This article was published in The Reverse Review on February 2, 2010.
The abuse of the elderly is a widespread problem within the United States. Statistics produced by the National Center on Elder Abuse estimate that “between 1 and 2 million Americans age 65 or older have been injured, exploited, or otherwise mistreated by someone on whom they depended for care or protection.”[1] The realm of elderly mistreatment includes physical abuse, neglect, and financial exploitation. In seeking to address the problems posed by this situation it is necessary to understand why it is that the elderly are so vulnerable to abuse and why these figures seem to have risen so staggeringly.
As the baby boomer generation ages, and the oldest members begin to reach age 65,[2] the number of elderly dependant on aid from surviving children, nursing homes, medical staff, and government agencies continues to grow. When this growing number of elderly meets and combines with the current economic recession a recipe for abuse and predation results.[3] During these financially precarious times the elderly are particularly at risk of succumbing to “get-rich-quick” schemes and other means of financial exploitation, such as the sale of unregistered securities and investment in bogus start-up companies, which may leave them in more dire financial straits than they began in. According to a Consumers Digest article about mistreatment of America’s elderly “[c]urrent estimates put the overall reporting of financial exploitation at only 1 in 25 cases, suggesting that there may be at least 5 million financial abuse victims each year.”[4]
With all of these statistics painting a gloomy picture of the reality surrounding financial abuse of the elderly in today’s day and age, reverse mortgages may offer a glimmer of hope and a potential solution to the situations that so many of America’s elderly find themselves in. A reverse mortgage, also known as a reverse-annuity mortgage or a home equity conversion mortgage, is a specially designed home equity loan for individuals age 62 and older which allows owners to convert a portion of the equity in their homes into an income stream. Typically, the loan proceeds are not required to be repaid during the homeowner’s lifetime, are not counted as taxable income, and do not affect the homeowner’s eligibility for Social Security or Medicare benefits.
Reverse mortgages were created as a mechanism to reduced financial stress on aging Americans who seek to convert the equity in their homes into a source of income without being required to sell their residence or relocate. For many elderly individuals, this system is particularly attractive as a means of securing an enjoyable retirement and ensuring that all lifetime needs are met. In the face of the potential for abuse and financial exploitation by trusted caretakers and unscrupulous financial predators, reverse mortgages offer elderly individuals the promise of financial security while maintaining their independence. By reducing reliance on adult children and other caregivers, as well as providing a source of income that may diminish the allure of financial schemes, reverse mortgages diminish the potential for abuse and exploitation. Reverse mortgages oftentimes empower the elderly to continue as active participants within society by removing the strain and restraints caused by financial pressures. The income produced from a reverse mortgage may also permit the aging baby boomers to preserve their dignity and sense of pride by allowing them to retain responsibility for their personal finances.
[1] Fact Sheet: Elder Abuse Prevalence and Incidence, National Center on Elder Abuse, (Washington, DC 2005) at 1.
[2] Shrestha, Laura B., Age Dependency Ratios and Social Security Solvency (Order Code RL32981), CRS Report for Congress (October 27, 2006) at 6.
[3] Abuse of Elderly Increasing in the Recession: The Warning Signs to Look Out For, FindLaw; As Recession Grinds On, Financial Abuse of Elders Takes a Growing Toll, The Boston Globe
[4] Wasik, John F., The Fleecing of America’s Elderly, Consumers Digest (March/April 2000).