Aging Texas and the Risk of Financial Fraud

Texas is one of the youngest states in the nation and will remain so for at least the next two decades. Given the Lone Star State's sheer size, however, even a relatively small percentage of persons 65 or older adds up to a lot of senior citizens.

Texas will have 5.9 million senior citizens by 2030. That's almost double the number in 2014, when Texas had the third-largest elderly population behind California and Florida. Some regions of Texas are have among the fastest-growing senior populations in the United States. ((see below).

When it comes to managing money, many seniors can of course manage their own and their family's finances long after they turn 65. But there is no denying the research that a disconcerting percentage of older Americans suffer steep declines in cognitive abilities.

Nationally, about half of people in their 80s suffer from "significant cognitive impairment" – a category that includes dementia and impairment without dementia – effectively rendering them incapable of making important financial choices," according to David Laibson of Harvard University. Investment-related skill generally declines earlier, with a sharp drop-off beginning around the age of 70. (By 2020, an estimated 2.6 million Texans will be 70 or older.)

Research indicates older Americans have difficulty figuring out how to diversity their assets and handle complex financial tasks such managing retirement wealth. In Dementia Risk and Financial Decision Making by Older Households," Joanne W. Hsu and Robert Miller say "older Americans are more financially vulnerable than the general population" regardless of their cognitive abilities.

Family finances do not simplify with age or having left the labor market. The elderly must budget, manage credit and debt, manage retirement savings, and pay medical bills that may be increasing with age.

The risk of financial fraud is compounded by the fact that persons who suffer from cognitive impairment – from mild impairment to Alzheimer’s – don’t fully grasp the decline of their decision-making abilities. Overconfidence in making financial decisions is a major factor in fraud.

Aging trends in Texas indicate that these issues will become more challenging.

In Texas, the senior population is aging rapidly,  particularly in three regions.

In the decade ended in 2010, Texas had three of the top 10 of U.S. metro areas with the fastest-growing senior populations:

  • Austin-Round Rock ranked second nationally, with a 53% increase
  • Houston-Sugar Land-Baytown ranked eighth, with a 39% increase
  • Dallas-Fort Worth-Arlington ranked ninth, with a 38% increase

Source: Steve Murdock, Michael Cline, P. Wilner Jeanty, Deborah Perez, and Mary Zeying, “Changing Texas,” Texas A&M University Press, 2014

Looking ahead, persons 65 years of age and older are projected to comprise a rising percentage of the Texas population:

  • In 2014, there were 3 million seniors, or 11.5% of the state’s population
  • In 2030, the projected number of seniors is 5.9 million, or 15.9% of the population
  • In 2050, the projection is 9.4 million seniors, or 17.3% of the population

Source: Aging in Texas, Texas Demographic Center, June 2016