Retirement Planning: Financial Fraud and Seniors

If you are retired or getting close to retirement, you probably have some great things going for you – like great credit, owning your home debt-free, and a substantial retirement nest egg. Sometimes these advantages can become our biggest weaknesses.

Unfortunately, these great things can also put you at greater risk for a range of frauds targeting senior citizens. In this article, we are going to look at three of the most common frauds perpetrated on seniors and what can be done to avoid being ripped off by thieves and scam artists.

Three Most Common Frauds Against Senior Citizens

Contractor Fraud

Odds are that your residence is going to need repair at some time during your retirement, especially if you’ve been living in it for the past 25 years. Contractor scams happen when the contractor starts doing repairs that are unnecessary and then often overcharges for the work, too.

Other common variants include:

  • Taking payments in advance and then never completing any of the agreed upon work
  • Using admittance into your residence as a means to burglarize it
  • Convincing owners to be part of fraudulent insurance claims

Reputable contractors don’t generally go knocking on doors to drum up business. If your house needs some work done, it’s usually better to ask around for referrals or check out the contractors listed by your Better Business Bureau. Check out the contractor for complaints before consenting to have any work done.

Reverse Mortgage Fraud

Reverse mortgages can be a legitimate technique to draw out equity from your home These are most commonly referred to as home equity conversion mortgages (HECM). HECMs are insured by the Federal Housing Authority (FHA). They were created so that people 62 years and older could easily pull the equity from their principal residence and not be burdened with monthly payments.


A problem can occur with non-HECM reverse mortgage scams; typically, a senior is used as an unsuspecting pawn in a property-flipping scheme or billed huge fees by an unscrupulous “advisor” that simply handles standard paperwork in a normal HECM loan.

If you’re interested in a reverse mortgage, your bank or a reputable mortgage broker is a good place to start.

Investment Fraud

While people of all ages are taken in by various investment frauds, seniors seem to be targeted the most.

Always be skeptical and double check with a trusted professional when it comes to your life savings. Don’t succumb to any time pressure tactics; if it’s something that you have to decide right now, your answer right now should be “NO.” False time limits are a common technique to get people to commit their hard-earned money to a fraud.


In Conclusion

It doesn’t seem fair that anyone has to be on alert in retirement. You have earned the right to just relax, enjoy the fruits of your labor, and enjoy life. Unfortunately, however, you must remain on guard for those unscrupulous persons looking to make a fast buck at anyone’s expense. In many instances, simply verifying information with third parties or demanding more details in writing will discourage most scam artists.

If you are taken advantage of or spot a scam being offered to you, report it immediately. Hopefully the perpetrator will be stopped before he can harm anyone else.

Remember that scam artists are usually looking for the easiest victim. They can be very persistent when they believe there is money to be made, but they’re also very quick to go away when things don’t look promising.

Safe and Sound

You might be able to retire from your profession, but you can’t retire from being careful. Keep an eye on that nest egg and don’t turn it over to anyone that you haven’t checked and double-checked. Such vigilance will help you keep the savings you worked so hard for away from thieves.


Thinking of Donating Your 401k to Charity?

Leaving Your 401(k) to Charity?

Many of us wish to leave the majority of our assets to our loved ones, but we also want to offer some to charitable organizations. This is where some smart tax planning can really pay off.  One of the most important parts of setting up your 401(k) is naming a beneficiary. This ensures that your 401(k) can pass to someone without going through probate. However, the beneficiary will have to pay income tax on the 401(k) balance. The tax rate in this case can be very steep, depending on circumstances.

There are other assets that can be passed to your heirs that are not taxed as aggressively. For example, if you pass stocks held outside of a qualified account to your heirs, your beneficiaries are not responsible for any capital gains that were achieved while you held the stock. The current price becomes their new price-point.  Leaving your 401(k) to your favorite charity and leaving the more tax-advantaged assets to your heirs makes a lot of sense. A greater percentage of your wealth will pass to where you choose, instead of to the government. Charities, since they are non-profit organizations, are tax exempt. So they pay no income tax on assets they receive.

Planning ahead now will help you avoid common mistakes.

There are three primary issues that can create significant challenges when passing on your 401(k) to a charity:

  1. Imprecisely or inaccurately naming the beneficiary. Listing “Greyhound Rescue” as the beneficiary is likely to result in your money going through the probate process. Instead, you’ll want to write in something more along the lines of “Southern Florida Greyhound Rescue Society.”    Also, be sure to list the Tax ID number for the organization. Many Tax ID numbers can be tracked down at
  2. Possession of the account. To avoid unnecessary taxation, it is imperative that the account passes directly to the charitable organization of your choice. If your heirs or your estate were to take possession of the account and then attempt to transfer the account to the charity, your heirs would be liable for income and estate taxes.
  3. Your spouse. If you wish to give your 401(k) to a charity, your spouse must sign a form agreeing to give up all rights to the account. Interestingly, this requirement is not necessary for IRAs.

