Protect Your Pocket Series

Avoiding Fraud Aimed at Older Americans

(originally published December 2008)

When well-known 20th Century bank robber Willie Sutton was asked why he robbed banks, he reportedly responded, “Because that’s where the money is.”

That same thinking results in get-rich-quick scam artists targeting seniors, who in theory have accumulated larger nest eggs than younger investors. In fact, people over 60 account for 30 percent of investment fraud victims, with an average loss between $12,500 and $25,000.

Some fraudsters target seniors living on a fixed income by preying on their fear of not having enough to cover medical expenses and monthly bills. With promises of guaranteed returns at no risk, a scam artist’s sales pitch can appeal to seniors. The reality is that no investment is guaranteed, and there is always an associated risk.

Other scam artists invite seniors to a “free” lunch seminar marketed as a chance to learn about investment strategies without purchasing anything. Seniors often end up being pressured to make hasty investment decisions on the spot or during follow up phone calls. You can learn more about detecting “free” lunch seminar scams at

In general, seniors are often offered investments that may be legal, but may not always be suitable for them. Common types are variable annuities, equity-indexed annuities and viatical settlements.

With variable annuities, investors essentially loan a company money with the expectation that they will be paid back over time with interest. While this investment is generally legitimate, it may not suitable for many seniors, particularly those of more advanced age. Investors are typically locked in for around seven years and incur very high surrender charges if they try to access their money. With medical expenses and often a fixed income, seniors may need more flexibility with their investments.

Equity-indexed annuities are contracts with insurance or annuity companies that can offer higher returns than CDs and money market accounts. But in many cases, it will take several years for an equity-indexed annuity’s minimum guarantee to “break even.” You may also have to pay a significant surrender charge and tax penalties if you cancel early.

Viatical settlements are also typically legitimate but are extremely risky. With viatical settlements, investors purchase the life insurance policy of someone who has an illness and is not expected to live very long. When the person passes away, the investor collects the death benefits.

Viaticals are risky because there is no way to know how long a person will live. With advances in medicine and technology, the person could live much longer than diagnosed. The investor is then stuck paying insurance premiums while losing money on the investment. Also, fraudsters can forge medical records to make someone appear in graver condition than they really are.

With these and any investment opportunities, seniors need to be cautious and consider whether or not the investment is appropriate for their needs. Unscrupulous brokers will often offer investments that have a high commission, despite their unsuitability for seniors.

To avoid working with an unscrupulous broker, talk to multiple licensed professionals when considering an investment. You should also make sure the person selling the investment and the investment itself are licensed and registered with the Indiana Securities Division by calling 1-800-223-8791 or using the searchable databases at

Finally, don’t be afraid to ask questions or simply end the conversation when offered an investment opportunity that doesn’t appear genuine. If the person is legitimate, they should not hesitate to answer any questions you have. If they hold back details or avoid giving written information, tell them you are not interested and walk away.

Related Information:

- Indiana Takes Steps to Protect Seniors from Investment Scam Artists (AARP Bulletin)

- Download the Fraud Aimed at Older Americans brochure

- Search loan broker database

- Contact the Securities Division

- Learn more about medicare and healthcare fraud