Financial Decision-Making

One out of 20 older adults in the U.S. is a victim of financial exploitation, losing an average of $80,000 to $186,000. Nearly half of these crimes are committed by someone the older adult knows and trusts, like a relative or caregiver. Despite these dire statistics, no currently available tools directly assess an older adult's financial judgment and underlying decisional abilities, while protecting their independence. 

Peter Lichtenberg, Director, Institute of Gerontology and Professor of Psychology
p.lichtenberg@wayne.edu • 313-664-2633


April 2016 Webinar by Dr. Lichtenberg for Natl Adult Protective Services


Research Publicatons for Financial Decision-Making
National and Local Press on Financial Decision-Making
Financial Gerontology Grant Details

IOG Director Peter Lichtenberg's research has created assessments to identify older adults at risk of financial exploitation, scams and fraud, while preserving the rights of capable older adults to handle their own financial decisions. His screenings and evaluations include a long-form interview for mental health professionals and a 10-item scale for financial services professionals, bank personnel, lawyers, law enforcement officers, and adult protective services employees.

His research model assesses older adults' financial judgment, measures vulnerability to thefts and scams, provides training and dissemination of tools to professionals, and isolates physical or mental health issues that could expose an older adult to financial predators. Field testing of these assessments is being conducted across an array of socioeconomic and education levels.

Initial studies confirm the Lichtenberg Financial Decision-Making Screening and Rating Scales (© 2014) reliably profile an older adults' vulnerability to fraud and ability to manage money. The screening tool uncovers whether a person may be currently under undue influence, be psychologically susceptible to outside influence, or unable to make sound, rational financial decisions. The rating scale determines whether the older adult understood the financial decision and made it with integrity, not whether the decision was wise. "Older adults, like all adults, have the right to make poor financial choices," Dr. Lichtenberg said. "We need to assess whether the decision was authentic."

Dr. Lichtenberg's vulnerability questionnaire sprang from a population-based study of 4,440 participants in which he found that severe depression combined with low social-status fulfillment increased the probability of a person being victimized by fraud by 226%. 

Three organizations are funding the project: the National Institute of Justice (three-years, $468,000); the Retirement Research Foundation ($69,000 with a $39,000 match from WSU and the American House Foundation); and WSU Technology Commercialization ($25,000).

On June 24, Dr. Lichtenberg spoke before the National Academies of Science in Washington, DC, as an expert on capacity assessment instruments and the underlying abilities required to manage and direct finances. The committee is reviewing the Social Security Administration process for determining whether adult beneficiaries are capable of managing their benefits. Dr. Lichtenberg testified before a congressional briefing in Washington, DC, in October 2014 on fraud schemes that target seniors.

Dr. Lichtenberg's work also has a community engagement component. To learn more about the free  service and educational programs offered by the IOG's Center for Financial Safety & Health, follow these links:
Taking Control of Your Financial Health is a four-part series of engaging and interactive workshops to improve financial literacy for adults 50 and older.
Success After Financial Exploitation (SAFE) provides free one-on-one assistance to victims of scams or identity theft to help them recover their financial standing. SAFE can also provide expert presentations to interested groups on financial decision-making, vulnerability and protection from scams.


Related Research Publications by Peter Lichtenberg

The National Adult Protective Services Association, in conjunction with the National Committee for the Prevention of Elder Abuse (NCPEA) released a Research to Practice (R2P) Brief in August 2016, titled New Assessments in Financial Decision Making and Financial Exploitation: the Lichtenberg Financial Decision Screening Scale (LFDSS) by Peter Lichtenberg, PhD, ABPP.  R2P publications link cutting-edge research with everyday practice in adult protective services. This brief is a follow-up to the webinar on the subject.

The Lichtenberg Financial Decision Screening Scale (LFDSS): A new tool for assessing financial decision making and preventing financial exploitation
Journal of Elder Abuse & Neglect, 2016, VOL. 28, NO. 3, 134–151

New Approaches to Preventing Financial Exploitation: A Focus on the Banks
The Gerontological Society of America, Public Policies & Aging Report, 2016, Vol. 26, No. 1, 15–17

Financial Exploitation, Financial Capacity, and Alzheimer's Disease
American Psychological Association, American Psychologist, 2016, Vol. 71, No. 4.312-320

Psychological and Functional VulnerabilityPredicts Fraud Cases in Older Adults:
Results of a Longitudinal Study

Clinical Gerontologist, October, 2015.

