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Ecology of Money

3 Vexing Money Matters for Retirees

Reverse mortgages, credit snafus, and financial scams are especially troublesome for the retired, says contributor John Wasik.

Every day, little money annoyances creep up on us. Perhaps it's a mystery charge on a credit card statement. Or late fees and other obnoxious charges that we were unaware of (or had forgotten about). Most of those little things can be fixed fairly easily.

But as you get older, financial matters--and therefore, financial complications--get more complex. The top complaints that regulators receive from retirees concern credit products and billing practices. Anything to do with borrowing money can get complicated, too, particularly when it comes to the terms of credit agreements.

The Consumer Financial Protection Bureau is a government agency created after the 2008 financial crisis to protect consumers. It has returned some $12 billion to consumers through its enforcement activities.

Here are some of the most persistent complaints the agency has received from retirees and how to deal with them.

Vexing Issue #1: Reverse Mortgages
I've written about reverse mortgages several times, yet I still find them difficult products to recommend.

On paper, they sound great. Reverse mortgages allow anyone who is 62 years or older and who is "house rich but cash poor" a way to tap into home equity--the bank pays you based on how much your home is worth. Your monthly payment will depend upon interest rates, your home value, and age.

Yet taking out a reverse mortgage is no simple matter. There's a lot you need to consider, and banks may not provide adequate guidance. And the fine print in these loans is dense.

The most prevalent problem with reverse mortgages, according to the Consumer Finance Protection Bureau, involves homeowners falling behind on their homeowner's insurance or property tax payments.

"Most reverse mortgages require consumers to continue paying taxes and homeowner's insurance premiums," the CFPB found. "[T]herefore, when consumers are unable to pay for taxes and insurance, their mortgage servicer might initiate foreclosure proceedings on their property."

Retirees also report challenges when it came to nonborrowing spouses requesting to remain in the property after the death of the borrower, and with buying or selling the property.

"Successors in interest stated they were not given an opportunity to purchase the property or to market and sell the property after providing documentation of proof to act on behalf of the borrower's estate," notes the Consumer Financial Protection Bureau.

As with all complex financial products, make sure you understand all of the benefits and drawbacks before you make a commitment. The AARP provides some good information about reverse mortgages. So too does Bankrate.com. And be sure to consult the federal government's resources on reverse mortgages, which include counseling.

Vexing Issue #2: Credit Snafus
Many of us have experienced unauthorized billing on our credit cards, or our banks have changed the terms of our accounts, or our mortgage companies send us baffling statements. While disclosure on financial products has gotten better over time, terms can still be unclear and confusing.

One of the biggest areas of confusion among older consumers, the agency reports, involves credit card terms, which remain layered with hard-to-decipher fine print.

"Some older consumers on fixed incomes reported that when they encountered large expenses, often medical, they turned to credit cards to cover the costs," notes the agency. "When opening these credit accounts, older consumers reported not understanding the  terms and conditions, such as the distinction between deferred interest and no interest. Months after charging these expenses, these consumers described being confused by the balances of their accounts."

In its effort to protect and inform financial consumers, the Consumer Financial Protection Bureau has some useful materials on credit card terms and balance-transfer offers. Consult its "Know Before You Owe" materials before putting a big expense on a credit card.

Don't like the service or rate you're getting with your current credit cards? It's never been easier to not only find the lowest rates and fees, but switching to companies that consistently offer the best deals. There's lots of competition, so there’s no reasons to accept bad service or high rates.

Vexing Issue #3: Financial Scams
I've been writing about the subject of financial deception for more than 30 years, and I can confidently say that that older Americans are the prime targets of fraud merchants. Some swindlers are so rapacious they'll go after people who've already been scammed in what regulators call "reload" schemes.

The best safeguard on this ever-expanding front is to stay on top of all credit card and bank statements. If you see an authorized charge or withdrawal, call your bank or credit card company immediately. And never believe a pitch that promises outlandish returns in a short period of time.

Generally the more complex the product or service, the more you should avoid it. What should you be looking for? Some companies, for example, will enroll you in credit monitoring services and automatically bill you a monthly fee. You can do this service yourself for free. Or publishers may automatically renew you for a publication you don't want or read. Identity theft is another perennial problem where account or Social Security numbers are stolen to open up fraudulent accounts or for illegal purchases.

"You need to be vigilant about checking safeguards every month," says Stacy Canan of the Office of Older Americans at the Consumer Financial Protection Bureau. You can challenge any unauthorized transactions, and should report any suspicious phone calls, emails, and mail inquiries.

The agency provides useful guidance if you think you've been a victim of a financial scam of some sort. You can find answers from the agency on a host of questions, including:

What do I do if I think I have been a victim of identity theft?

How do I get my money back after I discovered an unauthorized transaction or money missing from my bank account?

How do I dispute a charge on by credit card bill?

I have a joint account with someone who died. What happens now?

John F. Wasik is a freelance columnist for Morningstar.com and author of 16 books, including "Lightning Strikes: Timeless Lessons in Creativity from the Life and Work of Nikola Tesla." The views expressed in this article do not necessarily reflect the views of Morningstar.com.