Top 12 elderly scams and how to avoid them

Every one of us is susceptible to being taken advantage of by con artists, and as we age, the problem is magnified.

Before I get into the 12 elderly scams, let’s talk about why scamming the elderly has become so popular. The biggest reason is because scammers have found the older segment of our population is an easy target. What these con artists have realized is that they can easily manipulate the elderly population because many of them are lonely, and they’re not as mentally sharp as they used to be. Both of these two weaknesses can be easily exploited by someone who does not have your best interest in mind.

The first scam I’ll talk about today is the grandparent scam. If you’re a grandparent, this is one you have to be very careful of because this is one of the few scams where those trying to take advantage of you are going to pull your heartstrings. They know there isn’t anything you wouldn’t do to help the little grandson or granddaughter you love so much and yet maybe haven’t seen in years.

The scam goes something like this. You get a call from an unknown phone number. And the person on the other end of the line says, ”Hello Grandma (or Grandpa). This is your grandson calling. I bet you can’t guess which one of your grandsons this is.” For scammers, this prompt is very important because they are trying to get you to reveal the name of your grandchild, which allows them to make the call more personable.

If you take the bait, the scammer will then take on the identity of the grandchild you name.Then the person on the other end of the line turns the phone call into some type of an emergency. Some of the top emergencies are: My car just broke down, and I am stranded. Or, I need money, or they’re going to kick me out of the place I live, and I’ll be living on the street. There’s always an immediate need for money with the scam. And there’s always an explanation that nobody else is willing or able to help, including their parents.

The problem with this type of scam is that it can seem so real. If this is truly your grandson, and he is in this much need, you want to do your part to help him out. But in this situation, it isn’t your grandson on the other end of the phone. And so, the last thing you should be doing is getting involved.

There are some simple things you can do to keep from falling for this scam. The first one is to make sure you ask your own questions about things you know, things only your grandchild would know. Maybe it’s about his life or his parents or even your relationship with them. You can also get a phone number where you can call him back, and then make a quick call to his parents to find out if they know anything about what’s going on. Another option would be to get someone else involved with the call, maybe a friend or a neighbor, so they can help you make sure everything is legitimate.

The second scam is the investment schemes that exist out there. As a retiree, you are a target for financial advisors who are more concerned about their own retirement than they are about your retirement. The best advice I can give you here is if it sounds too good to be true, it probably is.

But investment schemes aren’t just limited to schemes by companies who are promoting high investment returns. I’ve seen schemes where they use tax credits as their basis for the investment. I’ve also seen other schemes where they claim high tax deductions for those who invest, and there are schemes where they claim the investment is backed by some form of tangible asset.

When it comes to investing, there are three rules I suggest you abide by.

First, never be in a hurry. If the person selling the investment tells you that if you don’t invest now, you’re going to miss the opportunity, then you should be concerned. Investing immediately is a red flag.

Second, only invest in well-known companies. There’s a time and a place to try riskier investment avenues, but during your retirement is not one of these times.

And third, do your homework and include someone else in helping you make your decision. As a CPA, I’ve been asked hundreds of times to help clients evaluate a decision, and getting a second opinion is always a good thing.

The third scam is a homeowner reverse mortgage scam. Scammers know most retirees have built up substantial equity in their homes, so they see this as an easy target for quick cash. One way they try to take advantage is by convincing you that you must have their products or services. But when you say you don’t have the money to pay for it, they offer a reverse mortgage.

Now all reverse mortgages aren’t bad, but if you’re using a reverse mortgage to buy something you really don’t need, you’re going to find out the hard way that doing this is not a good financial option.

Another scam many con artists are starting to use is when they pose as a government official and tell you that they can help you lower your property taxes, but you must pay them a fee before they can help you with the process. As with other scams we’ve already talked about today, the best way to avoid this scam is to take your time and rely on someone you trust to help confirm what you’re doing is right and that you’re making the right decision.

The fourth scam is the sweepstakes or lottery scam. One of my clients, Steven, had a gal who worked for him that was 100% convinced she was going to win the lottery during a period of time when the jackpot was in the hundreds of millions. She lived in Nevada, which doesn’t have a lottery, so she would often go to California or Arizona to buy lottery tickets.

