How to avoid losing your retirement nest egg to fraud
It takes years to build up enough savings for retirement and other needs. It may take only hours or minutes for those savings to disappear at the hands of thieves and con artists.
Unfortunately, there are countless individuals in the world greedy enough to do you irreparable financial harm without any remorse. The Internet and email have made financial scams easier to execute. But there are also plenty of phone calls, radio ads, and seminars at local community centers that are designed to lure unsuspecting victims of fraud.
Even if a crook is convicted of a felony and/or you win a civil suit, it’s unlikely you will recoup much if any of your lost money. Most of the money is spent by the time they’re caught, and whatever is left usually has to be doled out to multiple victims.
Therefore, the best way to fight fraud is to avoid being victimized. This requires constant vigilance to recognize their tactics.
What to watch for and avoid
Here are the best ways to protect yourself against financial and investment fraud:
Never — repeat, never — believe the hype. No matter how smart, sincere or sophisticated the salesperson is, there is no such thing as “once in a lifetime” offers, there are no secret trading strategies, and it’s impossible to earn 25 percent return on your investment without risk. You can’t make money overnight, but you can lose it if you fall for this kind of hyperbole.
Beware of exclusive offers, free access and other enticements. “This trading strategy is worth thousands of dollars but I’m offering to let you try it for free.” How kind and thoughtful. The fact is, this person does not have a trading strategy worth thousands, because one does not exist. And if it did, nobody with any business sense would just give it away. What this person has is a scam and the reason he’s offering it for free is because he has a way to get your money once you agree to meet. Just say no — and you don’t even have to be polite about it.
Check out a salesperson’s credentials. A professional selling life insurance or annuities must be licensed with the state insurance department before even talking with you. Likewise, the selling of investments and real estate requires licenses that you can verify with the appropriate governing bodies. You can also check with the Better Business Bureau to see if there are any complaints filed with the individual or company.
Never give out your account numbers or Social Security numbers to somebody who has called you. A company with whom you already do business will never need you to provide your account number, user name or password, or any information you have already given them. Companies do not “lose” this information and need you to re-enter it. That type of request is always somebody trying to obtain that information to either steal your money, use your credit or steal your identity.
Beware of phishing scams. These are attempts by thieves to use legitimate looking emails to obtain private information. Technology allows people to make emails look like they are coming from a bank, retailer or brokerage firm when in fact they were sent by somebody trying to obtain your sensitive information. Just like with phone calls, never give your account number or any private information in response to an unsolicited email, even if it looks legitimate. When in doubt, call the provider instead to verify.
Avoid doing business with anybody who:
- Calls or shows up unsolicited or without a referral. Most credible sales professionals only want to work with people whom they have met or have been referred by another party, as this increases the chance of closing a legitimate sale.
- Uses high-pressure sales tactics to the point where they try to make you feel guilty for questioning their pitch.
- Uses scare tactics such as claims that the economy is going to collapse, the government is about to double your taxes or eliminate Medicare, or your insurance company is going bankrupt. If they cite statistics such as the likelihood of needing nursing home care, make sure it’s from a credible source and not just a big, made-up number used to frighten you.
- Offers to give you part of their sales commission if you agree to their sales pitch. This is called rebating and it’s illegal in most states and a practice that is discouraged by insurance companies and investment firms.
- Acts flustered or annoyed when you ask for time to think about their pitch or to run it by a relative or advisor. If what they’re selling is legitimate, they won’t have a problem with this.
While it may seem like it’s impossible to avoid all types of scams, it can be done if you avoid making rash decisions, run everything by somebody you trust before committing, and trust your gut when it makes you feel uneasy during a sales pitch.