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Philadelphia — Financial exploitation of older Americans is “an issue for regulators and industry alike,” said Patrick T. Harker, president and chief executive officer of the Federal Reserve Bank of Philadelphia during a conference on the subject hosted by the Philadelphia Fed.
Elder financial security — particularly the issue of financial abuse and fraud — is increasingly becoming a topic of discussion. Estimates of the amount lost to financial exploitation alone range widely, from around $3 billion to over $36 billion. And the issue will likely only become larger. “While the question of protecting our older citizens is always important, it is increasingly taking on wide-ranging implications, owing to the simple math of demographics. With the boomers, we will see the largest generation in history ushered into retirement and older age,” he said.
Harker noted the complexity of elder financial health. “Like virtually every issue of import, this is not a problem that stands in isolation. It is woven into other segments of the economy — health care, for instance, or student debt,” he said, noting that the number of older (60 plus) Americans taking on student loans quadrupled between 2005 and 2015, mostly on behalf of children or grandchildren. “Not only does that have the potential to spill over to the real economy, it’s poised to become a multigenerational problem.”
“I should also note the obvious, that more people living longer means more people entering retirement with plans that may have estimated a shorter life expectancy — on fixed incomes that could be further compromised by the health issues that become more common as we age. That could add to debt, and, in turn, to the possibility of default. Research from the New York Fed shows that debt held by people between 50 and 80 increased some 60 percent from 2003 to 2015.”
Harker said that the interconnectivity of the issues related to elder financial health could make it more systemically dangerous than the sum of its individual parts. “The sheer size and complexity pose a challenge for industry and regulators alike,” he said, while noting that, therefore, addressing the problem early is in the best interest of both. Policymakers should recognize the unintended consequences of some regulation, he said, while the financial services industry should share best practices and embed solutions in their business models.