At the height of the employee’s conviction, Steven decided to take this employee to Arizona, so she could check some lottery tickets she had previously purchased. As they pulled into the gas station, my client told her he would fill up the car with gas while she went in and checked her tickets.

They just started filling the car when his employee came out of the store, and she was white as a ghost. As she got closer, my client asked her what was going on. She could hardly talk, but she said she knew she would win the lottery and had, according to the ticket scanner.She then asked my client to go back inside with her for some support.

On the spot, Steven hurried and finished filling up the car with gas and then took his employee in or ticket back into the convenience store. As they approached the clerk, the employee started shaking from her excitement. Stephen grabbed the ticket from her hand and handed it to the clerk.

He then asked the clerk to scan his employee’s ticket to see how much she had won. The clerk did so, but instead of millions they were expecting, they had won $5 instead.

They tell you this story for a number of reasons.

First, it can become very easy to be sucked in to believing that you’re going to be the next big winner. But statistics show this isn’t true. Yes, there are winners, but for every one winner, there are hundreds of thousands of losers.

Second, lotteries and sweepstakes are not designed to help you. They’re designed to help the companies and governments who put them together. Governments know these programs disproportionately hurt the elderly, yet they continue to run these programs on a daily basis.

And third, don’t waste your money on false hopes. As a retiree you have so much you already need to spend your money on, so why waste it on schemes that are rigged against you.

The fifth scam I want to talk about is the telemarketing and phone scam. There are too many of these types of scams to even list them all, but they’re all designed to trigger one of two emotions from you. The first one is fear, and the second one is greed.

The fear trigger most often used is based upon some type of error you’ve made with some government agency, like the IRS or Social Security. The scammer usually tries to convince you that, somehow, you have overlooked a financial obligation and that you need to pay the outstanding balance immediately or suffer major consequences. The most important thing to remember with a fear scam is no federal agency will ever call you to request money without having first sent you a letter in the mail.

When it comes to greed, this can be all over the board. And it’s only limited by your own greed limits. I’ve seen scams where people are claiming they have millions of dollars in a foreign account. They’re waiting just for the person they’re trying to scam. But that person must be willing to pay a small fee first in order to access the money.

I’ve also seen simpler scams where people are offering to provide a product or service at a fraction of the cost. But, like other scams, the decision must be made immediately, or the person being scammed is going to miss out on this opportunity. The hardest thing with phone scams is they often sound so real. I can’t tell you the number of times as a CPA, I’ve had to explain to a client multiple times that a scam is not legitimate. They get so bought into the story. They want to believe it’s true even though every other logical person in their life is telling them otherwise.

The biggest takeaway here is to slow down, to take a deep breath. And remember, if the person on the other end of the phone is trying to spur you to make a decision based upon fear or greed, the result generally is not going to turn out to your advantage.

The sixth scam is internet fraud. In this day and age, it’s almost impossible to stay off the internet. Therefore, it’s important to understand some of the top internet scams that exist, so hopefully you can keep yourself safe and secure.

The most popular scam of them all is what is called phishing. Now, this isn’t the type you do with your grandkids out of the lake, but it does resemble the other type of fishing you do with a rod and reel.

Essentially phishing is cybercriminals reaching out to you in hopes that they can get you to disclose or give them access to your information. This information can include something as simple as your name or a confirmation of your email address. But usually it goes much deeper into your personal information, such as your social security number, credit card details, or your bank account information.

There are two key things to remember when it comes to phishing scams. First, if it sounds too good to be true, it probably is. Second, take your time to understand what is being sent to you and who it’s coming from. If it seems weird or out of character from what the person would normally send you, the simple answer is to just don’t click.

The seventh (internet) scam revolves around companies who are claiming they will provide you with some type of product or service, but they have no intention of ever fulfilling this promise. If you end up on a site that is offering products or services you want, but you’re not familiar with the company, take some time to do some research. You can usually do a quick internet search and figure out within about five or 10 minutes whether a company is legitimate or not.