Financial Decision-Making Abilities and Exploitation in Older African Americans: Preliminary Validity Evidence for the Lichtenberg Financial Decision Rating Scale
Journal of Elder Abuse & Neglect, August 18, 2015

A Person-Centered Approach to Financial Capacity Assessment: Preliminary Development of a New Rating Scale
Clinical Gerontologist, 38:49–67, 2015.

Financial Decision Making and Financial Exploitation: Assessment Issues in Older Adults
Syracuse University Aging Studies Institute Policy Brief, Nov. 2014.

How to Protect and Help Clients with Diminished Capacity
MetLife Online Journal, April 2104.

Is Psychological Vulnerability Related to the Experience of Fraud in Older Adults?
Clinical Gerontologist, 36:132–146, 2013.

Misdiagnosis of Alzheimer's Disease: Case Studies in Capacity Assessment
Clinical Gerontologist, 35:42–56, 2012.

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News Citations on Financial Gerontology, Scams & Fraud

IA Watch Reporter, 7/7/16
By Carl Ayers

The increased focus by lawmakers, regulators and law enforcement on the issue of seniors' financial exploitation cries for some way that financial professionals may be able to better detect mental decline in their aged clients. Last year, we shared best practices for dealing with elderly clients and mentioned the work of Peter Lichtenberg, director of Wayne State University's Institute of Gerontology (IA Watch, July 9, 2015). He was testing a 10-item, multiple-choice questionnaire that financial professionals and others could use to gauge a senior's financial acumen and cognitive status.


The Wall Street Journal, Nasdaq.com, 6/29/16
By Joe Flint

When the legal battle surrounding Sumner Redstone had its last substantive turn in court, the media mogul's longtime companion was arguing he was mentally incompetent when he evicted her and removed her as his health-care proxy. A California judge dismissed that suit. Now, as a Massachusetts court prepares for a hearing Thursday in the latest chapter of the saga, the stakes are much higher and the legal terrain far more complex. At issue now is whether Redstone knew what he was doing in recent weeks when he reordered the power structure atop his media empire, which includes controlling stakes in Viacom Inc. and CBS Corp. In addition to his mental competency, the case also will get into the murky legal question of whether Redstone came under "undue influence" from his daughter, Shari Redstone, in making the changes, and how recent events square with the fine points of estate plans that the 93-year-old crafted in 2002, when he set up a trust to oversee his holdings upon his death or incapacitation. The suit has been brought by Viacom Chairman and Chief Executive Philippe Dauman and board member George Abrams, who were ousted from the board of Redstone's holding company, National Amusements Inc., as well as the trust. They are seeking reinstatement. They say that Redstone is suffering from a worsening brain disorder, can't walk or speak and would never have wanted them removed if he were in command of his faculties. Viacom will have to show that because of Redstone's vulnerability, he is "parroting someone else's ideas that have been planted over and over through repetition and isolation," said Peter Lichtenberg, director of the Institute of Gerontology at Wayne State University.


Detroit Free Press, 5/22/16
By Susan Tompor

May is officially Older Americans Month and is a good time to discuss some challenges many seniors face when it comes to paying their bills. One in three older adults are viewed as economically insecure, according to the National Council on Aging. About 10 percent of seniors were living in poverty as of 2014, compared with 8.9 percent in 2010. More than 60 percent of households headed by someone older than 60 had some form of debt in 2013. The median debt totaled $40,900 -- double the amount as of 2001. The Elder Economic Index data from the Wayne State University Institute of Gerontology indicates that about nearly 60 percent of seniors living within the Detroit Area Agency on Aging Region 1a do not have sufficient income to take care of their basic needs, compared to 37 percent of the older adults residing in Michigan. The data is from the Institute of Gerontology's Seniors Count project in 2011. The area includes Detroit, Hamtramck, Highland Park, Grosse Pointe, Grosse Pointe Park, Grosse Pointe Shores, Grosse Pointe Woods, Grosse Pointe Farms and Harper Woods.


