The Senior Safe Act is Now Law – Helping to Protect Elders from Financial Abuse

As part of a larger financial overhaul bill, on May 24, 2018, President Trump signed into law the Senior Safe Act.  While much of the reporting on the Economic Growth, Regulatory Relief, and Consumer Protection Act was about the Dodd-Frank revisions, the law incorporated most of the original provisions of the Senior Safe Act, a law geared toward protecting the elderly against financial abuse.

The Senior Safe Act

The Senior Safe Act allows financial institutions and its employees to report elderly financial abuse without  fear of privacy law violations.  Individuals and companies that properly train employees to recognize signs of elder financial abuse are immune from liability for reporting suspected abuse, as long as the reporting was done in good faith and done with reasonable care.  The financial institutions include credit unions, banks, brokerage firms and insurance companies.

Protecting the Elderly from Financial Abuse

Banks and other financial institutions are on the front lines when witnessing possible financial abuse. Until last week, individuals who witnessed elder exploitation risked being in violation of federal and state privacy laws if the suspected abuse was reported. Watching the abuse and not being able to say anything to authorities put these individuals and their employer in a tough spot. With this new law, the elderly can be better protected by financial services industry employees.

The elderly lose between $3 billion and $36 billion per year to financial fraud, according to Consumer Reports in 2015. The amount depends on the survey conducted. While the range varies between the different surveys, there is no dispute that the elderly are vulnerable to friends, family and strangers when it comes to their money. In another study, Allianz reported in 2016 that the average financial loss to elderly victims was $36,000.00, and the numbers will grow with the aging baby boomer population.

Something must be done about this unspeakable crime plaguing our elderly. The Senior Safe Act is a step in the right direction. Giving individuals and their employers who are closest to an elder person’s money the ability to speak out when wrongdoing is suspected is a relief, but more needs to be done to protect our elderly.

Advertisements

The Death of Convenience – Moving Out of a Metro Area

For those living in a large city or surrounding area, we tend to take for granted the ease of getting things done in our everyday lives. Convenience is hard when moving out of the city.  In the city and metro areas, grocery stores, dry cleaners, video stores, restaurants, and just about anything else we need to survive on a daily basis is either within walking distance or a short drive away. Having a pizza delivered or grabbing a carry-out is second nature. Jumping on an expressway and driving 20 miles to meet up with friends – no big deal – 20 miles for someone living in a city or suburb is a hop, skip and a jump. Then, as the years pass by, you decide to retire or semi-retire and move to that small town that offers a slower and less hectic life – something that you have dreamed about most of your working years. But with the move, you soon discover that you need to adjust to a lifestyle in ways you never thought before.

Convenience is Hard When Moving Out of a Metro Area

When you move to a more rural area, as we have discovered, the conveniences that you took for granted living in a large city or surrounding suburb are a rude awakening that, indeed, you took them for granted. We moved from a large metro area of about 4.2 million people to a town about 10 miles outside of a resort city, with a population for the entire area totaling 140,000. Big difference. We discovered shortly after making the move that our slower and less hectic lifestyle was wonderful, but our ability to get things done at the snap of the fingers was virtually impossible. For instance, trying to find a dry cleaner that has one hour or same day service – not to be found. Pizza delivery – we live too far outside the big city. Video store – they just closed the one by us and we now have to drive to the big city to rent a DVD. Grocery shopping – only in the big city. Restaurants – only a few in our small town and you get tired of the food. Chain stores – only in the big city. Soon after our move, we discovered that we were at least 10 miles away from just about every amenity we grew accustomed to when we lived in a metro area. Now, 10 miles may not seem like much to someone who lives in a big city or suburb, but in a rural area, 10 miles is about a one-half hour drive. Picking up carry-out Chinese food can take an hour. Finding a plumber entails an extra service charge for driving to our house. Renting an on-demand movie is much more expensive than being able to run to the video store to pick up a DVD. Making sure your car has enough gas is always on your mind.

