While many people look forward to the freedom that retirement can bring, aging can also bring its challenges. A key concern is protecting your finances as you get older. With financial abuse being a serious issue (it’s the most prevalent type of elder abuse in Canada), it’s important to understand how your finances could be in danger and ways to protect them.
Let’s take a look at the various dangers that could hurt your finances and ways to help you avoid them.
Financial abuse: understanding the risks
Financial abuse occurs when someone uses manipulation, coercion or deception to take advantage of another person's financial resources. This can happen in various forms:
- People (often family members) trying to take your money or valuables.
- Pressure being applied to make you sign legal or financial documents that you don't fully understand, often for services you don’t need.
- Care providers or other service providers overcharging you.
Such abuse can be especially harmful because it can often go undetected for a long time, gradually undermining your financial security and independence. As you age, cognitive decline or physical frailty can make you more vulnerable to such abuse. For instance, if you have trouble managing your finances due to memory loss or physical limitations, you might have to rely more heavily on others, increasing the risk of exploitation.
Fraudulent investments and scams
Scammers often target older Canadians because they may have significant savings, are less likely to report fraud and might be less adept at recognizing these types of schemes. Some of the most prevalent scams targeting seniors in Canada include:
- Romance scams: creating convincing online personas, these scammers aim to win your trust and affection before requesting money for various spurious reasons.
- The grandparent scam: scammers will pretend to be a family member (usually a grandchild), contact you to say they’re in some form of trouble and ask you to send money to help them out.
- Investment frauds: these include Ponzi schemes (an investment fraud that uses new investors’ money to pay out initial investors), affinity fraud (where scammers target members of specific groups, such as religious groups or older Canadians) and high-pressure sales tactics for unregulated or fraudulent investment products.
- Imposter scams: these scammers pretend to be government officials or real businesses and try to trick you into giving them your personal information or sending them money.
Read more on scams targeting Canadian retirees and investment fraud.
How to protect yourself and your finances
Taking proactive steps to mitigate the risks of financial abuse and fraud is essential to protect your finances as you age. Some key tools that can help include:
A power of attorney for financial decisions
You can choose a person you trust to handle your financial affairs if you become incapable of doing so, through a power of attorney (POA) or protection mandate in Quebec. This is a legal step that can be particularly useful as you age and need assistance with tasks like paying bills or managing investments.
Here are some key points to consider when setting up a power of attorney:
- Choose someone you fully trust, such as a family member or a close friend. Consider their financial acumen and ethical standards.
- There are different types of POAs, including a non-enduring POA (which ends if you become incapable of managing your own affairs) and enduring or continuing POA (which continues even if you become mentally incapable). Make sure to choose the appropriate type of POA.
- It’s advisable to work with a lawyer to ensure that your POA is tailored to your specific needs and complies with local laws.
You can find out more about powers of attorney here, including their pros and cons, how they protect your finances and how to choose the right person for the role. Saving for your kids’ education
Naming a trusted contact person
It's also wise to designate a trusted contact person for your financial accounts. This is someone you trust whom your financial advisor can contact if they think you may be experiencing financial abuse or exploitation, or if poor financial decisions are being made that are out of character. This person acts as an extra layer of protection. Here's how to do it:
- Choose a dependable person who will put your best interests first. This could be a family member or a close friend.
- Notify your bank, investment firm and other financial institutions about the person you trust. Provide their contact information and specify what information they can provide or actions they can take on your behalf.
- Keep your trusted contact person informed about your financial status and any changes to your accounts. This will help them identify any irregularities more effectively.
You can read more about trusted contact persons here.
Additional tips for protecting your finances
In addition to setting up a power of attorney and naming a trusted contact person, there are several other steps you can take to protect your finances:
- Stay informed by keeping up to date with the latest scams and frauds targeting older Canadians.
- Use strong passwords and be careful when sharing important information online or over the phone.
- Regularly review your bank statements, credit card statements and investment accounts for any unauthorized transactions or suspicious activity.
How IG can help you to protect your finances
Keeping your finances safe as you grow older requires proactive planning. By understanding the risks of financial abuse and fraud, and taking proactive steps to protect yourself, such as having an updated power of attorney and designating a trusted contact person, you can enjoy your retirement with greater peace of mind.
Talk to your IG Advisor about setting up a trusted contact person for your IG accounts. They can provide the guidance and support you need to ensure that your financial well-being is protected as you age. If you don't have an IG Advisor, you can find one here.
Written and published by IG Wealth Management as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on your specific circumstances from an IG Wealth Management Advisor.