The eighth (internet) scam I want to talk about is the bad download scam. This is where companies or individuals try to get you to download software, or click on something from an email or a website that appears to be harmless. But when you click on it, it downloads malware or ransomware to your computer.

Both malware and ransomware are very dangerous. Malware is designed to either gather information from your computer or wreak havoc on the operational capacity of your computer, and ransomware is designed to completely lock up your computer, making it useless. When this happens, the person who sent the ransomware then usually asked for a fee in order to remove the virus. Your best solution here is to stay away from websites that you’re not familiar with, to be very careful when opening emails with attachments, and to install some form of virus protection software onto your computer.

The ninth scam is the funeral crematory scam. To me this is about as low as you can get in the elder scam arena. This is where people take advantage of you as you’re trying to prepare for where your body will rest once this life is over. The problem with these types of scams is you may never know you were scammed. It may be those who are left after you pass away that find out the secret the scammers hid from you your whole life.

This scam can take various forms, but it usually involves selling you a burial plot or funeral services the company can’t fulfill or overselling you on items you don’t need. The best way to avoid this type of scam is to make sure you’re dealing with well-known companies who have a good reputation for providing funeral or crematory services and products in your area.

The tenth scam is fraudulent anti-aging products. For many people aging is one of the hardest things to experience in life, and scammers know this. All you have to do is stay up late one night and flip through the various channels on your television, and you’ll soon realize what a big business anti-aging products is. Our late night television is full of infomercials about products that claim to be able to do about everything but bring you back from the dead.
My best advice here is to forget about the magic potions and the lotions and just accept the natural aging process our bodies must go through you, and your wallet will both thank me in the end.

The eleventh scam is counterfeit prescription drugs. Of all the scams I’ve talked about, this is the worst one to me. Why? Because for many people, including myself, we’re talking about a life or death situation. What do I mean? Let me explain how the scam works.

As we age, many of us are required to take prescription drugs to keep us alive. But some of these drugs can be outrageously expensive and scammers know this. Therefore, they provide various offers to allow you to get access to these prescriptions for much cheaper than you would normally pay. These offers can come in the form of a dropship option where the products are delivered to your door, or it may require you to go to another country.

The problem with this scam is you have no guarantee of what is inside of that pill you’re being sold. The reason many of these drugs are offered at such a cheap price is because they’re not drugs at all. They’re a placebo that’s filled with something else.

If you’re on a prescription drug to keep yourself alive and healthy, do yourself a favor and make sure you’re using reputable sources to fill your prescriptions. Now that doesn’t mean you have to pay the highest price. Drugstores can charge substantially different prices for the same drug, so do your homework. There are a number of websites that can help you find the cheapest place to fill prescriptions with top pharmacy chains.

The twelfth and final scam is the Medicare health insurance scam. Current statistics report that the average retired couple has spent over $200,000 during their retirement in medical related costs. This sounds like an outrageous number, but it’s the reality facing many retirees.

As a result, many of them are looking for any loopholes in order to lower their out of pocket costs for healthcare. It’s in these loopholes where scammers are waiting.

These scammers are willing to play on your emotions and frustrations as it comes to the exuberant costs of healthcare. They use these emotions to then get you to buy products and services that are not what they appear. This includes medical services that are not done in accordance with safety standards established in the United States to health care policies that don’t really cover all the medical treatments they claim to cover.

Your best solution here is the same solution I’ve recommended for so many other scams I’ve talked about already. Stick with companies you know and that you can confirm are meeting the current requirements established by the government.

I must admit it is with a little bit of apprehension on my part, but I’m very glad I’ve been able to cover some of the top scams you may face in retirement. But I also know that what I’ve covered is not enough to protect all of you from people who are more interested in their own best interests than they are in your best interest. Because there’s thousands of dishonest people out there, and there’s only one of me. But regardless, I choose to move forward with hope.

And I will do that by leaving you with my top three takeaways.

Number one, if it sounds too good to be true, it probably is. Greed can destroy a well planned life as fast as anything else can.

Number two, take your time to do research and do your homework. Simple internet searches can go a long way to helping you learn about the validity of a company’s products or services you might be considering.

