Regulators are sending a message to investment professionals: The opioid epidemic could be affecting the retirement savings of your clients, so be on the lookout for financial fraud.
Two years ago, the U.S. Department of Health and Human Services declared a national opioid crisis.
The Centers for Disease Control and Prevention reported that about 68 percent of the more than 70,200 overdose deaths in 2017 involved a prescription or an illicit opioid.
“The opioid overdose epidemic is the public health crisis of our time, devastating families and communities across the United States,” the CDC says.
To gauge the impact of the opioid crisis, the Federal Reserve asked families about its impact on their economic well-being. The Fed’s 2018 report found that about one-fifth of adults said they personally know someone who has been addicted to opioids.
The crisis, of course, also has serious financial ramifications on individuals.
In fact, the opioid epidemic is contributing to a rise in elder financial abuse, according to the North American Securities Administrators Association (NASAA). And to help combat the exploitation of seniors, the NASAA recently released resource materials for investment professionals who might be first to spot a problem.
“The cost of opioid addiction and treatment can have major financial ramifications,” said Michael S. Pieciak, NASAA president and commissioner of the Vermont Department of Financial Regulation. “Clients facing opioid addiction, either themselves or within the family, may be strapped for resources and can be vulnerable to poor financial decision-making or even fraud.”
Opioid addiction can affect seniors in multiple ways. For example, many grandparents have had to step in to physically and financially care for the children of parents with an opioid addiction.
“With the rise in heroin and other opioid use, more relatives are raising children because the parents have died, are incarcerated, are using drugs, are in treatment or are otherwise unable to take care of their children,” according to a report released last year by the nonprofit organization Generations United.
A consequence of caring for their grandchildren, many seniors are spending their savings and going into debt to pay for treatment programs, sometimes repeatedly, for their adult children, according to Donna Butts, executive director of Generations United, which also runs the National Center on Grandfamilies.
“We also see grandparents mortgaging their home and spending all their savings to feed, clothe and pay for school fees for the children they find themselves raising,” Butts said. “We advocate for supports and services for grandfamilies so they aren’t raising the children in isolation and therefore [making them] more vulnerable. Family support programs offer those extra eyes and ears that offer protection against financial exploitation.”
Then there are the seniors who may be abusing opioids themselves and draining any savings they may have, either buying drugs or paying for treatment to overcome their addiction.
Particularly concerning to regulators is how the crisis is increasing incidents of older adults being exploited by people looking for a way to finance their habit.
Researchers from Virginia Tech’s Center for Gerontology and the Elder Justice Coalition conducted some focus groups to look into the connection between opioid addiction and elder financial abuse. In a recent blog post, the researchers cited a case where a grandson stole $85,000 from his grandfather to support his heroin addiction. The grandfather suffered from dementia.
“Participants also indicated that when desperate perpetrators had gone through the money, the drugs, or both, older adults were psychologically and physically abused,” they wrote. “Their abusers isolated the older adults in their own homes so that they could not reach out to others to help them.”
Here are some things to look out for whether you’re a financial professional, family member or friend, according to the NASAA.
• Someone is suddenly showing a lot of interest — too much — in a senior’s finances, or the person has been given complete control of the senior’s money.
• You notice unusual or frequent bank or investment account withdrawals.
• There’s a new name on the senior’s financial accounts.
• The senior appears fearful, anxious or submissive in the presence of a person helping them with their finances.
• There is a decline in the senior’s appearance or you see signs of neglect.
When traveling, I often see this notice: If you see something, say something. This certainly should apply to watching out for the financial well-being of the seniors we know, especially as it relates to the opioid epidemic.
Have you been affected financially by the opioid crisis? If you’re a financial professional have you had a client affected by this crisis? What signs of abuse did you detect? Send your comments to email@example.com. In the subject line put “Opioid Epidemic.”
Retirement Rants and Raves
I’m interested in your experiences or concerns about retirement or aging. What do you like about retirement? What came as a surprise?
If you haven’t retired yet, what concerns you financially?
You can rant or rave. This space is yours. It’s a chance for you to express what’s on your mind. Send your comments to firstname.lastname@example.org. Please include your name, city and state. In the subject line, put “Retirement Rants and Raves.”
Carrie Gillespie of Houston, who retired at 50, wrote: “My financial adviser told me to set aside five years worth of expenses in money market/municipal bond funds — something that was stable and could be easily liquidated. His reasoning was that if the stock market plummeted or catastrophe struck, my lifestyle could be largely maintained. I could put the remaining 100 percent in stocks if I wanted. At first, I balked because I have always been an 80 percent to 90 percent stock fund kind of gal, even in retirement. But I followed his advice and do have peace of mind. When Hurricane Harvey struck, the stock market was good and I was able to fund my rebuild by selling stock. But if the stock market had been poor, I would have been able to pull funds from my liquid portfolio instead of ‘selling low.’”
I’ve been asking people what they fear about retirement, and many people have said they are worried about the financial stability of Social Security.
“My biggest fear of retirement planning is the Social Security portion,” wrote Tami Taulbert from California. “I had always thought it would be best to begin taking Social Security at 70 and acquire the maximum amount, however, due to the current situation regarding SSA funds, I am considering taking it at 62. If I wait until I’m 70 (2030), SSA funds have been reported as being equal to ZIP, ZERO, nada, nothing by 2034.”
The news reports about the financial soundness of Social Security can certainly be scary, but it’s not as dire as you may think.
It is true that the reserves for the Old-Age and Survivors Insurance Trust Fund (OASI), which pays retirement and survivor benefits, will be unable to pay full benefits in 2034, according to the 2019 trustee report for the Social Security and Medicare trust funds. However, even without a fix, OASI will still have enough continuing tax income to pay out 77 percent of scheduled payments.
The second Social Security program, the Disability Trust Fund, which pays disability benefits, will have enough money coming in to cover 91 percent of scheduled benefits when its reserves are depleted in 2052.
And on the question of when to start Social Security read the following:
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