SEC releases guide for elderly investors on protecting assets

The Securities and Exchange Commission (SEC) recently issued a comprehensive guide tailored for elderly investors, outlining critical strategies to protect their assets through various stages of aging. This guidance, aimed at fortifying financial health, covers a wide range of topics from basic investing principles to detailed steps for safeguarding against fraud.

Investment Basics and Vigilant Monitoring

Starting with the basics, the SEC stresses the importance of education in investment practices. For newcomers or those needing a refresh, understanding the risks associated with securities and the benefits of diversification is fundamental.

Diversification involves spreading investments across varied assets to mitigate risks and stabilize returns. Additionally, the concept of asset allocation — how to apportion investments among different assets — is crucial for managing potential losses and gains.

Investors are encouraged to assess their risk tolerance regularly, considering the fluctuating nature of personal finances and market conditions. The guide advises reviewing and possibly rebalancing one’s investment portfolio every six to twelve months, ensuring alignment with personal financial goals and market realities.

The importance of monitoring investment accounts cannot be overstated. Regular reviews of account statements should be a routine practice, allowing investors to verify transactions, track investment performance, and gauge progress toward retirement goals.

Attention should also be directed toward any signs of unauthorized activity or discrepancies that might indicate fraud. Investors are advised to maintain strong security on online investment platforms by using strong passwords and enabling two-step or multifactor authentication.

Establishing Trusted Contacts and Understanding Fees

Adding a trusted contact to one’s brokerage account is another significant recommendation from the SEC. This contact acts as a safeguard, someone the brokerage firm can reach out to if they suspect issues such as potential financial exploitation or if they cannot contact the account holder directly.

Importantly, a trusted contact does not have the authority to make transactions or manage the account but can provide a critical communication link under certain circumstances.

Fees are another critical area covered in the SEC’s guide. Investors are urged to be mindful of the fees associated with their investments, whether these are ongoing management fees, costs related to buying or selling investments, or fees for professional advice.

Even small fees can substantially erode investment returns over time. Tools like FINRA’s Fund Analyzer are recommended for comparing fees across different investment funds to make informed decisions.

Diligent Research and Preparing for the Unexpected

Investment decisions should always be preceded by thorough research. The SEC emphasizes the necessity of accessing and understanding disclosure documents such as prospectuses or annual reports, which provide detailed information about an investment’s risks and returns. The SEC’s EDGAR database is a valuable resource for accessing these documents.

Conducting background checks on investment professionals through tools available on Investor.gov is also advised. This can reveal whether an advisor is registered with the SEC or has any disciplinary history, which are crucial factors to consider before entrusting one’s financial assets to an advisor.

Planning for potential illness or diminished capacity is another area of focus. The SEC guide suggests discussing plans and organizing important documents with trusted family members or friends, ensuring someone knowledgeable can make decisions if the investor is unable to do so themselves.

Withdrawals and Fraud Awareness

When it comes to tapping into retirement savings, the SEC guide provides strategies for judiciously withdrawing funds, which is critical in managing one’s financial longevity. Considerations like the timing of withdrawals, tax implications, and maintaining investment balance are discussed.

Lastly, learning to spot and avoid fraud is crucial. The SEC warns against the manipulative tactics of fraudsters who prey on fears such as the fear of running out of money or falling behind. Education campaigns like HoweyTrade are highlighted as resources to help investors recognize and stay clear of investment scams.