By Kori Eskridge, Fall 2014 Student Intern
While anyone can fall prey to financial fraud, older investors are a prime target. According to the 2010 U.S. Census, people age 65 and over number more than 40 million and account for 13% of the total population. This number is going to continue to rise as the Baby Boomer generation continues to age and look into retirement. It should come as no surprise that there are a number of reasons that older adults are targeted in fraudulent schemes.
Many older adults are stuck in an unprecedented position, especially as the mortality rate continues to increase. Older adults might find themselves caring for not only themselves and maybe a spouse, but also children or grandchildren, and sometimes even their parents. Additionally, they may have suffered from declining investment returns or dwindling savings accounts due to the financial crisis. This leaves many older adults contemplating retirement wondering how they will be able to survive financially. This is where fraudsters step in and try to “help.” Fraud tactics take many forms such as advance fee programs, free investment seminars and pyramid schemes. One survey conducted by FINRA found that 8 in 10 of Americans over the age of 40 have been solicited to participate in a financially fraudulent offer.
There are other factors that contribute to this kind of targeting. Older adults might experience decreased cognition, a drop in self-confidence, or overconfidence and a will to be independent. Fraudsters play on these factors to manipulate and con them into investing their money. While anyone can be a victim of financial fraud, in some ways it is far more devastating when it happens to older adults, as they are often unable to recover what they lost. Additionally, in many cases retired adults are on a fixed income or no income at all and relied on the lost funds for their livelihood.
While the warning signs and prevention tactics apply to investors of any age, it is especially important for older investors to solicit the help of trusted family or friends when considering investing any amount of money and be sure to thoroughly investigate any investment before agreeing to participate.