Seniors and Financial Scams

by Paul Konrardy

Seniors and Financial Scams

Worried because, after a “free investment dinner,” your elderly father has agreed to let the speaker handle his investments without first vetting his credentials? Concerned because your seventy-year-old mother received a call supposedly from the IRS, claiming she owes back taxes that must be paid ASAP?

Or maybe you’re the one who is second-guessing your plan to switch from your current mortgage to a reverse mortgage.

While financial scams can happen to anyone in any age group, seniors can be particularly vulnerable, according to MyCreditUnion.gov. The fastest-growing segment of our society, older people often have savings, investments, own their home and/or have excellent credit that make them a valuable target to exploit. And if they do suspect they were scammed, they may not know where to report it or may even prefer not to let anyone know out of a fear of appearing incompetent or incapable of managing their affairs. 

Here are three scams that target retirees and senior citizens and advice on what to do to avoid them from the National Council on Aging (NCOA), AARP, Take Charge America, Inc., Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC). You can also download CFPB’s Money Smart for Older Adults – Prevent Financial Exploitation guide for more advice.

Investment Scams

A free dinner? Why not? Because that “free dinner” can turn out to be an expensive learning lesson. It seems that as soon as someone turns 65, the postcards, letters and phone calls start coming, offering a free lunch or dinner in exchange for listening to a financial professional sharing tips on how to make your nest egg double or triple in value.

However, these “professionals” may be pitching a scheme that puts your nest egg in their basket, leaving you with nothing to show for your years of hard work. AARP’s Five Tips to Help You Avoid Investment Fraud advises to first verify that the investment is registered with your state securities regulator or with the Securities and Exchange Commission (SEC). You can find your state securities regulator at the North American Securities Administrators Association (NASAA) website. If it’s not registered, don’t invest, says the AARP.

Also, verify the advisor is licensed in your state or with the SEC to sell this product at FINRA Broker Check. (Check SEC’s Tips for Checking Out Brokers and Investment Advisers.) Want to file a complaint? The NASAA site is where you can do that.

IRS Scams

According to Take Charge America, the “You owe back taxes and if you don’t pay them now, we’ll take your house” type phone call scam is pretty common. The caller will leave frightening messages, threaten possible arrest and in general, do their best to scare recipients out of their wits, not to mention their money. Their goal? To get the person to provide his or her bank account or credit card information so the alleged debt can be paid immediately.

The reality is that the IRS doesn’t call—it sends letters via certified mail. According to the IRS website, the agency will never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving taxpayers the opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.

Note, the IRS also won’t call you about an unexpected refund, so if you get that kind of call, don’t go on a spending spree before you receive your money!

Mortgage Scams

The reverse mortgage scam is one that targets seniors because many of them own their own homes. The approach taken by the scammers is to offer the homeowners cash or a vacation home (neither of which actually exist) in exchange for the title to their property, explains Take Charge America.

That’s not to say that all reverse mortgages are scams, but it’s important to understand how they work and if a reverse mortgage (also called a Home Equity Conversion Mortgage or HECM) can help if you’re facing financial pressures due to health issues or the need for long-term care. But reverse mortgages come with fees, taxes and insurance, and you still need to maintain the home but no longer have access to the home’s equity for any major work.

Scammed? Here’s What To Do

If you or a loved one has fallen victim to any of these scams, the worst thing you can do is keep it to yourself out of embarrassment or fear, says NCOA. Instead, notify a trusted family member, the police, your bank and your state’s National Adult Protective Services Association (NAPSA), a national non-profit 501 (c) (3) organization that handles reports of elder abuse, neglect, and exploitation, and in most states, the abuse of younger adults with severe disabilities.

For contact information, visit the NAPSA website or call the Eldercare Locator, a government-sponsored national resource line, at 1-800-677-1116.

Also, consider contacting the AARP Foundation ElderWatch (1-800-222-4444, option 2) for help in reporting fraud and scams, and for additional information and tools relating to financial exploitation.


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Photo Credit: Philippe Leone

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