WWDB-AM (Philadelphia, Penn.), 2/9/16

Peter Lichtenberg, director of both the Institute of Gerontology and the Merrill Palmer Skillman Institute at Wayne State University, was a guest on "Boomer Generation Radio" hosted by Richard Address. Lichtenberg is a national expert in financial capacity assessment and financial exploitation of older adults. His particular areas of research include mental health in long term care, geriatric depression, geriatric psychology and medical rehabilitation and the early detection and management of Alzheimer's Disease. "As the population ages, there are certain reasons to be a little more careful about knowing how decisions are made and whether they are influenced by either psychological vulnerability or neuro-cognitive variables [like] loss of memory and problem-solving skills," Lichtenberg said. "We have found that people who were both financially and psychologically vulnerable were much more likely to be scammed."


Advisor Innovation and Client Dementia, 2/1/16
By Steven Starnes

Advisors and other financial professionals can improve how we serve and protect seniors, especially those facing age-related dementia. Medical research tells us that one of the first signs of dementia is difficulty managing personal finances. This means our clients can make really expensive mistakes with their money before their family or friends recognize there is a problem. How can we protect our senior clients, as well as their caregivers and families? Sandra Adams at the Center for Financial Planning and Peter Lichtenberg, professor at Wayne State University, discuss the signs of diminished capacity in their Journal of Financial Planning article, "How to Protect and Help Clients with Diminished Capacity." Perhaps your
client seems more disorganized than usual, does not remember recent conversations or is making decisions that do not fit with her plan or values.


Community Connection Greater Midtown 11/15

Dr. Peter Lichtenberg describes a case study to illustrate how older adults can protect themselves from being financially exploited. First of two parts.


News-Medical, 7/16/15

Peter Lichtenberg, director of the Institute of Gerontology at Wayne State University, won the Judge Edward Sosnick Courage to Lead Award for his extensive work to create ways of identifying older adults at risk of financial exploitation. The award is presented annually by the Oakland County SAVE (Serving Adults who are Vulnerable and/or Elderly) Task Force. Lichtenberg created a set of scales and assessments of a person's ability to make sound, rational financial decisions and/or risk of being subject to undue influence. Initial studies confirm that the Lichtenberg Financial Decision-Making Screening and Rating Scales reliably profile an older adult's vulnerability to exploitation and ability to make significant financial decisions.


WJR-AM, 7/15
Senior exploitation
Mitch Albom Show

During a segment on the "Mitch Albom Show," host Mitch Albom explored the growing problem regarding the exploitation of seniors by caregivers, family and others who take advantage of older adults financially. Albom referenced studies done at Wayne State University surrounding the issue of senior exploitation. (We are unable to download the audio file.)


Detroit Free Press, 7/14/2015
What's wrong with stealing from grandma? Plenty
By Robin Erb
A series of studies at Wayne State University is bringing into focus the vulnerability of elderly people not only to con artists and mail scams — but also to loved ones and trusted caregivers. And the lead researcher, as well as other experts agree: Part of the problem is the ability of the perpetrators to rationalize their deeds. "After a period of time, family members ... often feel entitled to take some of the money as sort of compensation for what they're doing, but also just of a sense (that) it's their money, too," said Peter Lichtenberg, director of Wayne State's Institute of Gerontology and lead author on the recent studies. Lichtenberg has designed two screening tools — one a 77-question version, the other an abbreviated, 10-question survey to gauge seniors' abilities to make financial decisions. Both also test for the presence of risk factors — trusted relatives or friends who appear predatory, for example. In one study, experts found that eight of the 69 elderly Detroit …participants had "decision-making incapacity," meaning that they no longer fully understand the risks and benefits of financial choices. Among those eight, five reported they had been financially exploited in the past year. None of the incidents had been reported to authorities, Lichtenberg said.


