The information age has brought with it many advantages and conveniences that you or your clients never would have imagined even a decade ago. But unfortunately, these perks are accompanied by many negative aspects as well.
One of the worst things to come out of the internet and mobile phone technology are scams. There are many types of scams, but today InvestmentNews will focus on scams that make use of the Social Security Administration – your client’s benefits, in particular.
Clients who are on Social Security or will get their Social Security benefits soon can fall for these types of scams, so it’s important for you to be informed. This way, you can help them avoid getting scammed in turn. Scammers often target senior citizens due to their unfamiliarity with technology.
If you have any clients that are retirees, they can get duped and have their Social Security benefits or savings siphoned off by these despicable criminals. In this article, we shed light on common Social Security benefits frauds or scams so you can stay vigilant and help your clients avoid falling prey to these scams.
What is a Social Security scam? According to the Social Security Administration, this is a fraudulent activity used by criminals to get sensitive information or money from those who are receiving Social Security or other benefits from the SSA. The perpetrators often use phone calls, emails, or text messages to impersonate SSA personnel and trick those on social security to give up their money or sensitive information.
Scammers usually threaten their victims with the loss of their benefits in exchange for money or sensitive personal information.
While it’s logical for these scammers to demand money, why would they ask for a retiree for their sensitive information? It can be at least one of two reasons:
If the internet was a city, the Dark Web would be its dank, dark alley where illegal activities and contraband thrive. Some say that the Dark Web is not solely for illicit purposes, but this is contestable.
One of the most popular illicit commodities on the Dark Web is sensitive personal information.
Credit card numbers, email addresses, phone numbers, medical records, Social Security numbers – anything hackers can steal and have stolen via the internet. Data like this is often sold in bulk to scam artists who attempt all manner of deception to steal money and other valuables from those unfamiliar with their scams.
When it comes to your clients’ social security benefits, there is a range of scams that bad actors use to target them. Here are the most common:
In this scenario, scammers target those who seek to replace their old social security cards. Scammers pose as SSA personnel and offer to replace the card with an expedited process for a fee. Once the victim pays, the scammers keep the “renewal fee” and disappear.
How to avoid this scam:
Fraudsters may approach individuals via email, text messages, or phone calls, claiming to be an SSA employee. They will claim that benefits will be suspended due to a problem with the account or suspicious activity connected to the account. The scammer will then offer to fix the problem and help the victim avoid a suspension of their benefits if they pay a certain amount.
How to avoid this scam:
Your client may receive a phone call, text messages, email, or be approached personally by someone who claims to be with the SSA. They may say that they found irregularities with your client’s account or with their Social Security benefits. In some cases, they might use scare tactics to pressure your client into giving them sensitive information like their bank account number or Social Security number.
How to avoid this scam:
Your client may likewise receive a phone call, text message, email, or be approached in person by someone claiming to work for the SSA.
Instead of asking your client for any information or money, they’ll make some outrageous claim that the government is releasing great investment opportunities. They may tell your client that these can supplement the social security benefits from their deceased spouse or any other Social Security benefits.
The catch is that they’ll have to pay some money up front for the investment. Or maybe the investment sounds too good to be true.
How to avoid this scam:
Fraudsters may contact your client and inform them that they were “overpaid” in their last Social Security deposit or check. They will then say that your client will have to return the excess amount.
Instead of asking for a cash deposit, they will ask for the excess amount in the form of wire transfers, gift cards, or other payment method that will be impossible to track. They may also threaten legal action if this refund is not made immediately.
Here’s a video from the SSA that shows how these cunning people prey on retirees. Have your client watch the video and answer their questions.
Here’s a closer look at Social Security benefits and how they work.
How to avoid this scam:
Most scams are avoided simply by ignoring the fraudsters. If there are any problems or irregularities with Social Security benefits or accounts, keep in mind that:
Perhaps the only instance where SSA staff will inform your client of a Social Security feature is when they first sign up to receive their benefits. They may speak to your client about the Social Security lump sum, an amount retroactively paid to retirees who filed for their benefits after reaching full retirement age.
Before your client considers taking this lump sum, share this guide on the Social Security lump sum benefit.
Your clients can avoid scams like this by checking the SSA website and looking up information on scams from time to time. The SSA usually posts a scam alert or public advisory warning of these scams.
Let's say your client wasn’t aware of these fraudsters’ tactics and fell for one of these scams. How do you report a Social Security scam?
First, report the incident to the Office of the Inspector General. The SSA has zero tolerance for fraudsters and actively investigates each scamming case.
You or your client should submit a report online to the OIG website or report directly to the OIG's fraud hotline at 1-800-269-0271. The OIG will review your allegation and take appropriate action.
Other measures your client can take include:
Your clients who are retired or on the brink of retirement are among the most vulnerable. Fraudsters see them as easy targets due to their lack of technological knowledge and regular income. The knowledge gap that retirees have about their Social Security benefits are common issues that scammers like to exploit.
Even if you don’t have a fiduciary duty toward your clients, it’s your moral duty to inform them about scams like this to help protect them and their assets. Remember that some of your senior clients are heavily dependent on their Social Security benefits for their needs and may also rely on and must make the most out of HSA and Medicare. Losing even a few hundred dollars can be harmful to their well-being.
While advances in fintech and other related technologies make finance an exciting and lucrative career, advisors and their clients should stay wary of the risks. Get all your fintech advice and updates here on InvestmentNews.
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