Advantages of Moving to a Small Town

We are by no means complaining of the simpler life we have chosen. Moving to a small town has added years to our lives. We enjoy the comfort of fresh air, the home-town charm of our friends and neighbors, the slow pace, the stress-free attitude, and of course, the beautiful waterside. But, as with everything in life, there is a yin and yang. We love our lifestyle, but we have had to learn to plan better. If we are down in the big city, we do everything at once, because if we forget something, it means another 10 mile trip down the road and 10 miles back. If we are having friends or family visit us, we meet them in the big city for lunch or dinner. If we need gas, it is a staple that we fill up when we are in the big city. Just about everything we do is centered around planning for when we go to the big city. Initially, this was very disruptive, but now it has become reflexive for one of us to ask the other if we need anything in the big city. So, our lifestyle in terms of the physical convenience of getting things done and having things at our fingertips is gone. But our lifestyle in terms of our new way of life far outweighs any of these hassles as we move to the retirement phase of our life. We have adjusted quite well.

A Private Mortgage – This Can Be A Win-Win With Family And Friends

There are banks on just about every corner in the event you want to borrow money to buy a house, but not every person can qualify for a mortgage. A person may have just come out of a financial hardship and unable to obtain bank financing or refinancing for a house.  A self-employed individual does not have W2 forms nor a steady income that lenders like.  Young adults are still building their credit scores.  There are a myriad of reasons a person’s finances do not look the way a bank wants them to look.  Banks look at credit score, payment history, ability to make future payments and collateral when reviewing a loan application.  Some borrowers, for whatever reasons, just can’t meet the stringent requirements of a bank.  Even though a potential borrower may be more than able to repay the loan, banks have specific criteria and rarely waiver in their requirements to qualify a borrower.  But, there are alternatives to obtaining a loan for a house.  One way is with a private mortgage.

What is a Private Mortgage?

The concept of a private mortgage is not very well known in this country. It is money that is lent to you by friends, family, or other private sources. The term “private” means the mortgage is not coming from a bank, mortgage broker or a financial institution, but is coming from a private arrangement. There are private mortgages that come from persons the borrower does not know, which are called hard money loans and not discussed in this post. The focus of this blog post is loans from and to friends, family and acquaintances. For instance, if a parent wants to sell their house to an adult child who does not qualify for a bank mortgage due to student loans or recent employment, the parties can finance the purchase and sale with a private mortgage. The parent would finance the sale by loaning the adult child the money, and the adult child would agree to the loan with a mortgage securing the home in the event the child ever defaults on the loan. The parent enjoys a steady stream of income until the loan is paid off and the adult child enjoys a custom-tailored loan with a low interest rate using the house as collateral. Or, if the parent has a self-directed IRA, the parent may be able to loan money from the IRA as an investment.

Get it in Writing

Now, I know the old axiom of never loan money to friends and family, and believe me, I have been burned a few times from it. But if you get a well-documented written agreement between the borrower and lender there should be no disagreement of what is owed and when it is owed.  With a private mortgage, if you are either a borrower or a lender, you negotiate the terms of the loan agreement.  The agreement sets the interest rate (make sure the interest rate is within the IRS guidelines), the terms, prepayment, collateral (usually, the house), other terms agreed to, and what to do if there is a default, e.g., foreclosure.  The terms are customized to fit both the borrower’s and lender’s wants and needs.  Even though this is a loan between friends, family or acquaintances, every aspect should be covered in the loan agreement.  Imagine what could go wrong if the loan was over a period of 30 years, and then imagine what you would do if it was not in writing.  So, when the loan agreement and collateral come into play, both the borrower and the lender should rely on experts to help them through this part of the process.  An attorney would be able to prepare the documents and advise on state law, a financial planner would be able to advise in the event the lender wants to use a self-directed IRA, and an accountant would be able to discuss tax deductions and appropriate interest rates.  The process is really not that difficult once the lender and borrower agree on the terms.

