A Senior’s Guide to Financial Scams (And How to Avoid Them)
Many financial scams specifically target seniors. Knowing what the warning signs are for each of these scams can help you avoid falling for them.
Increasingly more technology in our day-to-day lives has brought more opportunity for scam artists to increase the amount and type of scams they perform. From pretending to be a loved one to posing as a government employee, there are many ways scammers can trick you into giving up confidential personal and financial information.
No matter how new, attractive or promising a scam may sound, the result is always the same: you lose money. Knowing the warning signs will help you avoid being scammed, thus protecting the money you’ve worked long and hard for.
Why Are Seniors Susceptible to Financial Scams?
According to the Federal Bureau of Investigation, seniors account for more than $3 billion in annual losses due to fraud. While they aren’t the only ones falling for these scams and losing money, there are a few reasons seniors can be susceptible to them.
Many seniors, especially those who began retirement planning early on, tend to have a high net worth. Research done by AARP and Oxford Economics shows that people over 50 hold 83 percent of US household wealth. This, along with many seniors’ averseness to or lack of skill with technology, makes them prime targets. Many may also feel isolated and alone, leading them to trust others more readily.
There is also the factor of declining health. Scammers will sometimes try to prey on this, knowing you’re more likely to fall for their schemes. This is commonly found with annuity scams but can be a reason for scammers to perform other frauds such as Medicare and grandparent scams.
7 Financial Scams That Target Seniors
While many scams are similar, some scammers will try new approaches hoping you’ll take the bait. A few of the age-old scams still out there are fake-check scams, tech-support scams, and investment scams. While each can be slightly different, there are common themes and specific warning signs you should look out for so you don’t fall for any of them.
Once a scammer has your money, there’s often almost no way of getting it back. Much like having a financial disaster preparedness plan, you should also have a plan for what you’ll do if you feel you’re being scammed. Being aware of specific types of financial fraud that are likely to target you will keep you aware and alert if someone does approach you with one.
1. Fake-Check Scams
Fake-check scams are also often associated with other fraudulent practices like phony prizes or bogus jobs. Essentially, someone will send you a check with an amount that exceeds what they owe you and say it was an accident. They will then ask you to wire the excess funds back to them. After you’ve sent the money, you’ll find out the original check was fake.
For example, if someone were to send you a $500 check when they only owed you $50 for a good or service, they will ask you to wire them the $450 excess. Because of Regulation CC set up by The Federal Reserve, the bank legally has to deposit certain check funds within days, so the individual being scammed will think the funds are there and will wire them the money. In a few more days the bank will find that the check was fake, and you’ll realize that you lost $450.
Fake check scammers will often use a legitimate-looking check, so it can be hard to identify the fraud by just looking at it. Instead, there are a few things to note to protect yourself in other ways. Any time you receive a check and are asked to send money back, you’re being scammed. If you do find yourself in this situation, talk with your bank for an expert opinion, don’t accept checks for more than your selling price and never send money back to someone that sent you a check.
2. Medicare Scams
From 2018 to 2019, Medicare worked on changing beneficiary cards to protect against identity theft. To do this, they changed card numbers from your Social Security number to a randomly assigned number. Scammers have worked around this new feature by requesting your card number for activation purposes or by saying your card doesn’t work and that if you give them your personal information, they can send you a new one.
These scams can occur at any time but happen most often around the Medicare open enrollment period. One thing to remember is that Medicare employees will only call you under certain circumstances. Medicare.gov outlines five key points to keep in mind:
- “Medicare will never contact you for your Medicare Number or other personal information unless you’ve given them permission in advance.
- Medicare will never call you to sell you anything.
- You may get calls from people promising you things if you give them a Medicare Number. Don’t do it.
- Medicare will never visit you at your home.
- Medicare can’t enroll you over the phone unless you called first”
Likewise, saying you need to pay a fee for upgraded service, requests for personal information over the phone or requests for hospital bills for treatment that you didn’t receive are all warning signs of a Medicare scam. If you do answer an unsolicited and seemingly fraudulent phone call from someone claiming to be a Medicare employee, hang up, don’t share any personal information and don’t give old Medicare cards or card information to anyone (shred them instead).
3. Tech-support Scams
Because many seniors can be less familiar with technology than younger demographics, it can be easy to fall for a tech-support scam. These come in the form of a phone call, pop-up warning or an online ad run for a fake tech company. These scammers will make you think there is a virus or something wrong with your computer, phone or other technology. They will then ask you to wire them money to fix a problem that isn’t there.
One thing to keep in mind when dealing with tech-support scams is that tech companies won’t call you when there’s a real problem with your device. If you get a pop-up on your computer or other device instructing you to call a phone number, don’t call it. Real security warnings won’t have a number listed for you to call. Instead, stop what you’re doing, don’t click on anything and call a trusted company for help.
4. Lottery + “You’ve Won…” Scams
If you’ve received a call, email or letter in the mail saying you’ve won the lottery, a new car or any other large-ticket item that seems too good to be true or you didn’t enter to win, chances are it’s a scam. Lottery and other “you’ve won…” scams will often require you to wire money to pay a small fee. Whether it’s a customs fee or a charge to cover taxes, it will always be fake.
When it comes to these types of scams, your best bet is to act rationally. Keep in mind that any lottery or sweepstakes requiring money upfront is fake. Similarly, if you didn’t enter to win or if getting your prize depends on sharing your Social Security number or other personal information, it’s best to run in the opposite direction.