Remember that you have options. Managing your estate is not necessarily all-or-nothing. You could name multiple beneficiaries and assign a percentage to each. You could also leave your 401(k) to your heirs, and your 401(k) would only pass to the charity if all the other listed beneficiaries were deceased

Also keep in mind that the Pension Protection Act of 2006 allows IRA holders to transfer up to $100,000 to charity without paying income tax on the withdrawal. You do have to be over 70 ½ years of age to qualify, however. So using your IRA for charitable contributions is also an option.

Leaving your 401(k) to charity can be a really smart move. The tax burden on passing your 401(k) to your heirs is considerable, while charities do not have to pay income tax. Be sure to realize the total tax burden created by your choices and plan accordingly. Estate planning is one area where the services of a professional can really pay off. Whatever you choose to do with your 401(k), good luck, and happy planning!

Why Consider a Roth IRA for Financing Your Retirement?

Consider Roth IRAs for Financing your Retirement Fund

This is entirely an opinion based on the facts that I have available and should be viewed as nothing more than that. However, I feel I would be remiss in not pointing out the incredible value that Roth IRAs can bring to the table for savvy people who are planning their retirements. There are actually advisors that straddle the fence on this particular issue and I can honestly see the validity of both sides. For me, a Roth IRA is preferable to the Traditional IRA for one reason and one reason only. I would much rather face the evil that I know and pay taxes on that money now than the evil that I don’t know by paying taxes not only on the investment but also the earnings later.

I know what tax bracket I am relegated to at the moment. I know about how much I’m going to pay in taxes on the income I’ve labored to receive about 65% of. I know these things in terms of what a dollar means today and would much rather pay that price now than later when I have no idea what tax bracket I’ll be in or how much money I will actually see of my retirement earnings.

Many point out that the laws regarding the Roth IRA could change between now and then. This is very true. At the same time the laws in regards to the 401 (k) could quite possibly change in time as well. In the art form of complication the IRS could put out next years tax code in Greek and the average citizen would not be able to tell the difference, I for one think they already do this in the ultimate practical joke on the people. Bottom line is I would much rather retain the maximum allowable control over my money when I need that money rather than trying to write off the taxes I will gladly pay today.

Putting Off Taxes Until Later

Putting the taxes off until a later date is like getting a credit card with 0% interest for 12 months. What they don’t put in the big bold print is that after the one year period or the ‘honeymoon’ so to speak is over that number goes up to well over 20%. At this point in time I have no magic crystal ball that can in anyway indicate what my tax bracket will be nor can it indicate that percentage of taxes I will owe five years from now much less 35 when retirement comes knocking on my door. The peace of mind that goes with not wondering if it will be enough after taxes is well worth the inconvenience of paying taxes on those funds today.

If you’re looking for some even better news, try this on for size. By not paying taxes on the final amount you are actually adding hundreds of thousands of dollars to your income if you invest the full amount allowable over the course of the next 50 years. You will still save a huge amount of money if you only make the maximum investment over the course of the next 30 years. But make sure whatever you do, you minimize tax payments on your retirement fund.

Retirement Planning: Have You Considered a 401(k) Investment Plan?

Consider a 401(k) Investment Plan for Retirement

Have you started planning financial security for your retirement? It is estimated that somewhere in the neighborhood of 30% of employees who are offered a 401(k) through their employers fail to sign up for them. There have been instances in the past when unscrupulous administrators have taken advantage of the temptation that having access to those funds provided as well as many, many cases where the worst enemy when it came to 401(k) investing was the investor.

The good news is that like many things around the world we are learning from our mistakes and working to create a new and improved 401(k) for employees across the country. With this in mind and the advances that have been made very few people can honestly state that they are worried about the security of their money as a reason not to participate in their company offered 401(k) programs. The problem remains that far too many people believe in the sanctity of a now dieing system for retirement funds.

The truth of the matter is that no matter what, chances are very slim that social security will provide any sort of security for those that are retiring and relying on this as their ‘golden’ years. There have been mistakes along the way and will continue to be. Not only do the administrators of these plans make the mistakes but also by those receiving the benefit of these plans, which can be so very important when, it comes to establishing some degree of security for your financial retirement planning.

Along the way we’ve learned that the penalties for borrowing against your funds can be much more harsh than a mere slap on the wrist. We’ve also learned the cashing out is very rarely a wise decision in the grand scheme of things when it comes to your 401(k) plan. These lessons are hard learned in many cases and cost years if not decades of your retirement plan. Do not make these mistakes unless the stakes truly merit the costs involved.

Don’t be afraid to actually make the investments you feel are necessary in order to maximize the potential of your 401(k). This is your retirement after all and the new rules regarding your 401(k) are putting you in the driver’s seat so to speak. Don’t let yourself and your investment down by not doing the necessary research. If you plan to invest in stocks make sure that you are diversifying your stock holdings and that you have thoroughly researched the stocks in which you are investing.

You should also take the time to research the differences in a traditional 401(k) and a Roth 401(k) and see which one you feel will best suit your needs as a consumer and as an investor. There are marked advantages and disadvantages associated with each and ultimately which is better comes down to a matter of preference as there really is no absolute right or wrong answer to this question.

I strongly encourage you to seek the services of a competent financial planner in order to help you properly diversify your portfolio for long-term investing with maximum potential. Getting good financial advice will give you a worry free retirement.