It’s been more than seven years since Bernie Madoff’s shocking arrest for operating a Ponzi scheme, the largest financial fraud in US history.
As the full scope of the scheme came to light, many of us were surprised at the number of highly intelligent people who were ripped off.
According to the MetLife Study on Elder Financial Abuse, people over age 60 are swindled out of an incredible $2.9 billion US per year. Much of this has to do with scammers following the money: retirees sitting on large nest eggs.
Now you might think you’re too smart to be taken in, but remember that scammers and con artists understand human psychology very well. Smart and savvy retirees are just as vulnerable to scammers as the young and naive.
Here are the five most common tactics scammers use on retirees:
1. Posing as a Customer Service Agent
By far, the most common type of identity theft is for the scammer to call you with some very simple questions about your account.
Most people are unwilling to be rude to a caller, and if the call seems to be legitimate, you may not even question why your bank is asking for your Social Security number or your mother’s maiden name.
When it comes to questions about any identity-related information, always be cautious. Never give out information to someone who initiates contact with you. Instead, hang up and locate the customer service information for your account; call and ask if the contact was legitimate.
2. Exploiting Your Greed
Many con men and women get money from pre-retirees by preying on their greed. Scammers have long recognized that people can get dollar signs in their eyes when promised a huge payout in exchange for a “small initial investment.”
If someone is approaching retirement and doesn’t have enough money saved, they’re even more vulnerable to this kind of con. It can be very easy to lose your healthy skepticism in the face of greed or desperation, but skepticism is what keeps you from getting ripped off.
3. Peer Pressure
Human beings are social animals, to the point where researchers have found that conformity is often more important than being correct. For example, individuals will often lie about an inconsequential issue, such as which of a series of three lines is the longest, if others unanimously agree on the incorrect answer.
Scammers use your discomfort with nonconformity to their advantage. They will make it seem as though you’ll be the only sucker missing out on the big retirement investment opportunity.
If you learn that many other savvy investors have put up their money, you might find yourself following the herd rather than asking tough questions.
4. Applying Artificial Time Constraints
Most sales professionals, from retailers to realtors, use quick deadlines to force consumers into making a decision. They know that our fear of missing out will often prompt us to jump in rather than follow our better instincts. Scammers use this trick to force you to ignore your concerns and keep you from doing independent research.
5. Posing as an Expert
Many people feel overwhelmed by financial or retirement decisions, which can make them vulnerable to scammers posing as experts.
Scammers know that many people’s fear of looking stupid will keep them from asking hard questions. But a con artist doesn’t actually have to know anything in order to convincingly fake expertise. Real experts know they don’t know everything and they won’t try to convince you otherwise.
What’s the Best Way to Protect Yourself?
Ask lots of questions.
Asking questions will help you better understand legitimate investment opportunities, and no real investment opportunity or advisor will have a problem with your questions or research.
Also, your questions will give you the mental space to make a rational decision, instead of allowing your emotions to be manipulated.
And scammers hate dealing with a questioner — it cramps their style. The reaction you receive to your questions will tell you about the legitimacy of the deal.
To report a scam, contact the Federal Trade Commission.
