Financial Scams Target Boomers

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Baby boomers are still looking out for their parents, even as they have fallen into the crosshairs of financial con artists themselves. It’s a bona fide boomer nightmare: they are becoming their mom or dad—at least as it concerns being vulnerable to fraud.

Boomers are roughly a quarter of the U.S. population and now span the ages 48 to 65, when humans start to lose cognitive function. So scoundrels and cheats are salivating at the thought of such a huge generation of potential victims. Indeed, investment-related enforcement actions involving victims past the age of 50 will hit a record this year, according to a report in the Wall Street Journal, which also notes:

“Last year, there were 1,241 criminal complaints, cease-and-desist orders and other regulatory actions launched at the state level involving investors age 50 or older, according to the North American Securities Administrators Association, a group of state regulators. That was more than double the 506 cases in 2009.”

Why are boomers suddenly a target? Many are struggling to counteract lost income from the recession and stalled portfolio growth from the lost decade in stocks. They are especially vulnerable to retirement-related scams as they reach for higher returns and try to call it quits for good on schedule. Meanwhile, they have reached an age when they may begin to lose financial acumen. Ability to make effective financial decisions peaks at 53.3 years and goes downhill from there, according to a recent study from the Center for Retirement Research at Boston College.

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The most likely targets of financial fraud or abuse are seniors ages 61 to 75, according to the Certified Financial Planner Board of Standards, which offers these red flags to watch for. The Elder Financial Planning Network estimates that seniors have lost $2.6 billion to financial mismanagement or abuse. One out of five elders past the age of 65 has been the victim of a financial swindle, reports the Investor Protection Trust, a nonprofit devoted to investor education and which offers these tips to prevent fraud.

The main vehicles for fraud are unregistered securities such as promissory notes, private placements and investment contracts. Many fraudulent pitches are geared to folks 50-plus who have self-directed individual retirement accounts, where they can buy non-traditional securities such as stakes in gold mines, oil and gas wells and real estate.

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The good news is that scams can be fairly easy to root out with just a little due diligence and common sense. The promise of excessive or certain returns should be viewed skeptically. If something is too complicated to understand, you shouldn’t invest. Pitches where you are urged to act now before the opportunity vanishes are probably not legit. For more tips on how to protect yourself look here and here.

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