And number three, have a trusted friend or advisor. This person needs to be someone you feel comfortable enough with that you can call them at any time to get their advice on a decision you’re making. Now, this doesn’t mean you should call them to figure out what you’re going to have for lunch tomorrow. But if you’re looking at making a big decision where someone could possibly take advantage of you, this friend or advisor may be your best bet at protecting yourself.

If you have family members who are elderly, it’s very important you do your part to help make sure they’re protected from the various scams I talked about. There are two main ways you can make a difference in these people’s lives.

First, educate any elderly relatives or friends on the various types of scams that exist in hopes they will be able to recognize them when they happen. And second, stay close to these family members or friends, and make sure they know they can call you if they need help with anything. You may be the only person standing between them and a big disaster.

Now if you’re getting elderly yourself, put in safeguards to protect yourself and establish a lifeline with someone you can trust. So, if you think of scams happening, you can turn to this person to help you out.

Every one of us is susceptible to being taken advantage of by con artists, and as we age, the problem is magnified.

Before I get into the 12 elderly scams, let’s talk about why scamming the elderly has become so popular. The biggest reason is because scammers have found the older segment of our population is an easy target. What these con artists have realized is that they can easily manipulate the elderly population because many of them are lonely, and they’re not as mentally sharp as they used to be. Both of these two weaknesses can be easily exploited by someone who does not have your best interest in mind.

The first scam I’ll talk about today is the grandparent scam. If you’re a grandparent, this is one you have to be very careful of because this is one of the few scams where those trying to take advantage of you are going to pull your heartstrings. They know there isn’t anything you wouldn’t do to help the little grandson or granddaughter you love so much and yet maybe haven’t seen in years.

The scam goes something like this. You get a call from an unknown phone number. And the person on the other end of the line says, ”Hello Grandma (or Grandpa). This is your grandson calling. I bet you can’t guess which one of your grandsons this is.” For scammers, this prompt is very important because they are trying to get you to reveal the name of your grandchild, which allows them to make the call more personable.

If you take the bait, the scammer will then take on the identity of the grandchild you name.Then the person on the other end of the line turns the phone call into some type of an emergency. Some of the top emergencies are: My car just broke down, and I am stranded. Or, I need money, or they’re going to kick me out of the place I live, and I’ll be living on the street. There’s always an immediate need for money with the scam. And there’s always an explanation that nobody else is willing or able to help, including their parents.

The problem with this type of scam is that it can seem so real. If this is truly your grandson, and he is in this much need, you want to do your part to help him out. But in this situation, it isn’t your grandson on the other end of the phone. And so, the last thing you should be doing is getting involved.

There are some simple things you can do to keep from falling for this scam. The first one is to make sure you ask your own questions about things you know, things only your grandchild would know. Maybe it’s about his life or his parents or even your relationship with them. You can also get a phone number where you can call him back, and then make a quick call to his parents to find out if they know anything about what’s going on. Another option would be to get someone else involved with the call, maybe a friend or a neighbor, so they can help you make sure everything is legitimate.

The second scam is the investment schemes that exist out there. As a retiree, you are a target for financial advisors who are more concerned about their own retirement than they are about your retirement. The best advice I can give you here is if it sounds too good to be true, it probably is.

But investment schemes aren’t just limited to schemes by companies who are promoting high investment returns. I’ve seen schemes where they use tax credits as their basis for the investment. I’ve also seen other schemes where they claim high tax deductions for those who invest, and there are schemes where they claim the investment is backed by some form of tangible asset.

When it comes to investing, there are three rules I suggest you abide by. First, never be in a hurry. If the person selling the investment tells you that if you don’t invest now, you’re going to miss the opportunity, then you should be concerned. Investing immediately is a red flag.

Second, only invest in well-known companies. There’s a time and a place to try riskier investment avenues, but during your retirement is not one of these times.

And third, do your homework and include someone else in helping you make your decision. As a CPA, I’ve been asked hundreds of times to help clients evaluate a decision, and getting a second opinion is always a good thing.

The third scam is a homeowner reverse mortgage scam. Scammers know most retirees have built up substantial equity in their homes, so they see this as an easy target for quick cash. One way they try to take advantage is by convincing you that you must have their products or services. But when you say you don’t have the money to pay for it, they offer a reverse mortgage.