5. Investment Scams
As you age and begin to see the fruit of your long years of work, investments may catch your eye as a way to keep increasing your retirement savings. This can be especially enticing for retirement planning late starters who are behind on saving. Because scammers know this, you may find yourself a target of these scams.
To avoid finding yourself a victim of fake investment scams, verify the salesperson’s credentials and, most importantly, don’t let anyone rush you into making a decision. Scammers will always make you believe there’s no time to waste, or else you’ll miss out. This is often a tell-tale sign that what you’re looking to invest in is fake. Another thing to be wary of is a guarantee the investment will perform well. While some investments do, there is always risk involved — that’s the name of the investing game — and no one can predict precisely how well it will do.
7. Grandparent Scams
Scammers will do anything to get your money — even if it takes posing as your grandchild. The scheme is to call you (as your grandchild) in desperation and say they are sick, hurt or in trouble. They will then ask you to wire money over to them quickly. Lisa Schifferle, an attorney at the Federal Trade Commission, outlines on the FTC website how crucial it is to be aware of these scams, particularly during the COVID-19 pandemic where many people already feel vulnerable.
Similar to investment scams, never let anyone rush you in these situations. Scammers will typically request your secrecy and an urgent need for money, but it’s important to contact a family member if you’re unsure if it’s a scam or not. It can also help to ask probing questions that only your actual grandchild would know in an attempt to catch the scammer in the act. However, if they say they’re a family member, they ask for money immediately and request your secrecy, it’s safe to say it’s probably a scam and you can just hang up.
7. Charity Scams
With so much need in the world, it can be difficult declining to help a charitable organization. However, because scammers know there are people out there who genuinely want to help, they will often pose as a charity, collect your money and pocket it. While these scams can happen at any time, they are more heavily prevalent after large-scale disasters.
The first step in determining a fake charity is by doing your research. Look online for anything you can find about the organization. If the scammer has used the same charity previously there will often be warnings that it’s a fraud. You can also look at the Better Business Bureau Wise Giving Alliance or Charity Navigator to see if there is any information in their databases about the charity. If you can’t find any information, it’s best to avoid donating.
How to Avoid Getting Scammed
While there are specific actions you can take for each type of scam, there are also a few general best practices to keep in mind. To avoid any type of scam, it’s important to be aware of these points:
- Don’t let anyone rush you. Give yourself time to process what’s happening.
- Verify the person’s credentials before giving out confidential information.
- Talk with someone you trust if you’re unsure it’s a scam.
- Keep your social media accounts private to prevent scammers from getting personal information.
- Never wire money over to someone without verifying the person or organization.
The best thing you can do when dealing with any possible scam is to give yourself time to process and not rush yourself. Scammers will have done their research to know key points about your life, so don’t trust them even if they know a personal detail.
Keep in mind that two tell-tale signs of a scammer are requests for urgent money and requests for secrecy. Some scammers won’t outright request secrecy, particularly if they perform their scam through the mail. However, if someone asks you to wire them money or give up your personal or financial information, you should always verify the person’s credentials first.
Another way to avoid being scammed is by blocking unknown callers. The more scammers you block, the less you’ll have to worry about potentially falling for one of their schemes. Many seniors don’t keep active social media accounts, but if you do, it’s best to keep your page private so scammers won’t have as much access to personal information about your family, whereabouts or hobbies.
What to Do If You’ve Fallen for a Scam
If you’ve fallen for a scam, immediately quit communication with the scammer. Gather all the information you have on the person, such as text messages or phone calls, and report this to the Federal Trade Commission.
If the scammer obtained your Social Security number, you should contact all three credit bureaus as well as the Social Security Administration. If the scammer has your bank information, you should also contact your financial institution as soon as possible. They can help you decide what the best course of action is — whether it be getting a new account number or stopping payment on a check.
While you may not get your money back, you could help prevent the loss of more money or others from falling for the same phony scheme.
No one wants to be scammed. Not only do you lose money, but you also have to spend time and effort repairing your personal information. To avoid this, always be wary of giving out personal or financial information over the phone or to someone you don’t know. Check the person’s credentials, allow yourself time to research and talk with someone you trust. It’s always better to be too careful, as you don’t want to lose valuable retirement savings, money coming from a purchased annuity or any other savings you may have.
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- AARP & Oxford Economics. (2016, September). The Longevity Economy: How People Over 50 Are Driving Economic and Social Value in the US. Retrieved from: https://www.aarp.org/content/dam/aarp/home-and-family/personal-technology/2016/09/2016-Longevity-Economy-AARP.pdf
- Federal Bureau of Investigation. (n.d.). Elder Fraud. Retrieved from: https://www.fbi.gov/scams-and-safety/common-scams-and-crimes/elder-fraud
- Schifferle, L. (2020, April 3). Grandparent scams in the age of Coronavirus. Federal Trade Commission Consumer Information. Retrieved from: https://www.consumer.ftc.gov/blog/2020/04/grandparent-scams-age-coronavirus
- AARP. (2021, February 4). Medicare Card Scams. Retrieved from: https://www.aarp.org/money/scams-fraud/info-2019/new-medicare-card.html
- Medicare. (n.d.). Help Fight Medicare Fraud. Retrieved from: https://www.medicare.gov/forms-help-resources/help-fight-medicare-fraud