IQ Fifty Plus Guide

Retirement Planning

Financial Planning and Saving for Retirement

Scams and Risky Ventures to Avoid

Retirement savings and investments are an enticing target for scam artists. The pickings are all too easy, as millions of victims have discovered. Late starters may be eager to boost their nest egg. Retirees who must roll their IRAs or other retirement savings plans into new investments are often looking for investments that are low-risk but high-yield. With such wishes, it’s all too easy to fall victim to the scam artists’ golden promises. Here are some handy general resources and then some articles on several of the most common rip-offs that target retirement investments.

Guide to Identifying and Avoiding Securities Fraud: Online Publications at the SEC from the Securities and Exchange Commission and Investor Alerts and Tips from the North American Securities Administrators Association offer brief articles that show investors how to recognize and avoid a variety of investment frauds. Also check out the Wisconsin Department of Financial Institutions' article: DFI Identifies Top 10 Traps Facing Investors.

Ask Questions from the SEC describes questions you should ask about your investments and what you should do if you run into problems.

Protect Your Money: Check Out Brokers and Investment Advisors from the SEC describes how you can determine the validity of your broker’s credentials, whether your broker has had any problems, and more.

SEC Center for Complaints and Enforcement Tips provides a way for you to file a complaint or provide the SEC with tips on potential securities law violations.

Internet Fraud

There is a lot of investment advice, both good and bad, on the Internet. Investment scams can be found in e-newsletters, bulletin boards and newsgroups, web sites and spam.

Be Alert for Telltale Signs of Online Investment Fraud from the Securities and Exchange Commission provides tips for spotting investment scams.

Internet Fraud: How to Avoid Internet Investment Scams from the Securities and Exchange Commission outlines frauds related to e-newsletters, bulletin boards/newsgroups, and spam and how to avoid them.

Investing Wisely Online from OnGuard Online has tips for how to use the Internet to invest wisely and avoiding investment scams online.

Affinity Scams

Affinity investment fraud targets the members of a specific group, such as religious or ethnic groups, work or social groups. The fraudster is often a member of the group or dupes leaders in the group into promoting the scheme. Victims trust friendship rather than check the proposed “investments” out thoroughly. Most affinity scams feature some sort of pyramid or “Ponzi” scam that uses money from recent victims to pay partial “dividends” to earlier “investors,” stringing them along too.

Affinity Fraud: How to Avoid Investment Scams that Target Groups, an Investor Alert from the Securities and Exchange Commission, provides tips on how to recognize and avoid such schemes.

Bilking the faithful in the name of fraud from MSN Money is a cautionary tale of affinity fraud. Individuals seeking to roll their IRA funds into an investment that would produce a fixed income; what they thought was a faith-based venture funding faith-based projects was really a Ponzi scheme.

Promissory Note Fraud

Promissory notes are one legitimate way that companies raise money. A promissory note is a loan of money from an investor to a company for a set period of time. In return, the company promises to pay the investor a fixed return on the amount loaned. The catch is that “promissory notes” marketed widely to individuals are usually fraudulent. The promoter is typically an independent life insurance agent to whom the fraudster has promised large commissions.

Broken Promises: Promissory Note Fraud from the Securities and Exchange Commission details the fraud and how to properly and thoroughly check out any promissory note you may be considering.

Avoid scams by friendly insurance agents by Liz Pulliam Weston on MSN Money details promissory note scams, fraudulent investment scams, and affinity scams involving insurance agents.

“IRA approved” scams

Some hucksters try to sell their pie-in-the-sky but fraudulent investment scams as “IRA-approved,” "IRA-sanctioned," or "IRS-approved"—there’s no such thing. The IRS doesn't review or approve investments nor does it endorse any investments. The IRS also doesn't issue any statements that an investment in an IRA is protected because a particular custodian or trustee has been approved by the IRS.

In the past, most of these scams were promoted through high-pressure telemarketing calls. Newer schemes have been promoted through television "infomercials" and radio ads. Don't buy an investment based only on the "infomercial." Always check out an investment before purchasing.

Get the low down on the scam with Bogus “IRA Approved” Investment Schemes from the North American Securities Administrators Association.

A word about "lottery" and "sweepstakes" scams

Strictly speaking, these are not "investment" scams, but the scam artists often specifically target seniors and their retirement savings. These scammers may contact you by phone, mail, or email and indicate that you have won a large sum of money (possibly hundreds of thousands) in a foreign sweepstakes such as the Canadian or Australian lottery. Here are two main ploys the scam uses to steal your money.

The "lottery representative" (scam operator) says that you must send money to "pay taxes on the winnings." If you pay once, they will come back and ask for more "taxes."
You are asked to provide your account information so that they can deposit the winnings in your account. Instead, the scam operator will steal you money from your account.

To protect yourself, never respond to foreign lottery solicitations and notifications. If you respond to one, even an email to ask for more information, you'll get on the databases that scammers share and you will receive many more "offers" for lottery and other "investment" opportunities.

IQ links to sites provided by a variety of sources. We review sites for credibility and reliability, but IQ, of course, can't control advertising and other links on these sites. We advise ignoring pop-up ads, links to sales of products or services, and the like.