Retirement Investing: 7 Ways to Protect Your Retirement from Investment Frauds

Protection from Investment Fraud

Selling bogus investment products to older Americans is big business, with an estimated $2.9 billion worth of retirement investing losses being attributed to financial elder abuse annually.

It’s a common scenario: You receive an email, letter or phone call promising easy money or dire consequences. If it sounds too good to be true, that’s because it probably is. Financial fraud schemes are an all-too-common way older Americans are scammed out of financial assets that are critical to their retirement stability.

“You’ve got to be really cautious and suspicious of what seems too good to be true,” says Florida-based Attorney Mitchell Kitroser, of the firm Mitchell I. Kitroser, P.A. “It’s human nature that we all want something for nothing, and in a lot of these cases, particularly with older people, they want to think they’ll have enough money for retirement and still have a legacy for their children, and [people] will prey on that.”

Fraud solicitation is just one way older people are scammed. They’re also targeted by investors, who promise unrealistic or guaranteed returns, as well as their own family members, who may feel entitled to their money.

Here are 7 ways to protect your retirement from investment frauds:

1. Protecting Yourself from Investment Fraud — Know the Facts About Investment Returns

Many older Americans are particularly vulnerable because they often lack an understanding of reasonable returns on retirement investing, making them targets for fraudulent pitches.

More than 40% of people surveyed found an annual return of 110% for an investment to be appealing, and 43% found “fully guaranteed” investments to be appealing, even though annual returns over 100% are highly unlikely and virtually no investment is riskless, according to data from a 2012 survey on financial fraud by the Financial Industry Regulatory Authority (FINRA).

Inflated returns and guarantees are common pitches of fraudsters.

2. Be Wary of a Hard Sell and Get a Second Opinion

Before making any investment, you should get a second opinion from a trusted advisor, lawyer or accountant, says Kitroser, who specializes in a variety of practice areas, including elder financial exploitation.

“If you go to an investment advisor and he says you need to buy an annuity, the right response should be, ‘Tell me why’ and ‘I want to share it with a different advisor to weigh my options.’ There is nothing wrong with saying let me think about it. Anyone who says you must do this right now is probably scamming you. There’s no investment that can’t wait.”

Maryland-based Attorney Ron Landsman, of the firm Ron M. Landsman, P.A., agrees that immediacy is a red flag for fraudulent investor schemes.

“If you have to decide today, don’t,” Landsman says. “Go slow [and] check with someone else you trust.”

Understanding the warning signs and getting a second opinion can help save you from a scam that might just deplete your retirement savings.

3. Protect Yourself from Investment Frauds — Keep Your Social Security Number and Account Information to Yourself

While it is impossible to never share your information, you should be extremely careful with all account numbers and especially your Social Security number.

A few tips:

  • Keep your Social Security card and any unused credit cards in a secure location. Do not carry with you unless necessary.
  • Consider keeping copies of your account information in a safety deposit box.
  • Be careful about disposal of bank statements or other paperwork that has account numbers.

4. Be Wary of All Unsolicited Pitches

If you receive an unsolicited phone call, email or letter and they ask for any account numbers, be very careful — even if they say they are with an institution you are associated with.

You can always hang up and call back the company using the number found on your statements or via the company web site.

5. Be Cautious with Online Passwords

Make sure to keep your passwords secret and make sure that they are fairly robust with both upper and lower case letters, a combination of letters and numbers and additional symbols like *, %, $, etc…. It is also a good idea for you to update your passwords with regularity.

6. Monitor Your Credit Report

You should regularly check your credit report to look for suspicious or unknown transactions. There are services that will monitor your credit report for you (ask your bank) or you can check it directly via any of the three major credit bureaus:
Equifax: 800 685 1111 — www.equifax.com
Experian: 888 397 3742 — www.experian.com
TransUnion: 800 916 8800 — www.transunion.com

7. Be Aware About Protecting Yourself from Your Own Family Members

You might be shocked to learn that 34% of reported elder financial abuse is perpetrated by family, friends and neighbors.

And, it can be tricky to protect yourself from friends relatives. Often, older Americans are vulnerable because of their trusting nature and their desire to help out those who are in financial distress, suggests the 2011 MetLife Study of Elder Financial Abuse.

MetLife estimates that the annual financial loss by victims of elder financial fraud — including family members stealing from their elders — is at least $2.9 billion. Instances in which family members were involved were the second-most reported cases of elder financial abuse.

“If there’s any kind of significant amount of money involved, [older] parents have to first watch all of their children,” Kitroser says. “In a lot of families, the kids look at the parents’ money as their money or their inheritance and it creates potential problems.”

In some cases, adult children may offer to manage their parents’ money or ask that their names be added to their accounts. These behaviors, Kitroser says, are “danger signals” of financial fraud waiting to happen.

So with your retirement income on the line, it’s critical to be savvy to financial fraud schemes and to be skeptical about investments or financial decisions, even when they involve your own family members.

“It’s better to educate clients and possible victims than it is to try to fix the problem after it’s happened,” Kitroser says.

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