Based on the latest U.S. Census Bureau data from 2010, there are more than 40 million senior citizens aged 65 and up within the United States. As time goes on, this number is expected to soar. Improved health education, greater access to medical care, and improved medicine, diagnostics, and medical devices have helped push the average life expectancy up by roughly nine years over the last five decades to 78.8 years according to data from the Centers for Disease Control and Prevention.
I mention these statistics because seniors play an important role in society: they are the primary holders of wealth within the United States. A 2010 Survey of Consumer Finances report broke down household wealth by age group, and found that those aged 75 and up hold nearly 14% of all wealth, while 65 to 74 year-olds hold a little more than 19% and 55 to 64 year-olds make up 31% of this nation's household wealth. That's nearly two thirds of all household wealth for persons aged 55 and up (note that the defined age range of a senior citizen isn't set in stone, and for some organizations can be anyone aged 50 and up).
Ensuring that seniors have ample funds to live comfortably in retirement is critical to the success of future generations. Whether it comes from Social Security income designed to help seniors pay their monthly expenses, Medicare to help soften the blow of potentially high medical costs, or individual defined benefit and savings plans to help fill in the gaps, having sufficient wealth that'll see you through the length of your lifetime -- and perhaps provide a boost to your beneficiaries -- is a must.
But since senior citizens possess a vast chunk of this nation's wealth, they also make for an easy target for criminals.
Consumers Digest reports that an estimated 5 million cases of financial fraud against seniors occur each year, but government officials are only made aware of a scant 4% of these instances of fraud.
A study published by AARP outlined some of the reasons why senior citizens are so easily duped by crooks. First, AARP notes that seniors expect honesty in the marketplace, and they tend to be less likely to take action when they're defrauded. Additionally, seniors aren't as knowledgeable about their rights compared to today's younger generation. Lastly, seniors are at home more often than younger adults, meaning they're easier to reach via telemarketing and home soliciting scams.
3 financial scams seniors need to watch out for
With this in mind, let's have a brief look at some of the more common financial scams that senior citizens should be on the lookout for, and then we'll take a look at steps seniors can take to reduce their chances of being defrauded.
1. Medicare, Social Security, and tax identity scams
Entitlement programs like Social Security and Medicare are arguably some of the easiest targets for criminals because they provide quick, guaranteed income, and the government is often far too busy (or understaffed) to ensure that payments are being made to the right people and businesses. Something similar can be said of tax fraud, with so-called "suspicious" returns nearly tripling between 2010 and 2012 to 2.5 million from 900,000.
In this type of scam a criminal will call a senior citizen and pose as a Medicare, Social Security, or IRS representative. Once gaining the trust of a senior (which AARP notes isn't tough to do), criminals can obtain social security numbers, addresses, and potentially even income histories to collect Medicare benefit checks, Social Security benefits, or tax refunds before a senior knows what's happened to them.
2. Investment fraud
Another source of criminal activity against seniors is investment fraud. As seniors get older, they may entrust their everyday finances to the hands of a financial advisor. To be clear, many financial advisors are great and honest people -- but there are a few bad apples among the bunch that can take advantage of seniors who don't understand their cash flow.
One tactic employed by dishonest advisors is to skim money from defined benefit (e.g., pension) or savings plans (e.g., 401(k) or IRA), or from the dividend income of a senior's managed investment portfolio. Unless the family members of a senior are paying close attention to the money coming in or out, it could be difficult to catch these dishonest advisors, who are expected to act in the best interests of their clients.
3. Homeowner scams
Scams targeted at senior homeowners are another source of worry.
In one particular scam, explained in detail by the National Council on Aging (NCOA), criminals in San Diego sent unsuspecting seniors personalized letters letting them know the property value of their homes had risen, and that they would need to make up the property tax difference unless they wanted to pay a fee for a reassessment. The letters were apparently very realistic and sent on behalf of the San Diego County Assessor's Office.
Bait-and-switch scams are worrisome as well, with criminals promising money or a house somewhere else in exchange for the title of a seniors' current home. This type of scam can lead to seniors losing their homes according to the NCOA.
Actions seniors should take to protect their money
As you can see, scams are a very real concern for seniors. The good news is there are steps that can be taken to help reduce your chances of being swindled in your golden years.
For starters, be vigilant with your personal identification information, such as social security and Medicare numbers. In fact, the Social Security Administration will never call you and ask you for your social security number, so if you're getting a call from the SSA asking for this information it's most likely fraudulent.
Additionally, consider shredding paperwork that has your personal information on it. This includes your social security number, date of birth, name and address, income history, and anything that criminals could easily use to manipulate your entitlement or tax benefit checks in criminals' favor. Along similar lines, before shredding important paperwork, check it for accuracy. Does your Medicare bill match what you were expecting to be charged? Is your tax refund correct? Keep in mind a lot of today's information can be found online, so shredding your paperwork doesn't mean the data is gone forever -- but it could mean removing easy access to your data from would-be thieves.
In terms of reducing your chances of being an investment fraud victim, your best defense is to have a good offense. In this respect you need to take ownership of your financial decisions and regularly stay on top of your cash flow via monthly statements. If this isn't possible, go to someone you can trust -- a close family member, for instance -- who can help you manage your month-to-month finances to ensure their accuracy.
To reduce your chance of becoming a homeowner fraud victim, the Federal Trade Commission has a handful of suggestions. First, the FTC wants people to know that its Mortgage Assistance Relief Services Rule provides all homeowners certain rights and protections against fraudulent activity such as the "forensic audit" or bait-and-switch. According to MARS, consumers are under no obligation to pay any money to a lender until it's provided you with a written loan modification offer and you've accepted the offer. Also, MARS requires lenders to spell out important information upfront to homeowners, including the risks associated with potentially not paying your mortgage while waiting for assistance. Lastly, the FTC suggests consulting with a lawyer with a proven track record to minimize your chances of being scammed.
If you're looking for more great ideas on how to reduce your chance of becoming a fraud victim, I'd encourage you to visit StopFraud.gov and peruse its valuable list of suggestions and resources.