Now all reverse mortgages aren’t bad, but if you’re using a reverse mortgage to buy something you really don’t need, you’re going to find out the hard way that doing this is not a good financial option.

Another scam many con artists are starting to use is when they pose as a government official and tell you that they can help you lower your property taxes, but you must pay them a fee before they can help you with the process. As with other scams we’ve already talked about today, the best way to avoid this scam is to take your time and rely on someone you trust to help confirm what you’re doing is right and that you’re making the right decision.

The fourth scam is the sweepstakes or lottery scam. One of my clients, Steven, had a gal who worked for him that was 100% convinced she was going to win the lottery during a period of time when the jackpot was in the hundreds of millions. She lived in Nevada, which doesn’t have a lottery, so she would often go to California or Arizona to buy lottery tickets.

At the height of the employee’s conviction, Steven decided to take this employee to Arizona, so she could check some lottery tickets she had previously purchased. As they pulled into the gas station, my client told her he would fill up the car with gas while she went in and checked her tickets.

They just started filling the car when his employee came out of the store, and she was white as a ghost. As she got closer, my client asked her what was going on. She could hardly talk, but she said she knew she would win the lottery and had, according to the ticket scanner.She then asked my client to go back inside with her for some support.

On the spot, Steven hurried and finished filling up the car with gas and then took his employee in or ticket back into the convenience store. As they approached the clerk, the employee started shaking from her excitement. Stephen grabbed the ticket from her hand and handed it to the clerk.

He then asked the clerk to scan his employee’s ticket to see how much she had won. The clerk did so, but instead of millions they were expecting, they had won $5 instead.

They tell you this story for a number of reasons. First, it can become very easy to be sucked in to believing that you’re going to be the next big winner. But statistics show this isn’t true. Yes, there are winners, but for every one winner, there are hundreds of thousands of losers.

Second, lotteries and sweepstakes are not designed to help you. They’re designed to help the companies and governments who put them together. Governments know these programs disproportionately hurt the elderly, yet they continue to run these programs on a daily basis.

And third, don’t waste your money on false hopes. As a retiree you have so much you already need to spend your money on, so why waste it on schemes that are rigged against you.

The fifth scam I want to talk about is the telemarketing and phone scam. There are too many of these types of scams to even list them all, but they’re all designed to trigger one of two emotions from you. The first one is fear, and the second one is greed.

The fear trigger most often used is based upon some type of error you’ve made with some government agency, like the IRS or Social Security. The scammer usually tries to convince you that, somehow, you have overlooked a financial obligation and that you need to pay the outstanding balance immediately or suffer major consequences. The most important thing to remember with a fear scam is no federal agency will ever call you to request money without having first sent you a letter in the mail.

When it comes to greed, this can be all over the board. And it’s only limited by your own greed limits. I’ve seen scams where people are claiming they have millions of dollars in a foreign account. They’re waiting just for the person they’re trying to scam. But that person must be willing to pay a small fee first in order to access the money.

I’ve also seen simpler scams where people are offering to provide a product or service at a fraction of the cost. But, like other scams, the decision must be made immediately, or the person being scammed is going to miss out on this opportunity. The hardest thing with phone scams is they often sound so real. I can’t tell you the number of times as a CPA, I’ve had to explain to a client multiple times that a scam is not legitimate. They get so bought into the story. They want to believe it’s true even though every other logical person in their life is telling them otherwise.

The biggest takeaway here is to slow down, to take a deep breath. And remember, if the person on the other end of the phone is trying to spur you to make a decision based upon fear or greed, the result generally is not going to turn out to your advantage.

The sixth scam is internet fraud. In this day and age, it’s almost impossible to stay off the internet. Therefore, it’s important to understand some of the top internet scams that exist, so hopefully you can keep yourself safe and secure.

The most popular scam of them all is what is called phishing. Now, this isn’t the type you do with your grandkids out of the lake, but it does resemble the other type of fishing you do with a rod and reel.

Essentially phishing is cybercriminals reaching out to you in hopes that they can get you to disclose or give them access to your information. This information can include something as simple as your name or a confirmation of your email address. But usually it goes much deeper into your personal information, such as your social security number, credit card details, or your bank account information.

