Senior Retirees Drain Assets Chasing 'Lottery Winnings'

NEW YORK (MainStreet) — Scott Sargent, a financial advisor in Newport Beach, Calif., received a typical request from a client: a withdrawal from his brokerage account. The 81-year-old man needed $15,000 to cover taxes -- on his winnings from a Costa Rican lottery. Sargent told Financial Planning magazine that it was only the beginning of a long, sad story.

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It was the elderly client's first withdrawal in 17 years – and despite the financial advisor's stringent objections – the gentleman was insistent. He had won the lottery and needed to pay the taxes in order to collect $5 million. Reaching out to the client's family, Sargent discovered the senior retiree had already tapped-out other accounts, paying $150,000 to scammers around the world. His brokerage account was all that he had left.

Even though a doctor and an attorney determined that the client was mentally acute, the financial advisor – backed by his firm – refused to disperse the funds. Protecting unsuspecting senior clients from financial predators is a growing concern for families and financial institutions.

The Alzheimer's Association says over five million Americans are living with Alzheimer's disease -- 200,000 of which are under the age of 65. By 2050, up to 16 million seniors will have the disease. In addition, frontal lobe dementia, while less common than Alzheimer's, is now believed to account for 10-15% of all dementia cases – and up to half of all cases for those younger than 65. The cell damage caused by frontotemporal dementia (FTD) affects planning, judgment and emotions, among other symptoms. And FTD is difficult to diagnose; there are no tests available -- only a doctor's best guess.

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Facing financial challenges and lapses in judgment are not always related to chasing fraudulent lottery winnings. The National Council on Aging says that while such scams are among the top ten schemes targeting seniors, others include Medicare scams, telemarketing fraud and pyramid investment rackets.

Dr. Janey Peterson of Weill Cornell Medical College recently conducted an extensive study regarding elderly financial abuse and determined that one in every twenty seniors in America have been the victim of financial exploitation. Shockingly, the research revealed that nearly 58% of the cases involved not foreign strangers, but the victim's adult children.

And it's not just rich retirees at risk. Peterson found that the most common prey were older black adults struggling with poverty, or seniors living in large households without their spouses.

"Financial exploitation of older adults is a common and serious problem, and especially happens to elders from groups traditionally considered to be economically, medically and socio-demographically vulnerable," Peterson said in a release announcing the study. "In addition to robbing older adults of resources, dignity, and quality of life, it is likely costing our society dearly in the form of increased entitlement encumbrances, health care, and other costs."

--Written by Hal M. Bundrick for MainStreet

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