Liz Skinner of Investment News wrote this week to report on a study recently released by insurance company MetLife. The study reports that the elderly lose almost $3 billion annually to abuse by “family members, strangers and businesses.” According to Skinner’s article:

That total is 12% greater than the study’s 2008 findings, which estimated that elders were being swindled out of $2.6 billion a year. Both numbers may be underestimating the problem, however.

“I expect we’ll continue to see this go up,” said Sandra Timmermann, director of the MetLife Mature Market Institute, which released the study earlier this month. “It’s still a conservative estimate because four out of five cases are not reported.”

Senior citizens are especially vulnerable to financial fraud because they may be cognitively impaired or simply confused by complex financial opportunities or products. Research from behavioral economist David Laibson shows that people tend to make poorer financial decisions as they get older. They also are often lonely and more willing to talk to strangers.

It’s easy to miss the practical impact of a figure like $3 billion. The number is so large that it obscures what becomes of the individual senior citizens who fall victim to such crimes. Their retirement years are plagued by worry and misplaced guilt. People who had every reason to expect to live independently have to move in with their adult children. Folks who saved enough to live in a very nice retirement community instead spend their days in a Medicaid nursing home. Seniors who worked hard and saved diligently with the intent of passing a financial legacy to the next generation, instead leave behind nothing but memories of loss and dependency. It is unimaginably sad, and I see it every day.

Vigilant investors can protect themselves against the army of scamsters, reckless financial advisers, and unscrupulous relatives who otherwise would rob them of the joys of retirement. But it requires a better understanding of human nature and more advice than what appears on the standard list of dos and don’ts. Stay tuned this fall for the release of The Vigilant Investor, which Booklist magazine calls “A good investment for readers seeking to protect their financial assets.” The book is available for pre-order now on Amazon and Barnes and Noble.

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