Win-Win

A private mortgage with family and friends can be a beneficial situation for all involved. Borrowers typically save money by paying relatively low interest rates and can customize the terms of loan, and lenders who have extra cash on hand can earn more interest on the loan than what is paid on a CD or savings account. There are, however, risks to the relationship between the lender and borrower. So, before signing up for such a substantial commitment of being either a lender or a borrower, make sure it’s in your best interests – financially and emotionally.

A Gig Economy is Perfect for Retired Baby Boomers

Retired Baby Boomers now have the best of both worlds with a gig economy. They have freed themselves from the confines of an organizational life after putting in 25-30 years with a company or companies. Pension, IRA and savings in hand, they can now move to a different chapter in their life of travel, grandchildren, gardening or just plain doing nothing. However, if boredom sets in, if financial constraints require them to seek another job, or if they just want some play dough – cheer up, we live in a gig economy.

Boomers Can Get Paid for Each Gig

A gig economy is where organizations contract with independent contractors for short term “gigs” or temporary positions. A study by Intuit shows that 40 percent of American workers will be independent workers by 2020. For some, independent contracting can be more of a choice, going from project to project. They have the freedom to take on several different ventures and they are their own boss. They give up health care and other benefits a larger company would provide them, but they work on their own terms. This is a different environment than Baby Boomers experienced, where staying at the same company for an entire career was more of a feather in one’s cap because of the generous retirement benefits that came at the end of that career.

In 2016, the McKinsey Global Institute published a report showing that independent workers fell into four categories: free agents, who actively choose independent work and it is their primary income; casual earners, who use independent work for supplemental income and do so by choice; reluctants, who make their primary living from independent work but would prefer traditional jobs; and the financially strapped, who do supplemental independent work out of necessity.

Upsides of Going from Gig to Gig

For retired Baby Boomers, being a casual earner and cashing in on the gig economy only has upsides. Typically, benefits and all the trappings of the corporate life are behind them. They are living on their own terms now as age and retirement have set in. If they feel like taking on part-time work for a few months, the gig economy provides them numerous opportunities for short-term or project style work. If they want a steady part-time job at one business, the owners are usually happy to have them on contract, since the employer does not have to pay health care or taxes. If Baby Boomers want to work for one day – yes, one day – the Washington Post just published an article where retailers are now beginning to hire for one day jobs. Imagine. If you are a Baby Boomer that splits time between the north and south depending on the season, you can literally make some extra cash going from retailer to retailer picking up open shifts. Or, if you are retired and bored and want something to do, you can pick up some project work in one of your skilled areas, which in today’s high-tech world, can probably be completed on your computer from either your winter or summer house. There really is no losing in a gig economy for Baby Boomers who want to make money after retirement.

Gig Economy for Baby Boomers

Photo by NeONBRAND on Unsplash

Elder Scam #9 – Craigslist Sale – Overpayment

Scamming the elderly out of their money is becoming more and more prevalent in our society. In an effort to make people – parents, children, grandchildren, siblings – more aware of the devious attempts by strangers, friends and relatives to prey on the elderly, I plan to post all of the scams I become aware of.

Craigslist Ad Started Out Innocently

A woman places an ad on Craigslist trying to sell her mother’s vintage bedroom set. A person replies by email and tells the woman she really wants the set because she is going to ship it down south to another home. Overnight, the seller gets a check in the mail for the price of the bedroom set plus shipping costs. The buyer emails the seller and tells her to cash the check, pay the shipper, ship the bedroom set, and keep the extra money. No phone numbers or phone calls were ever exchanged. The seller, feeling a bit leery, takes the check to the police station. The police tell her that the check is phony. Well, if the seller had deposited the check and shipped the bedroom set, by the time the check bounced, the seller would have been out the cost of the bedroom set and the shipping costs. Fortunately, the seller had the wherewithal to suspect something was fishy. However, if it had been her elderly mother that was selling the bedroom set, the outcome may have been quite different.

Family members need to be cautious and stay informed of what their elderly relatives are doing. We live in an age where trusting a stranger or trying to help out a stranger on blind faith no longer provides the “feel good” rewards that it once did. Unfortunately, the “do good” outlook that many of the elderly grew up with has been corrupted by charlatans and swindlers.