Sometimes it's not our vices but our virtues that can become our weaknesses. If you are retired or nearing retirement, you have a lot of good things going for you. These likely include great credit, owning your own home and a retirement nest egg.
TUTORIAL: Retirement Planning
Unfortunately, these things - along with the realities of aging - make you a target for a range of frauds targeting older people. In this article, we will look at some of the more common ones and what you can do to avoid being taken in.
Chances are that your house will need work at sometime during retirement - especially if it has been yours for 25 years. Foundations leak, roofs need new shingles and so on. Contractor fraud occurs when the contractor in question starts doing work that doesn't need doing - and then overcharging for it to boot. Other common variations also include:
- Taking upfront payments and then vanishing without doing the work
- Using entry in your house to rob it
- Convincing owners to join in fraudulent insurance claims and on and on. (For more on potential fraud, check out Homeowners, Beware These Scams!)
Reputable contractors don't usually go door to door trying to drum up business. If you need work done, it is far better to ask friends and family for referrals or simply check the contractors listed by your Better Business Bureau. Never agree to have work done on the spot without checking into the company for complaints.
A lot falls into the category of medical fraud - anti-aging treatments, unnecessary equipment, placebo vitamins and even doctors piling on tests and treatments to get more Medicaid payments. One frequent fraud involves people calling and posing as Medicare officials to get social security numbers and banking information.
Skepticism is your best response to most of these fraudsters. Ask questions about products promising miracle cures - specifically where the hard research is and when this wonder drug was sent for Food and Drug Administration (FDA) approval. That will help sort out most snake oil salesmen. When wonder drugs or wonder products are actually what they claim to be, they don't need to be marketed over the phone or in late night TV slots.
Your doctor, however, may be a different matter. If you feel like you are being poked and prodded to pad your MD's pockets, then consult another physician as well as your family and friends before agreeing to further procedures. If the procedure is necessary, your doctor should have no qualms about justifying in front of others.
Reverse Mortgage Fraud
Reverse mortgage are a legitimate way to draw out equity from your home. These are most commonly known as home equity conversion mortgages (HECM). Proper HECMs are insured by the Federal Housing Authority (FHA) and created so that people 62 years and older can take out the equity in their principal residence without having to make monthly payments. The problem occurs with non-HECM reverse mortgage scams where a senior is used as an unwitting pawn in a flipping scheme or simply charged huge fees by an "advisor" who really just passes on the standard paperwork in a HECM loan.
If you are seeking out a reverse mortgage, find a reputable mortgage broker first. You should be the one seeking them, not the other way around although this isn't always foolproof. Run any proposed plan by your regular banker or financial advisor for a second opinion. If someone approaches you with a plan that will either have you living in a new home rent-free or receiving monthly payments for a home you don't own, run the other way. After you have escaped, file a complaint with the FBI or the U.S. Department of Housing and Urban Development Office of Inspector General (HUD-OIG). (Home equity can be a viable financing alternative, but it depends on how you spend the funds Is A Reverse Mortgage Right For You?)
Some fraudsters actually scan obituaries in order to make false claims upon estates for debts owed. In other cases, these people have threatened to "expose" some previously unknown scandal. Even in the perfect marriage, there is always room for doubts as to whether or not your loved one kept something secret - and unscrupulous people are ready to prey on those doubts.
If any claim is made on the estate of your spouse, ask for written documentation or a written explanation of the claim to be forwarded to the executor. That is the purpose of having a clear-headed executor around. The executor will evaluate the claim and decide the merits of it. Fraudsters - and even people with legitimate but undocumented claims - will likely give in rather than go to small claims court. (Find out how to protect yourself and your loved ones from financial fraudsters, check out Stop Scams In Their Tracks.)
In the case of a fraud claiming to expose the departed, contact legal authorities immediately. Frequently this type of extortion goes unreported for all the wrong reasons. The unresolved doubts it creates may harm your own feelings towards your loved one more than any scandal - true or false - could have.
This plagues people of all ages, but the aggressive boiler-room tactics used by these swindlers seem to corner more seniors than other demographics. The FBI keeps a helpful list of all the different flavors of investment fraud, and it is long. From the Nigerian letter scam to the prime bank note scheme, there is a long tradition of fraudsters promising the world for the petty cost of your life savings. (The BBB is one resource to help you connect with the best product/service providers in your area, read The Better Business Bureau's Tool Belt For Saving Cash.)
Avoiding investment fraud is simply a matter of combining steps we've covered for other types of fraud. Be skeptical, double check with a trusted professional or family and friends, and never be pressured into snap decisions. Every investment fraud from the dawn of time has used false time limits to pressure victims into committing. If you don't have the time to dig into a particular investment, let it - and the person selling it - pass you by.
The Bottom Line
It hardly seems fair that you have to be on guard in retirement, the reward for a lifetime of work and diligence. However, this is the case. In most instances, verifying information with third parties or simply requesting more details in writing will discourage most fraudsters. If you do fall victim or spot a scam aimed your way, report it. Hopefully the perpetrator will be caught before he or she can break too many nest eggs.
Generally speaking, fraudsters and scam artists are always looking for the easiest mark. They can be persistent when they smell blood, but they also are quick to drop targets that react in unpromising ways. You can retire from working, but unfortunately, you can never retire from being careful or you may find your retirement funds are quickly diminished. (From pyramid schemes to envelope stuffing, there are a lot of scams masquerading as legitimate part-time work, see Recognize And Avoid "Work At Home" Scams.)