Taking Their Money

“UNCLE” PHAN, MY father’s closest friend and my godfather, committed suicide a few years ago. I regret not seeing him often enough when he was alive and not letting him know how much I appreciated his humor and generosity.

I also regret not knowing his financial and emotional situation.

Uncle Phan retired as a surgeon 20 years ago and took a lump sum distribution instead of a lifetime monthly pension. It should have been enough to last the rest of his life, but he became a victim of financial scams by close relatives and supposed friends. He also suffered depression and it all proved too much for him. At the time of this death, Uncle Phan was penniless and living alone in a small shack.

Earlier this year, my father had a stroke that forced him to shutter his own medical practice. Working with my brothers, we went through his financial records, as we wound down the business. We discovered that he, too, was a victim of financial scams and exploitations that had been going on for years. He had been paying out large sums to current and former employees, each with a sob story of need, including his assistant to whom he had been a mentor.

My father had always been a diligent saver and careful spending. Maybe that’s why we didn’t notice for so long. He was the one who taught his four children to favor saving over thoughtless spending. Yet, in his later years, here he was doling out large sums without thorough recordkeeping and, worse still, without regard to preserving the savings he and my mother needed for the rest of their lives.

Luckily, my parents had a financial backup, in the form of a monthly pension my father continues to receive. My mother also has her own savings from the medical clinic.

Through these experiences, I’ve learned some unfortunate truths:

• Studies show that, as we age, our brain becomes less able to detect fraud. Changes occur in the region of the brain that helps us decide whether or not to trust someone.
• A majority of financial exploitation is carried out by people the victim knows.
• One study found that financial literacy declines by about 2% every year after age 60. Confidence in financial decision making, however, doesn’t decline with age. That combination—reduced ability but continued confidence—helps explain poor financial decisions by older adults.

My father’s and Uncle Phan’s financial decision making had been deteriorating for years. That made them easy targets for their abusers. Perhaps those who took their money weren’t even aware they were asking for money from people with a diminished capacity. I now see that it can happen to anyone, in any family.

In my father’s case, two things helped to lessen the impact of the money squandering. First, while Phan took his pension as a lump sum, my father took his as a lifetime monthly pension. He could only give away what he had on hand, so the financial damage was limited to his past monthly pension payments, while his future distributions remained protected.

Second, while Phan had no children to safeguard him, we were able to catch my father’s spending habits before he made himself and my mother destitute. In the end, there’s no substitute for a family support system.

These experiences have caused me to take precautions now to protect my and my husband’s retirement savings. While we currently manage our own portfolio, I’ve laid out three steps to implement in the next five years:

• We’ll arrange to have our money managed by either a low-cost financial company, such as Vanguard Group, or a fee-only financial advisor.
• We will build on our already good communication with our adult sons. Today, they have a list of all our financial accounts, in case something happens to us. In future, I want to make sure they are kept apprised of our financial status on an ongoing basis.
• We’ll include both our sons in the discussions we will have with our financial advisor, especially when we review our assets and how our annual withdrawals are impacting our portfolio’s likely longevity.

Jiab Wasserman recently retired at age 53 from her job as a financial analyst at a large bank. She and her husband, a retired high school teacher, currently live in Granada, Spain, and blog about financial and other aspects of retirement—as well as about relocating to another country—at YourThirdLife.com. Her previous articles were Why Wait and Won in Translation.

Want to receive our weekly newsletter? Sign up now. How about our daily alert about the site's latest posts? Join the list.