Wednesday, October 7, 2015

Protecting Your Family from Elder Fraud

     I have a client who was defrauded by an unscrupulous financial adviser. He was caught and found guilty and forced to make reparations. She won't completely recover her losses, but this is a far better outcome than most victims of elder fraud will experience.

     I have posted on this topic before. Because elder fraud is so pervasive, so devastating and growing, I felt it was time to write another. The November 2015 Consumer Reports magazine notes that a recent study by the Journal of Internal Medicine found that about 1 in 20 elderly Americans has been financially exploited. If you're a fan of the 4% Rule (I'm not), then perhaps you think you should have no more than a 5% chance of outliving your money. The chances of losing your savings to elder fraud, instead, are about the same.

     Quoting again from that C.R. article, "The Federal Trade Commission says that fraud complaints to its offices by individuals 60 and older rose at least 47% between 2012 and 2014."

     I strongly recommend that if you are in or approaching retirement, or you have parents who are, that you read the article. Those who don't subscribe to Consumer Reports can read it here.

     Elder fraud can destroy retirements when victims are older and unable to recover financially. Aside from getting lucky, as my client partially did, the only recourse may be the possible deduction of those losses on a tax return, but many retirees won't have enough income to fully use the deduction even if it is available. There are several limits on deductibility.

     Ken Fisher's book, How to Smell a Rat: The Five Signs of Financial Fraud, has long been a favorite of mine. It's an easy read and provides simple rules to greatly reduce the risk of fraud. One of those suggestions, never give custody of your money to your financial planner, might have protected my client's savings.

     Financial planners can manage your money without having custody of it. Granting them custody opens the opportunity for your planner and your money to end up in an unidentified Central American country together with no forwarding address.

     Please be careful with your hard-earned retirement savings  – a bear market isn't the only way to lose them. You may be equally likely to lose your savings to fraud. And if you have an older parent, please watch out for them, too. Reading Fisher's book and this Consumer Reports article are a great way to start.

I added a "Follow Me on Twitter" button at the top right to make it easy for you to follow @Retirement_Cafe. Sometimes, I find important information that's too concise to warrant a blog post – interesting papers to read, other bloggers' posts, or tweets from researchers like Wade Pfau, Moshe Milevsky, Michael Kitces and others – and I will post these on Twitter.

If you're not familiar with Twitter, check out this starter's guide. It's very easy to use and a source of a lot of timely information. As you find "Tweeters" you like, you can follow them, as well. Twitter apps are available for your smart phone, tablet and desktop, or you can simply use the website.

As I mentioned previously, I have also acquired the domain name for  to make it easier to reach and share my blog.

As always, thanks for reading! 


  1. Very, very practical post! There is no shortage of schemers looking to exploit consumers' weaknesses.

  2. Interesting timing for this article as just this AM I received a phone call from someone using the IRS scam - call us immediately or you will be sued by the IRS. Needless to say I did not return the call.
    Amazingly even reputable companies (TIAA-CREF) occasionally ask for some sensitive information on the phone to verify my identity. I am not adverse to that level of security, but ... not when they called me.
    Never share any personal information with anyone that calls you. Thanks for the updated article and link to the CR article.
    Good post