Financial Scams


As the number of Americans age 65 and up has risen, retiree fraud has become a huge growth industry. According to a 2010 survey by the Investor Protection Trust, 20 percent of seniors have been victims of financial fraud. It’s estimated that $3 billion are lost annually by seniors to financial scams.

Seniors are often considered a relatively easy target for hucksters. Not only are their numbers rapidly growing, but members of earlier generations were generally raised to respect authority and to be polite and trusting, making them easy prey for scammers.

They also often have good credit and sizeable assets – according to the Employee Benefit Research Institute, people age 65 and older have an estimated $8.6 trillion in their retirement accounts, not counting personal savings and pensions.

There are some common-sense rules for avoiding becoming a fraud victim. It boils down to taking your time and doing your due diligence. Even if the person you’re dealing with is someone you know socially, you should beware. Jim and Diane Smart, two active members of the Church of Jesus Christ of Latter-Day Saints in Utah, lost $200,000 to a fraudster whom they knew through their close-knit group at church.

Even trained and experienced professionals can fall victim. Steve Sampler, a licensed stockbroker with years of investing experience, was scammed out of $40,000 by a high-pressure investment salesman.

Contrary to stereotypes, investment fraud victims are typically well-educated with above-average incomes and financial knowledge. Their interest in new ideas and openness to try new things often lead them astray.

Do your own investigation

Scammers exploit the fact that many people don’t do their due diligence, instead relying on the salesperson themselves for information.

There are many resources available to you nowadays to investigate both the person and the company they claim to represent. Do your own independent research and talk with friends and relatives. If the salesperson claims to represent or be affiliated with a legitimate business, contact the business and verify their credentials.

Make sure you fully understand the offer, the background, and the risks. Be especially careful of unsolicited offers you receive in the mail or through email. Remember, if something sounds too good to be true, it’s not true.

Don’t judge by appearances

Fraudsters know how to present a polished, professional appearance. They can make any offer sound like a great deal, with expensive attire, slick presentation materials, polite mannerisms, and friendly gestures. Just because the salesperson and company present a nice appearance doesn’t mean the offer is legitimate.

Ruth and Len Mitchell were taken by their accountant, whom they knew through their ice skating club.

Take your time

Like Steve Sampler, fraud victims often get rushed into investment schemes with the pitch that “there are only a few left” or “this once-in-a-lifetime opportunity won’t last long”. Take the time needed to research both the offer and the company, and don’t allow the salesperson to rush you into anything.

Watch out for salespeople who exploit your fears

Many retirees worry about having sufficient retirement savings, especially in the face of rising healthcare costs. Fraudsters know to pitch their schemes to appeal to these fears.

“Free lunch” investment scams

Seniors are popular targets of “free lunch” scams. In these scams, the victim is invited with others to attend a free lunch or dinner and then listen to an investment presentation. The victim is guilted into purchasing whatever product is being peddled. Even if the announcement says “nothing will be sold at the presentation”, the victim is subjected to a sales pitch at a later date.

This video tells more about “free lunch” scams and how to protect against them.

Don’t be afraid to complain

If you suspect fraud, don’t let embarrassment, or fear of appearing unable to manage your affairs, prevent you from filing a complaint with federal or state regulatory agencies.

This website shows how to report different types of fraud.

Protect yourself online

Use a reputable firewall, antivirus, and antispyware software on your computer and keep them up to date. Don’t open attachments or click on links in emails from unfamiliar people, as they might contain malicious software that a scammer can use to take control of your computer remotely or steal information.


This scam meter helps you determine whether an offer you’re considering is likely to be a scam.

This risk meter can help you determine whether you have characteristics and behaviors that make you likely to become a fraud victim.

Read the Financial Self-Defense Guide for Seniors by the Certified Financial Planner Board of Standards.

Visit the SEC’s Seniors page for information about investing and investment scams.

Watch this video for some general tips to avoid scams: