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The Basics

Scammers want to steal your retirement

Seniors often fall prey to smooth-talking thieves who promise big prizes and great investment returns. Protect yourself or your elderly parents from such predators.

By Kiplinger's Personal Finance Magazine

In 2000, Liz Mulligan took a job as a caregiver for an elderly man. She had recently retired from a position that involved auditing, so it didn't take her long to figure out that her client's bookkeeper had stolen $219,000 from him. The bookkeeper eventually went to prison.

"That got me interested in helping seniors who've been financially exploited," says Mulligan, 64, who lives in Seattle. "I saw the disastrous effects."

Mulligan started a business that helps victims organize their financial records and negotiate with creditors and banks. She also volunteers as a "fraud fighter" for a program created by the AARP Foundation and the Washington attorney general's office.

As a fraud fighter, Mulligan calls seniors around the U.S. to advise them on how to dodge scam artists. And when she calls, many people tell her horror stories about how they have fallen for a con.

Scams on the rise

Across the country, law enforcement officials are noting an uptick in senior-directed scams. Anxious to replenish their recession-embattled retirement savings, many retirees are falling for the tantalizing promises of smooth-talking predators.

"Seniors are scared that they don't have enough money for medical costs or that their home isn't worth as much as it was," says Jean Mathisen, the director of AARP's Fraud Fighter Call Center in Seattle, one of nine such centers. "People are feeling such desperation that they sometimes suspend common sense."

Many con artists promise large returns on IRA investments. Telemarketers hawk anti-aging products that are never delivered or are worthless.

These shysters are creative. Take what's known as the "grandparent scam." State attorneys general warn that a caller might say, "It's your favorite grandson." The senior might respond with something like "Is this Joe?" Then "Joe" claims he's been in an accident or stranded and persuades the senior to wire money. (Read "Beware fake grandkids calling for cash.")

Favorite cons

As much as you may want to bolster your sagging retirement savings, remember the adage "If it's too good to be true, it probably is." Here are some of the con artists' favorite senior-directed scams:

Fabulous offers. A scammer will call or send a letter or e-mail alerting you that you've won a big prize or that you can buy a product, perhaps prescription drugs, at a great price.

With sweepstakes schemes, for instance, a scammer will tell a senior that to claim the prize he or she must first pay a fee. However, it's illegal for a company to require someone to pay to claim a prize. You won't get your money back, and you certainly won't see any sweepstakes winnings. "Whatever money you've sent by wire transfer is impossible to recover," says Kristin Alexander, a spokeswoman for the Washington state attorney general's office.

A 66-year-old Illinois man learned that the hard way. In late 2008, a man called to say that the retiree had won $3.5 million. The caller told the retiree to wire $200 to cover a delivery fee. Then he called later to say that there was a mix-up with the wire transfer and that the retiree had to send $150 more. "He convinced me that I had won it," says the victim, who asked that his name not be used. "I was gullible."

Also watch out for postcards, e-mails or certificates promising cheap or free cruises or vacations. You'll know it's a scam if the promoter tells you the deal is a time-limited offer and pressures you to provide a credit card number, certified check or money order right away. The entire trip could be bogus. Or you could be hit with lots of extra fees after you've sent your deposit.

Phony banks. Watch out for callers who claim to be from your bank or credit card company. They'll tell you they've noticed suspicious activity on your credit card and want to check it with you. You'll know the call is not legitimate if the caller asks for your credit card or Social Security number to confirm he's talking to the right person.

Beware of e-mails from what purports to be a trusted institution asking for your Social Security number or account numbers. Phony Bank of America and Citibank messages are common. One prevalent scheme is an e-mail promising you a tax refund from the IRS -- except the IRS doesn't e-mail taxpayers.

Scammers usually adapt their cons to the changing economic environment. Law enforcers warn of a hoax based on the rise in bank failures. An e-mail will appear to be from a financial institution that has recently taken over a consumer's bank or mortgage and will ask for updated account information.

If you have a bigger mortgage than you can afford comfortably, watch out for companies that offer to negotiate a payment plan or loan modification. The fraudster might claim to be affiliated with your lender. You might be told to pay upfront fees. If you're having trouble making your payments, call your lender or find a housing counselor approved by the U.S. Department of Housing and Urban Development.

Continued: Investment schemes

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