There are two key things to remember when it comes to phishing scams. First, if it sounds too good to be true, it probably is. Second, take your time to understand what is being sent to you and who it’s coming from. If it seems weird or out of character from what the person would normally send you, the simple answer is to just don’t click.

The seventh type of internet scam revolves around companies who are claiming they will provide you with some type of product or service, but they have no intention of ever fulfilling this promise. If you end up on a site that is offering products or services you want, but you’re not familiar with the company, take some time to do some research. You can usually do a quick internet search and figure out within about five or 10 minutes whether a company is legitimate or not.

And the eighth internet scam I want to talk about is the bad download scam. This is where companies or individuals try to get you to download software, or click on something from an email or a website that appears to be harmless. But when you click on it, it downloads malware or ransomware to your computer.

Both malware and ransomware are very dangerous. Malware is designed to either gather information from your computer or wreak havoc on the operational capacity of your computer, and ransomware is designed to completely lock up your computer, making it useless. When this happens, the person who sent the ransomware then usually asked for a fee in order to remove the virus. Your best solution here is to stay away from websites that you’re not familiar with, to be very careful when opening emails with attachments, and to install some form of virus protection software onto your computer.

The ninth scam is the funeral crematory scam. To me this is about as low as you can get in the elder scam arena. This is where people take advantage of you as you’re trying to prepare for where your body will rest once this life is over. The problem with these types of scams is you may never know you were scammed. It may be those who are left after you pass away that find out the secret the scammers hid from you your whole life.

This scam can take various forms, but it usually involves selling you a burial plot or funeral services the company can’t fulfill or overselling you on items you don’t need. The best way to avoid this type of scam is to make sure you’re dealing with well-known companies who have a good reputation for providing funeral or crematory services and products in your area.

The tenth scam is fraudulent anti-aging products. For many people aging is one of the hardest things to experience in life, and scammers know this. All you have to do is stay up late one night and flip through the various channels on your television, and you’ll soon realize what a big business anti-aging products is. Our late night television is full of infomercials about products that claim to be able to do about everything but bring you back from the dead.
My best advice here is to forget about the magic potions and the lotions and just accept the natural aging process our bodies must go through you, and your wallet will both thank me in the end.

The eleventh scam is counterfeit prescription drugs. Of all the scams I’ve talked about, this is the worst one to me. Why? Because for many people, including myself, we’re talking about a life or death situation. What do I mean? Let me explain how the scam works.

As we age, many of us are required to take prescription drugs to keep us alive. But some of these drugs can be outrageously expensive and scammers know this. Therefore, they provide various offers to allow you to get access to these prescriptions for much cheaper than you would normally pay. These offers can come in the form of a dropship option where the products are delivered to your door, or it may require you to go to another country.

The problem with this scam is you have no guarantee of what is inside of that pill you’re being sold. The reason many of these drugs are offered at such a cheap price is because they’re not drugs at all. They’re a placebo that’s filled with something else.

If you’re on a prescription drug to keep yourself alive and healthy, do yourself a favor and make sure you’re using reputable sources to fill your prescriptions. Now that doesn’t mean you have to pay the highest price. Drugstores can charge substantially different prices for the same drug, so do your homework. There are a number of websites that can help you find the cheapest place to fill prescriptions with top pharmacy chains.

The twelfth and final scam is the Medicare health insurance scam. Current statistics report that the average retired couple has spent over $200,000 during their retirement in medical related costs. This sounds like an outrageous number, but it’s the reality facing many retirees.

As a result, many of them are looking for any loopholes in order to lower their out of pocket costs for healthcare. It’s in these loopholes where scammers are waiting.

These scammers are willing to play on your emotions and frustrations as it comes to the exuberant costs of healthcare. They use these emotions to then get you to buy products and services that are not what they appear. This includes medical services that are not done in accordance with safety standards established in the United States to health care policies that don’t really cover all the medical treatments they claim to cover.

Your best solution here is the same solution I’ve recommended for so many other scams I’ve talked about already. Stick with companies you know and that you can confirm are meeting the current requirements established by the government.

