Beware of Benefits Scams
How to spot and avoid fraudsters and con artists.
Through careful planning over years of government service, many federal workers have transitioned from employee to annuitant and are living their retirement dream.
Unfortunately, some retirees have also endured nightmares. Along with large Thrift Savings Plan accounts and substantial retirement benefits come scammers and con artists who would like to take some of that money from you.
Recently, AARP reported on a former financial adviser who faces up to 20 years in prison for fraud. Federal retirees are not immune from unscrupulous investment advisers. It’s important to stay educated and aware of scams to avoid unfortunate decisions that could lead to financial ruin.
My late aunt, a federal retiree, got caught up in a sweepstakes scam in her later years of retirement. It works like this: Thieves say they’re depositing sweepstakes or lottery winnings into the victim’s bank account and then collect “fees” or “taxes” associated with the winnings. But the deposit check bounces a few days after the victim’s bank account has been debited to collect the so-called fees.
Retirees should be wary of telemarketing schemes involving reverse mortgage offers, insurance, and even funeral expenses. The National Council on Aging has identified the top 10 financial scams targeting seniors, and offers advice on protecting yourself from swindlers.
The Office of Personnel Management recently issued a warning about what it called an “aggressive marketing push” targeting federal retirees. In this case, a company under investigation by the Consumer Financial Protection Bureau contacted OPM to try to obtain retiree annuity amounts and bank routing and deposit numbers. Retirees have also informed OPM that they have been contacted by this company and offered cash payments for a portion or even all of their federal retirement benefit.
If you’re a retiree, you should be wary of “pension advance” schemes that ask you to deposit a portion or all of your pension into a newly created account or to accept a cash payment or high interest rate loan in exchange for giving up control of your hard-earned monthly government annuity. Report any suspected scams to OPM’s Office of Inspector General.
Besides your monthly pension, your TSP investments are an attractive target for fraudsters. Here’s one example: For at least 20 years, Kenneth Wayne McLeod operated a Ponzi scheme that targeted law enforcement officers and other federal employees until he committed suicide when he became aware he was being investigated in 2010. McLeod was engaged by several federal agencies to provide pre-retirement seminars such as the ones that I have taught for almost 30 years, so this case was especially upsetting to me.
Hopefully federal agencies have learned to be more careful about who is invited to provide the training that federal employees need and deserve to help them with their retirement planning. But you must do your own due diligence, because you’re ultimately responsible for making decisions about your retirement and your finances.
The Securities and Exchange Commission has set up a website to help research investments and learn how to check out potential financial advisers and brokers. AARP has tools and a quiz to help you figure out if you’re vulnerable to scams. And the TSP has a seven-question scorecard to determine whether it makes sense to move your money out of the plan. (There’s also an entertaining short video about the benefits of maintaining your investments in the TSP after retirement.)
Federal agencies hire firms like the one I work for, the National Institute of Transition Planning, to educate their employees about planning for retirement and managing assets and benefits. But it’s up to you to do your own research when you engage in the services of a financial, legal or other professional, especially when you are being advised to make a decision that could impact the financial security that you have worked so hard to secure.
Photo: Flickr user David Goehring