Alzheimer’s] can have very devastating effects on one's finances because there can be a failure to remember some really important financial decisions that were made,” Spreng says. “There can be investments that are potentially made without thinking through and remembering all of the potential implications.”
Even minor memory lapses can have big financial consequences when, for example, those with Alzheimer’s contribute again and again to charities because they forget about previous contributions. The problem can be exacerbated if a person is home alone and sees phone solicitations as a source of social connection and is willing to give more just to have the opportunity to talk with someone. Con artists recognize this and use it to exploit that vulnerability.
What makes matters worse is that those with Alzheimer’s experience a more rapid decline in their financial decision-making and their ability to spot threats. So they are at a heightened risk of being exploited.
How to guard against financial mistakes and exploitation
Using scans, Spreng and other researchers have been able to identify structural differences in the brains of exploited adults. That doesn’t mean, though, that you should schedule a brain scan to determine if you’re at risk. “We're not yet in a state of the science to just look at someone's brain and know if they're vulnerable for exploitation,” Spreng says.
Instead, he recommends recognizing that, as you get older, there will be declines in your cognition that will make managing your finances more difficult. “The sooner we can start bringing in more support, using more tools to help us manage and protect our finances, I think the better,” Spreng says.
Talk about your finances with trusted family members. It’s critical to start sharing information about your financial situation with family members as you age, Spreng says. Discuss what your sources of income are, whether you have savings, and what financial obligations and liabilities you have. This will help family members spot changes in your financial situation if you start struggling to stay on top of money matters as you age and give them the information they need if they have to step in and help.
Build a strong social safety net. In addition to sharing information about your finances, talk with family members about what roles they’re willing to play to help protect your finances as you age. “Casting light into that space can help just build up levels of support and then insulate us from situations where we could become exploited,” Spreng says. If you’re not willing to talk and reach out for help, you leave yourself more vulnerable to exploitation.
Get a second set of eyes on your finances. Letting family members see what’s going on in your bank account might feel like you’re giving up your autonomy. However, Spreng says having a second set of eyes on your finances can offer a lot of protection as you age. Again, it’s important to identify family members you trust and to give a certain level of access before you experience any sort of cognitive decline so that a safety net already exists before problems arise.
One service that makes it safe and easy to give family members view-only access to your financial accounts is Carefull. Carefull provides account, credit, and identity monitoring and will alert you if it spots something unusual. You can add trusted family members to your “circle” of support so that they can see your linked accounts (but not make transactions) and get alerts.
Put legal protections in place. Meet with an attorney to draft powers of attorney documents. A financial power of attorney document lets you name someone you trust to make financial decisions for you if you can’t. A health care power of attorney document allows you to name someone to make medical decisions for you if you can’t.
Drafting these documents while you still are relatively young, healthy, and mentally competent allows you to decide who will be in charge of your finances and health care if something happens to you. If you wait and start to experience cognitive decline, you might be talked into giving these powers to someone you wouldn’t normally trust.
Putting legal protections in place, having family money talks, developing a safety net, and getting a second set of eyes on your finances can help reduce your risk of being financially exploited as you age. Don’t wait to take these steps.
Learn more about Carefull for Advisors and Planners.