5 Tips for Protecting Your Finances as You Grow Older

Financial abuse of elderly Americans is a serious problem.

Up to 6.6% of Americans aged 65 or older have lost money to exploitation, fraud, and theft, according to the Securities and Exchange Commission. The SEC says that "elder financial exploitation is emerging as the most prevalent form of elder abuse" in the United States. And with 10,000 people turning age 65 each day in this country, the problem of elder financial abuse is forecast to worsen in coming years.

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Fortunately, there are steps seniors can take as they age to protect themselves from fraud and manipulation -- either by scammers or, in some cases, by friends and family. Many seniors also need protection from themselves as money management often becomes difficult as physical and cognitive functions decline with age. Here are five ways to protect yourself.

1. Automate your finances

Americans are increasingly on their own when it comes to managing their money in retirement. In 2017, $14.5 trillion was held in self-directed retirement accounts in the U.S., according to asset management firm Cerulli Associates. That's a lot of money to manage, and it often becomes difficult for elderly people to handle their finances as their physical and cognitive functions decline. For this reason, seniors should automate their finances. Seniors should have all sources of income -- such as pension funds, Social Security, and disability payments -- deposited directly into their bank accounts. Similarly, regular bills such as utilities, insurance, and mortgage or rent payments should come out of your bank account automatically on set days each month. Automating your finances will make it easier to manage them and to track money flowing into and out of your bank accounts.

2. Require an authorized signer

Another way people can protect their finances is by setting up an authorized signer on their bank account. An authorized signer has authority to sign checks, to make deposits and withdrawals on behalf of the account holder, and to access account information such as balances and activity. However, an authorized signer does not have ownership over your bank account and has no rights to the account's assets unless they are designated as the account beneficiary in the event of your death. This setup is different from a joint account: A joint account holder shares ownership of a bank account and the money in it. A joint account holder also has the ability to withdraw all funds in a bank account and close it.

An authorized signer should be someone you trust, whether it's an adult family member, neighbor, or friend. Making that trusted person an authorized signer will enable them to keep an eye on what's happening with your bank account and ensure that no single person, including you, makes a large or unusual transaction. Again, choosing an authorized signer you trust is critically important.

3. Establish a power of attorney

One of the very best ways for elderly Americans to protect their finances is to establish a power of attorney. This means giving a trusted person (again, a family member, friend, or neighbor) authority to manage your financial affairs, including your property, if you are not able to do so yourself -- even temporarily. A power of attorney is different from a will in that it ensures your wishes are followed while you're alive. (A will ensures that your wishes are respected after you've died.) You can also appoint more than one "agent, or "attorney-in-fact" (the legal terms for people who have power of attorney). Many lawyers recommend this, as it ensures that no single person can act unilaterally when it comes to your money and property, thereby reducing the risk of fraud, theft, and financial mismanagement. You can require that two or more agents make all decisions together regarding your affairs.

Typically, agents can access bank accounts, manage investments, file tax returns, deal with health insurance, and sell property. Power of attorney is used when seniors lack the mental capacity to make their own financial decisions. It is also used when elderly people still have their mental faculties but, due to illness or infirmity, need help managing their finances. You will need to obtain the forms necessary for awarding enduring power of attorney in the state where you live. The completed forms should be reviewed by a lawyer and signed by you and the agent(s) you designate in front of a notary public. Typically, there are two types of power of attorney: one for financial decisions and the other for medical decisions.

4. Avoid cash

It is never advisable to keep large amounts of cash around your house or in a wallet or purse where it can be easily accessed by other people, and paying with a bank or credit card provides an electronic record. This can be valuable in the event that someone makes fraudulent purchases with your card as, a "paper trail" can help the bank or law enforcement identify the culprit and recover your money. Further, credit card companies are very good at spotting and declining unauthorized charges before you even notice any foul play has occurred. On top of all that, even if an unauthorized charge does go through, federal law limits your liability to $50 -- and most credit card issuers in the U.S. offer $0 fraud liability.

Elderly people are often used to having cash on hand, as they remember a time before ATMs and online banking. But dealing in cash is hazardous, as it can easily go missing. Try to keep a trail of your financial transactions that can be reviewed by you or an authorized signer, agent, lawyer, or banker. This is the best way to know where your money is and where it has gone.

5. Get an annual credit report

Request a free credit report from each of the major U.S. credit bureaus -- Equifax, Experian, and TransUnion -- each year, as is every American's right under federal law. You can request those credit reports at www.AnnualCreditReport.com. A credit report will contain any unusual or potentially fraudulent financial activity involving your accounts, such as credit cards you may not have ordered or unauthorized purchases. If you or someone you trust notices unusual financial activity, report it to the big three credit bureaus, your bank, and other financial institutions that you do business with regularly. They can cancel fraudulent credit cards and put holds and other safeguards on your accounts.

Growing old comes with many challenges, adjustments, and responsibilities. And few are as important as protecting your finances from fraud, manipulation, or theft. Elder financial abuse is a real and growing problem. Being aware of the problem and taking steps to protect yourself is the best way to ensure that your twilight years are comfortable and free of financial stress.

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