Access Magazine (Area Agency on Aging 1-B), Summer 2015
Screening Tool Helps Protect Vulnerable Seniors
Peter Lichtenberg was interviewed for this cover story on tools to help identify and protect older adults who are vulnerable to financial exploitation. Dr. Lichtenberg explained his current research project in which he created and is testing screening scales to determine an older adult's ability to make financial decisions. This tool has garnered much attention from professionals in financial planning, banking, law and medicine who routinely work with older adults and must assess their capacity.

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Slate.com, 3/13/15
How exactly does an elder abuse investigation work?
By Jay Deshpande
On Thursday, the Alabama Securities Commission announced that it had concluded its inquiry into whether Harper Lee's decision to publish "Go Set a Watchman" was in fact her own—or a case of elder abuse. But the Alabama Department of Human Resources is still looking into the matter after receiving a complaint last month that Lee was being exploited. Some suggest that Lee was in no way capable of making such a major decision, while others claim she has "full possession of her mental faculties." Peter Lichtenberg, director of the Institute of Gerontology at Wayne State University, explains that the term "elder abuse" can cover mistreatment ranging from physical or emotional abuse, to financial exploitation, to various forms of neglect. In terms of whether the elderly person has been unduly influenced, he said: "We look at ... What active steps did [the alleged influencer] take to procure monetary things? Did they flatter, cajole, berate, all of these? Did they isolate?" After checking the person's mental wellbeing for susceptibility to persuasion, the investigator must look for patterns by which the subject could be exploited. Lichtenberg looks for a "confidential relationship," often involving finances. If a person close to Lee has earned her confidence and then encouraged her to isolate herself, no longer talking to anyone else about her personal affairs, then this may be a sign of exploitation.

Oakland Press, Macomb Daily, 10/25/14
Depressed seniors more vulnerable to exploitation
By Diana Dillaber Murray

Older adults with severe depression and low social-status fulfillment are more apt to be victims of fraud, according to a study done by Peter Lichtenberg, director of the Institute of Gerontology at Wayne State University. Lichtenberg studied the problem in 4,440 older adults and found fraud increased by 226 percent under those circumstances. "Psychological vulnerability can impact older adults' lives in serious ways," said Lichtenberg, who planned to present his findings to Congress. He will also moderate a panel assembled by Florida congressman Ted Deutch and Minnesota senator Amy Klobuchar to bring attention to the Seniors Fraud Prevention Bill they recently introduced in Congress.

Lichtenberg received a $468,000 grant from the National Institute of Justice (beginning in January) to further validate the screenings and refine methods for wide-scale distribution of these tools across multiple such professionals as financial planners, bank personnel, lawyers, law enforcement officers and adult protective services employees. "We aren't trying to usurp a person's independence," Lichtenberg said. "We want to balance autonomy with protection and determine how best to educate and support older adults most at risk of being exploited."

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The Kansas City Star, 9/13/14
Exploitation of elderly woman by a 'friend' is another chapter in an increasingly common story
By Eric Adler
No one knows precisely how many of the 60 million U.S. adults age 60 or older are victims of scammers. The few studies that exist estimate that up to 5 percent of seniors — 3 million people — are financially exploited each year. Social isolation long has been known as a major risk factor for exploitation. Without trusted relatives or peers, impressionable and needy adults can more easily fall prey to self-serving people. "What we have is a group of people, especially as they get into their 80s, who often have to give up driving, become widowed," said Peter Lichtenberg, a geriatric neuropsychologist who is director of the Institute of Gerontology at Wayne State University. "Their worlds become smaller. Loneliness is a factor. They become targets." Lichtenberg is one of a number of researchers nationwide who is placing increasing attention on the role conditions such as mild dementia or depression play in exploitation. He studied some 4,400 people age 60 and older. In research published last year, Lichtenberg found that while about 4.5 percent had been victims of fraud, the rate of victimization was three times as great among those who reported being the most depressed and the least socially connected.

http://www.kansascity.com/news/local/article2101455.html

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WDET-FM, 9/26/13
Taking advantage of elders
One out of every 20 seniors are now facing the challenge of dealing with financial exploitation. Victims lose anywhere from $79,000 to $186,000 or more. Peter Lichtenberg, director of the Institute of Gerontology at Wayne State University, will discuss his findings Sept. 30, at the Berman Center for the Performing Arts. During the event, experts will analyze the multiple ways older adults are exploited, and a documentary film titled "Last Will and Embezzlement," will be show featuring Hollywood star Mickey Rooney.

