Retirees are often vulnerable to scams because they're looking to stretch their limited income and sometimes they don't even realize (or won't admit) that their financial decision-making has declined.
Retirees are often vulnerable to scams and financial abuse. They make easy targets sometimes because they’re mental capacities have declined, but sometimes even those who aren’t suffering from any signs of dementia can become victims as they try to stretch their limited income.
A study by MetLife found that nearly $3 billion is stolen from elders every year. One problem with fighting elder financial abuse, though, is that “no one wants to appear incapable or hapless,” as columnist Jeff Brown wrote.
“Unfortunately, for us, our increasing ability to extend physical well-being has not been matched by our ability to reduce cognitive decline and Alzheimer's among seniors,” he wrote in a separate column.
Compounding the problem is that a study found that while knowledge of basic money management concepts declines 2% each year after age 60, confidence in those financial decision-making abilities does not fall.
And while they become easy targets for scams, for many seniors the money they have accumulated over the years is irreplaceable. Here are some of the top scams and financial pitfalls to watch out for in retirement.
People are very willing to help their grandchildren and there are scammers out there willing to take advantage of that very fact.
USA TODAY explains that the grandparent scam involves someone calling claiming to be a grandchild. Crying, in a crisis, they need money urgently; they beg the grandparent to send money, but, please, don’t tell mom and dad. The grandparent wires the money. The scammer calls back begging for more.
Many retirees can let their houses go; unable to climb ladders or spend hours working on the landscaping, the outside of the house might start to see some wear and tear that doesn’t immediately get fixed.
Enter the fraudster.
You get a call from a company that was driving in the area and noticed your roof or a tree needed repairing. They soliciting repairs you don’t actually need, according to USA TODAY.
For many retirees, medical costs are a huge dent in their savings and something they typically underestimate. So they might get a call from a company with a special on a heart monitor, a bench for the shower or a wheelchair.
They ask for a deposit, some personal information, maybe your Medicaid number. But no equipment ever comes and now they’ve got your information.
One of the top scams facing retirees is one where scam artists pitch a self-directed IRA. The self-directed IRA is a real and safe way to invest, but retirees need to be mindful of the scams surrounding them.
According to MarketWatch, investors are convinced to move their assets from an existing IRA into a fake self-directed one that is held by a custodian created and owned by the scam artist. The financial penalty for an early withdrawal usually causes investors to keep the funds in longer, which the scammers use to their advantage.
Now these aren’t a scam, but retirees can get some pretty bad counsel that ends up benefitting the agent. Annuities can be attracted because they can provide lifetime income for seniors, which is great for someone on a fixed income. But deferred annuities are not the right investment for retirees. These annuities are for people with a long-term plan, not someone who might need the money more immediately.
Deferred annuities can levy a charge if you try to withdraw the money within the first seven to 10 years. But agents will target them to seniors who might not have as sharp of decision-making skills as when they were younger.
According to Kiplinger, “an agent who convinces a retiree to roll over a $200,000 IRA into an annuity can earn as much as $24,000.”
Really, anyone can fall victim to these sorts of scams, particularly around the holidays. People ask for money for fraudulent charities, for instance. But retirees are potential victims because people prey on a senior’s loneliness with sweetheart scams.
Hyped up investments
The investment sales pitch sounds great and the huge returns are guaranteed — a retiree could really use that money. But every investor, not just retirees, should be very suspicious of any broker who promises unrealistic or guaranteed returns. If it sounds too good to be true, then it probably is. Unfortunately, Americans are very bad at identifying financial scam red flags.
Do your due diligence: check out the broker’s background, see if his or her credentials are real, make sure there are no legal claims in the past, and make sure all the fees are discussed ahead of time.