7 Financial Scams that Target Seniors

Fraudsters prey on seniors

As many senior citizens spend their retirement traveling with family, pursuing second careers or becoming more active in the community, con artists are creating devious schemes to prey on their accumulated wealth.

Most recently, Treasury Secretary Jack Lew, 59, said he almost fell for a financial scam. A fraudster posing as an IRS agent called him and left a phone number for him to call back, but after he put the number into Google (NASDAQ:GOOGL), he learned it was a well-known scam. He said the IRS has recorded 290,000 scam calls since October 2013.

Michael Raanan, former IRS agent and president of Landmark Tax Group in California, says the IRS telephone scam is one of the most pervasive scams targeting seniors.

He says senior citizens are receiving phone calls from scammers who purport to be IRS agents. They claim to be calling about unpaid back taxes and proceed to threaten the senior citizen with arrest, lawsuits, suspension of their driver's license and more.

"This is the biggest phone scam the IRS has ever seen and has already netted over $5 million after hitting all 50 states and now Canada," Raanan says.

Here we will look at several common scams aimed at seniors.

Health care scam

Senior citizens are most vulnerable to health care scams, according to Tod Burke, associate dean and professor of criminal justice at Radford University in Virginia. Burke says people will call as health care or Medicare representatives to gain access to their personal or contact information.

They will use their contact information to call seniors back at a later date and say they spoke with their daughter, son or other relative and that it's OK to give them Social Security numbers, driver's license numbers or other personal information. Scammers might also offer help getting seniors medical insurance.

In many cases, they use the personal information they provide to bill Medicare and pocket the money, according to the National Council on Aging.

Unscrupulous financial advisers

Gideon Schein, a partner with Eddy and Schein In-Home Administrators for Seniors, says seniors have to be careful, even with trusted professionals. He cites an example of a client who had been paying $40,000 extra per month to a financial adviser who had known the client's father.

"My clients -- George, a retired math professor, and Elaine, a homemaker -- had their money with an institution for almost 20 years. I had been working for them for two years when their daughter called to ask me why her parents had spent so much money last year. I informed her that they did not. She then asked, 'What have I been doing with $40,000 per month?'" Schein says. "I told her that I only got $20,000. Since the distributions were regular and sufficient, I had never asked to see a statement."

It turns out that their financial adviser had been taking $20,000 out of the distribution for himself. This had been going on for years. Their adviser was convicted of fraud and embezzlement, but Schein's company was able to recover 70 percent of the money taken.

Financial advisers with excellent credentials, experience and ethnics abound, but it's always important to pay close attention to the money coming in and going out of your investment accounts.

Great grandchild scam

Scammers will call pretending to be a grandchild or great grandchild and try to get money from the senior, Burke says. Before paying them, make sure the person is an actual relative.

A scammer will place a call to a senior citizen and when the mark picks up, the fraudster will say something like: "Hi, Grandma. Do you know who this is?" When the unsuspecting grandparent guesses the name of a grandchild the scammer most sounds like, the scammer has established a fake identity. Once they establish a relationship, they ask for money.

"They'll know just enough information that they get from Facebook (NASDAQ:FB) and other social media websites, such as where the grandkids live, where they are vacationing or other personal details, and use this information to get (the senior) to open up," Burke says. "If the scammer is calling from a cellphone with bad reception or a Bluetooth, it's not always easy to decipher and know it's not the relative."

Prescription and anti-aging drug scams

Because of the rising costs of some prescription drugs, senior citizens are going online to look for cheaper drugs. But these drugs can be counterfeit, making this scam extremely dangerous.

Or, in another iteration of the prescription drug scam, the fraudsters just take the money without delivering the drugs. These are referred to by Bonnie Russell, founder of the Stop Elder Financial Abuse website, as faceless online pharmacies

This scam is growing in popularity. Since 2000, the Food and Drug Administration has investigated an average of 20 such cases per year, up from five per year in the 1990s, according to the National Council on Aging.

"The same goes with some anti-aging products," Burke adds.

Whether it's fake Botox, like the scam in Arizona that made its distributors $1.5 million in about a year, or bogus homeopathic remedies, seniors are being targeted by fraudsters offering anti-aging products.

If it's too good to be true, it is," Burke says.

Burke advises seniors who are faced with dubious transactions or products to contact their local police department. Many police departments have a fraud unit. If not, they likely will refer them to the state police or FBI.

The obituary scam

In the obituary scam, con artists read obituaries from the local paper and call the deceased relative's family and demand money for a supposed outstanding debt that the deceased left behind.

Another version of this scam is when fraudsters read the obituaries to pinpoint recent widows as targets. After identifying their next victim, a messenger arrives at the home of the recent widow with a cash-on-delivery package, claiming the recently deceased spouse ordered something and then demands immediate payment. After taking the money, the messengers are long gone before the victim realizes the box contains old magazines or newspapers that are worthless.

"As if it's not bad enough to scam seniors, this one really pulls at the heartstrings," says Sandra Crasko, vice president of community services at Chicagoland Methodist Senior Services.

She says that by reading obituaries, scammers are identifying their targets and appealing to them at their worst moment.

"Anyone who is legitimate will come back or give you their contact information, an order number, a tracking number or even identify who was the originator of the package," Crasko says.

"If there truly is a package that needs to be delivered, you can say, 'I don't have the money right now,' or 'I need to verify this and get back to you.' If someone doesn't feel right for whatever reason, take time to research it and that's OK," Crasko says.

Funeral and cemetery plot scams

Even some shady funeral homes have been caught doing dishonest business. They will have seniors buy the most expensive casket, even if they are performing a cremation, Burke says.

They will say things like, "You need this casket because you want to be able to remember them this way," Burke says.

When going to a funeral home, it's best to have all the questions you want answered written down ahead of time, he says. Seniors should give themselves time to do their research. Go with a family member or a close friend.

Another tactic of disreputable funeral homes is to capitalize on family members' unfamiliarity with the considerable cost of funeral services to add unnecessary charges to the bill.

These scams can affect anyone, but seniors tend to be targeted more often, Burke says.

Bankrate.com's editorial, corrections policy

Updated: March 6, 2015