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Detroit Free Press, USA Today, 9/23/13
Protecting seniors and their money is focus of daughter's documentary
USA Today
By Cassandra Spratling
An article highlights a documentary film, Last Will and Embezzlement, which aims to raise awareness about financial exploitation of elderly people. One out of every 20 older adults in the U.S. will be a victim of financial exploitation, and the rates are rising, said Peter Lichtenberg, director of the Institute of Gerontology at Wayne State University. To help, he is developing an assessment to determine whether a senior citizen is at risk of being the victim of financial abuse. He said he hopes to be able to pilot the 61-question assessment by the end of the year.

Detroit Legal News, 9/18/13
Film highlights alarming rise of financial abuse of older adults
One out of every 20 older adults in the U.S. will be a victim of financial exploitation this year, and the rates are rising. Prevention is the best defense against this exploding problem. But first we must pinpoint who is most at risk. Peter Lichtenberg, director of the Institute of Gerontology at Wayne State University, has created the Lichtenberg Financial Decision-Making Rating Scale to do just that. Initial studies confirm the scale as a reliable tool in determining older adults' vulnerability to fraud and ability to manage their money. "We aren't trying to usurp a person's independence," Lichtenberg said. "We want to balance autonomy with protection and determine how best to educate and support older adults most at risk of being exploited." Lichtenberg will discuss his findings as part of the "Safeguarding the Golden Generation" panel and movie preview Sept. 30, from 6:30-9:30 pm at the Berman Center for the Performing Arts, in West Bloomfield. The evening analyzes the multiple ways older adults are exploited and kicks off with the screening of a documentary titled "Last Will and Embezzlement." The film will also be shown on Sept. 25 at the Italian American Cultural Center in Clinton Township. Among the presenters are Jocelyn Benson, interim dean of Wayne State University's Law School.

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The Sun Sentinel (Fort Lauderdale, Fla.), 5/26/13
New study, bill puts focus on senior fraud
By Diane C. Lade
New efforts are underway to combat what aging experts say has become one of the top threats facing elders: losing their savings to con artists and financial predators. Gerontologists at Wayne State University have created, for the first time, a potential victim profile that could alert professionals and families to which seniors are most psychologically vulnerable to fraud. And a bipartisan bill filed last week by U.S. Rep. Ted Deutch, a Democrat from Boca Raton, and two other representatives would create a federal advisory office dedicated to protecting elders from fraud and ensuring victims' complaints are handled efficiently and quickly. Deutch's bill mandates that the Federal Trade Commission, which would house the new office, "immediately" funnel elder fraud and exploitation reports to appropriate local law enforcement or regulatory agencies for investigation, something the FTC is not required to do now. The new office also would alert elders to new scams and educate them about investment fraud. Peter Lichtenberg, director of Wayne State University's Institute of Gerontology and the researcher behind the elder fraud victim profile, commented in the story.

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Senior Planet 5/20/13
Scams: Are You Immune?
By Kathleen Doheny
Research into what makes older adults vulnerable to scams by IOG Director Peter Lichtenberg was the subject of an extensive interview.  Risk factors for seniors, tips on staying safe, and details of the 4,400 older adults (average age 66) studied were included.  Lichtenberg said that of the 5% who had been victimized, depression and not feeling socially fulfilled greatly increased the odds of falling prey to financial fraud.  People who don't feel loved and appreciated are easy targets for charming thieves who know how to establish bonds and trust quickly. The article included a "Fraud Awareness Quiz."

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Macomb County Legal News, 5/6/13
Honoring work on behalf of 'vulnerable adults'
By Sheila Pursglove
Elder Law of Michigan has scheduled two events for the 5th Annual Joe D. Sutton Call to Justice Awards, honoring individuals and organizations that help adults in need and work towards health, safety, fairness and justice for vulnerable people. Peter Lichtenberg, director of the Institute of Gerontology and the Merrill Palmer Skillman Institute at Wayne State University, will receive the Leadership Award. Lichtenberg is the founding director of the Wayne State University Lifespan Alliance. He also has written several books on aging and served as chair of the Michigan Dementia Coalition and president of the Adult Development and Aging Section of the American Psychological Association.