I must admit it is with a little bit of apprehension on my part, but I’m very glad I’ve been able to cover some of the top scams you may face in retirement. But I also know that what I’ve covered is not enough to protect all of you from people who are more interested in their own best interests than they are in your best interest. Because there’s thousands of dishonest people out there, and there’s only one of me. But regardless, I choose to move forward with hope.

And I will do that by leaving you with my top three takeaways. Number one, if it sounds too good to be true, it probably is. Greed can destroy a well planned life as fast as anything else can.

Number two, take your time to do research and do your homework. Simple internet searches can go a long way to helping you learn about the validity of a company’s products or services you might be considering.

And number three, have a trusted friend or advisor. This person needs to be someone you feel comfortable enough with that you can call them at any time to get their advice on a decision you’re making. Now, this doesn’t mean you should call them to figure out what you’re going to have for lunch tomorrow. But if you’re looking at making a big decision where someone could possibly take advantage of you, this friend or advisor may be your best bet at protecting yourself.

If you have family members who are elderly, it’s very important you do your part to help make sure they’re protected from the various scams I talked about., There are two main ways you can make a difference in these people’s lives.

First, educate any elderly relatives or friends on the various types of scams that exist in hopes they will be able to recognize them when they happen. And second, stay close to these family members or friends, and make sure they know they can call you if they need help with anything. You may be the only person standing between them and a big disaster.

Now if you’re getting elderly yourself, put in safeguards to protect yourself and establish a lifeline with someone you can trust. So, if you think of scams happening, you can turn to this person to help you out.

READ MORE

Five takeaways from the Power of Zero paradigm

There are five takeaways from the Power of Zero paradigm. This paradigm is based upon the belief that taxes will be higher in the future. The best way we can insulate ourselves against the time of higher taxes is to do appropriate planning now, so we can eliminate tax rate risk in the future.

When I teach the power zero paradigm for the first time to most people, the process usually goes something like this. During the first 20 minutes or so of the presentation, they seem to have this deer in the headlights look. Then, as I get into the middle of the presentation, the deer in the headlights look goes away, and I start seeing a few heads nodding—they start to understand what I’m talking about. Then, by the end of the presentation, logic kicks in, and not only are people nodding in agreement, but they’re starting to question why they’ve never heard of this before. 

Because I’ve thought about this experience, I’ve concluded that the main reason most people haven’t heard of the Power of Zero paradigm is because for advisors, it’s just much easier to ignore the effect of future tax rate than planning for a tax-free retirement. 

Tax free planning takes work. And unfortunately, it’s work most advisors aren’t willing to put in. Power of Zero planning requires an advisor to take the traditional retirement plan people have created during the working years and completely turn it on its head. You have to be willing to take the time to move all that money that is sitting in the taxable and tax deferred bucket and move it into the tax-free bucket. This can take years to do and can be a very time consuming process for the advisor. It also takes the ability to think outside the box, which many advisors aren’t interested in doing either. You have to be willing to look at products, such as permanent life insurance and annuities as possible options to help solve the problem. 

At this point, I’ve trained about 30,000 CPAs and EAS on tax free and risk-free retirement, and during this time, I’ve gotten a lot of testimonials. But I’ve also gotten some complaints. I’m sure it’s nearly impossible to do this amount of training and not get some complaints during the process. What I find interesting is between 80-90% of the time, the complaint is that permanent life insurance sucks and that annuities are of the devil. These aren’t the exact words, but I’m sure you get the drift. 

Because the way our training is done, I get to see where these complaints come from. And guess what, 100% of the time these complaints come from one group of people, can you guess who they are? Yes, financial planners, who don’t sell insurance and annuities. 

Just because you don’t sell a given product or service, it doesn’t mean it is not right for someone else’s retirement. In fact, what mainstream financial planners who’ve been against insurance annuities for years are finding is that these products may be the only way to eliminate some of the risks facing current retirement plans because of our longevity and how long we’re living. 

I’m going to share with you five main takeaways from the Power of Zero paradigm. But before I do, one last reminder, if you don’t understand what the Power of Zero paradigm is, I suggest you sign up for my free Power of Zero webinar here where I talk about the Power of Zero in detail.

