How to Spot Retirement Scams

They can wipe out your entire savings in minutes

Be aware: Scammers are coming after your retirement savings.

These con artists come armed with a huge bag of tricks they use to get you to willingly hand over your money. And they’re very convincing… so you have to be ready for them.

After all, saving for retirement is hard enough without losing money to frauds and schemes. And even a single encounter with these con artists can completely wipe out your retirement savings before you realize it.

That’s why it’s so important to take decisive steps to invest carefully and protect your nest egg against threat you can…especially the ones you can avoid.

Investment Scams Are Everywhere

Fraudsters know that we worry about about having enough money saved for retirement, and that makes us perfect targets. These con artists profit by preying on our fears and promising a way to get to build up millions.

They look and sound professional. They deliver perfectly polished presentations with “proof” of guaranteed returns. The offer “once in a lifetime” opportunities to earn higher than market returns – even chances to double or triple your money.

No matter how you were introduced to the person making those promises… even if you know someone who says they’ve made money with this investment… don’t believe it until you’ve done some homework.

Feeling insecure about your retirement savings? Learn more about what you can do to build a substantial nest egg in my book Retirement 101.

Know How to Spot the Red Flags

Spotting investment scams can be really tricky. That’s especially true when you’re already feeling anxious about your retirement savings – or lack of retirement savings.

Con artists know exactly how to tap into your biggest fears about financial security, and then use those fears to steal your money. They “reassure” you that only they can help you catch up… recoup market losses…and earn spectacular returns… guaranteed. And that should feel off when you hear it. Because that kind of talk should raise a field of red flags.

So pay attention to your gut, trust your spidey senses, and walk – actually run – away immediately if you spot any of these red flags:

  • Phrases like “guaranteed returns,” “never run out of money,” or “risk-free”
  • Penny stocks
  • Free travel, meals, or seminars
  • Confusing or convoluted explanations
  • Lots of hype with few details
  • Unsolicited emails or cold calls
  • Pressure to make an on-the-spot investment

If you spot any of these red flags or in any way suspect someone is trying to con you, file a complaint immediately. You can report your suspicions to the SEC (Securities and Exchange Commission) or to FINRA (the Financial Industry Regulatory Authority).

Take These Steps to Avoid Retirement Scams

Never – NEVER – invest in something that you don’t fully understand.

Be skeptical when someone is working overtime to sell you something, or pressuring you into acting quickly (“before it’s too late”).

Ask questions… and verify the answers independently with your own research.

And take these steps to confirm that you’re dealing with a legit salesperson and a legit investment before you hand over any money or personal information:

  1. Verify the salesperson’s credentials. Make sure they’re a legally licensed investment broker by searching for them on BrokerCheck.  
  2. Check with your state’s securities regulator to see if any complaints have been filed. You can find their contact information on the North American Securities Administrators Association (NASAA).
  3. Don’t rely on documents provided by the salesperson – do your own digging. Look into the company’s background along with current and historical financial statements through EDGAR, the SEC’s online database.

Remember, it’s not rude or insulting to ask questions. And if someone tries to make you feel wrong for asking, they’re probably trying to steal your money.

2.2 million people lost $3.3 billion to fraud in 2020 according to the FTC (Federal Trade Commission).

There are dozens of investment scams floating around, but according to FINRA most fall into these five categories:

  1. Phantom Riches: The prospect of “guaranteed” wealth. For example, “These [insert investment here] will pay you $5,000 a month guaranteed.”
  2. Source Credibility: Presenting strong – but false – credentials to gain your trust. For example, “As an award-winning corporate leader, I know the inside story on these investments.”
  3. Social Consensus: The “everyone is doing it” argument, usually vaguely naming other groups of people you know. For example, “My mom and church group are already making money.”
  4. Reciprocity: Giving you something back in exchange for your buy-in. For example, “The minimum investment is usually $10,000, but I’ll let you in for just $7,500.”
  5. Scarcity: Adding pressure by talking about limited opportunity. For example, “ We’re only allowed to accept three new investors, so you’ll miss out if you don’t invest now.”

There are dozens of twists on these scams… and new scams get dreamed up every day.  But they all involve trying to get you feel like your best choice is to turn over your money voluntarily.

Your Best Defense Against Retirement Scams

No matter where you are on the retirement timeline, scammers may come after your money… but they won’t get it as long as you’re prepared to protect it.

You can defend your nest egg against scams by:

  • having a complete, clear investment plan
  • working with financial advisors that you trust and feel comfortable with
  • asking questions until you’re satisfied with the answers
  • understanding your investments and how they work together
  • knowing you’ll need to occasionally adjust your plan

Check in on your retirement accounts regularly. And pay attention to what you see, so you make sure your investments continue to match your plans.

Find out everything you need to know about saving for retirement in my book Retirement 101.

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