The Deseret News, 4/30/13
Some Seniors More Vulnerable to Fraud
Research by IOG Director Peter Lichtenberg points to areas of increased vulnerability among seniors as loneliness and isolation motivate them to connect with strangers who are potential predators.

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Detroit Legal News, 4/29/13
Elder Law of Michigan to host two "Call to Justice" award events in May
By Sheila Pursglove
Peter Lichtenberg, director of the Institute of Gerontology and the Merrill Palmer Skillman Institute at Wayne State University, will receive the Leadership Award on Tuesday, May 7 at the Glen Oaks Country Club in Farmington Hills. Lichtenberg also is the founding director of the Wayne State University Lifespan Alliance, author of several books on aging and has held office in several professional organizations including Chair of Michigan Dementia Coalition and President of the Adult Development and Aging Section of the American Psychological Association.

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CBS Detroit, Medical Xpress, News Medical, Examiner, 4/25/13
Wayne State finds 'psychologically vulnerable' more vulnerable to fraudsters
Older adults with the highest levels of depression and the lowest levels of social needs fulfillment experience higher levels of fraud, according to a new study from Wayne State University and the Illinois Institute of Technology. The schools advise clinical gerontologists in the field to be aware of older adults' needs for assessment of financial exploitation or its potential when working with highly vulnerable individuals. Financial exploitation of the elderly is on the rise according to the National Association of Area Agencies on Aging, and the numbers are expected to continue to grow as Baby Boomers age. This exploitation, which includes telemarketing scams, fake home repairs, fake check scams, identity theft and more, costs approximately $3 billion each year. The study, "Is Psychological Vulnerability Related to the Experience of Fraud in Older Adults?" published in the recent issue of Clinical Gerontologist, is the first study to include prospective predictors of reported financial fraud victimization of older adults, and is the first to review financial exploitation of any kind with the same population from a psychological-vulnerability perspective. "This study illustrates how we can enhance our understanding of this major issue by performing a clinical analysis instead of one that stops at epidemiological or broad population-based reviews," said Peter Lichtenberg, director of WSU's Institute of Gerontology and lead author of the paper. "Those in the clinical study showed characteristics of extreme depression symptoms and perceived low social-status fulfillment, thus showing they were more vulnerable to the experience of theft of scams.

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Grosse Pointe Today, 12/19/11
Be Aware of Special Vulnerability of Elderly to Scammers and Thieves
By Anne Marie Gattari
Some 13 percent of older African-American residents of Metro Detroit report they have been the victim of a scam or a theft in the past year while the national average is just 3 percent, according to new research from Wayne State's Institute of Gerontology (IOG). Dr. Peter Lichtenberg, the IOG's director, just finished crunching the numbers and the results are dramatic – but not surprising, he said. "Three-quarters of those interviewed said they underestimated how much they'd need in retirement," he said. "And the best victims of fraud are those that are stressed about their finances." Add that to the fact that the elderly tend to be less critical and more accepting, they are the perfect victim, Lichtenberg said. That's why, he said, "everyone needs to be on guard, but some more than others."

http://grossepointetoday.com/gp-fyi/aging-america/002477-be-aware-special-vulnerabilityof-elderly-scammers-and-thieves


Detroit Free Press, 6/19/11
As weather warms, watch out for home repair scams
By Tammy Stables Battaglia
Wayne State University professor Peter Lichtenberg, who studies elder abuse, commented in a story on repair scams and thieves that usually prey on seniors who have little money and those who feel disrespected. His 2010 study found that 1 in 10 senior citizens in Detroit have been victimized by fraud.

http://www.freep.com/article/20110619/NEWS05/106190479/As-weather-warms-watch-out-home-repair-scams

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Seniors Victimized by Fraud
(December 2010, 0:19:59 minute clip, mp3 format)
IOG Director Peter Lichtenberg discusses why seniors fall prey to con artists; downsizing problems for Michigan's older adults who are "rusting in place," financial gerontology and latest research from the Gerontological Society of America.