Older Americans are under more financial pressure than ever. Unfortunately, scam artists are taking advantage of the sometimes desperate needs of seniors to boost their income, and victims have lost huge portions of their life savings as a result.
A recent survey from the CFP Board of Standards found that senior citizens who were victims of financial abuse lost an average of $140,500 -- and more than half of scam victims lost $50,000 or more.
Moreover, an increasing number of older Americans have been hurt by bad financial advice. More than half of the roughly 2,650 financial planners surveyed say that they've worked with at least one client who's been hit by unfair, deceptive, or abusive practices.
Here's How It Happens
Retirees are particularly attractive targets for scam artists because, unlike younger potential victims, they often have large amounts of savings available to them. That's why exploitation comes in so many different flavors, and often includes the following:
- Invitations to free seminars soliciting payment for investment strategies were by far the most common, with 73% of advisers reporting their clients getting targeted for such presentations.
- Cold-calling is still a popular way to lure seniors to give up control of their money, with 58% of advisers reporting unsolicited calls selling financial products and services.
- With many seniors struggling to make ends meet, income-producing investments have become very popular. Half of all advisers dealt with clients who were offered supposedly "low-risk" high-yield investments that went bad.
- More specialized schemes often look sophisticated enough that seniors believe they're genuine. Advisers reported seeing scams related to reverse mortgages, pension buyouts, aid for veterans, and even being named a winner of a contest supposedly offering a cash prize.
The survey singled out equity-indexed or variable annuities as "by far the most commonly used products" in senior-exploitation cases.
Surprisingly, though, scam artists aren't as greedy as you might think. The survey revealed that advisers serving clients with mid-range assets of $100,000 to $750,000 are more likely to be targeted than richer or poorer senior citizens.
How to Protect Yourself
The study concluded with two important points. First, victims are often hurt by people they know, including existing investment advisers and even guardians or holders of power of attorney. Second, many victims never report abuses.
Sadly, you have to be on guard with your money all the time. Before trusting anyone with your finances, make sure you check references, do a simple investigation, and take other measures to make sure you won't get scammed.
Motley Fool contributor Dan Caplinger thinks law enforcement should lock up financial con artists and throw away the key. You can follow him on Twitter @DanCaplinger.