Let’s go through the takeaways.

Number one: Tax rates are likely to be dramatically higher in the future than they are today. Right now, we’re enjoying a period of historically low tax rates. The top marginal tax rate is only 37%, and we have bigger income tax brackets than we’ve ever had in the history of America. 

A married couple can earn over $300,000 in taxable income, and still be in the 24% tax bracket. 

But it’s not going to stay this way forever. We have two big issues facing us when it comes to future tax rate risks. The first issue was caused by soldiers who came home from World War Two and started doing something that had never been done in America’s history. And that is, they started having babies. There are 78 million baby boomers, and they’re signing up for Social Security and Medicare at a rate of about 10,000 people per day. But they’re only about 6000 people per day who are leaving the programs. This means the costs are going up and will continue to do so for decades to come. 

The second issue is the ever increasing national debt. We are currently sitting on about $26.7 trillion in current national debt. Yeah, it seems almost unbelievable, doesn’t it? If this amount continues to grow, there will come a point where we can no longer pay the interest on the debt. When this happens, the government will have no other option but to raise taxes. Right now, they have a second option, and that is to cut spending. But all you have to do is turn on the news to realize that cutting spending is not going to be the current option. So it will only leave one option in the future because the debt will already be incurred, and that is going to be increasing taxes. 

Number 2: The only way to insulate yourself is to get to the zero percent tax bracket. The great thing about the zero percent tax bracket is that even if taxes double, you’re sure in great shape because two times zero is still zero. However, getting to the zero percent tax bracket is not easy because right now, 95% of you have all of your retirement assets saved up in tax deferred accounts such as 401Ks, 403Bs, and traditional IRAs. 

This means you have to be willing to pay the entry fee if you want to make the transition from tax deferred to tax free, and that fee may cost you hundreds of thousands of dollars. What is the entry fee? The entry fee is you must be willing to pay your taxes now, for some of you, this is going to scare you away, which may be the reason other advisors don’t talk about this issue, because they’re afraid to lose you as a client. For those of you who believe tax rates will be even 1% higher in the future, there is no other option but to bite the bullet now, so you can enjoy a more safe and secure retirement. 

Number 3: You will need multiple streams of tax free income to get to the zero percent tax bracket in retirement. When most people think about what a tax free retirement might look like, the first thing that comes to mind is Roth accounts, Roth IRAs, Roth 401Ks, or maybe even Roth 403Bs. But for most people, these accounts don’t allow a high enough annual contribution rate to provide all the needed income and retirement. 

Therefore, we have to look at other options. One of my favorite options is the life insurance retirement plan. It is treated differently than any other retirement asset available to retirees. You can take distributions out of this investment pre age 59 and a half without any penalties from the IRS. They’re also no 1099s being issued to the IRS each year because the income in this investment grows tax free. There are no contribution limits or income limits, which means you can put as much money as you want into these plans—anytime you want to do it. They’re tax free distributions, which means you can use these funds during retirement without having to worry about tax rate risk. 

There’s also very little if any legislative risk. The government’s made changes to these plans three times in the past, and each time they have grandfathered in those who already have these plans in place. You also want to get the right amount of money into your tax deferred bucket. If you do this, then this income will become tax free as well your Social Security income. 

Another option of tax free income that isn’t talked about as frequently is a Roth annuity. This allows you to have inflation adjusted guaranteed lifetime income. You can match up with your Social Security to cover your monthly living costs and be able to do it in a tax free environment, taking away much of the worry that many people have, or they’ll have enough monthly income. 

Number Four: We know the exact day taxes are scheduled to go up. This is January 1, 2026. On this date, tax rates will roll back to what they were in 2017. When this happens, the top bracket will only go up about 2.6%. But if you’re in the top end of the 24% bracket, your tax rate will go up 9% overnight. Right now, we have a lot of uncertainty in the government.  People often comment that taxes could go up sooner than January 1 2026, especially if administrations in the government change. And they’re correct. But all that does is prove our point that you need to stop wasting time and put in the effort to create a tax-free interest free retirement. 

Number 5: Is all good news. I told you in the beginning, we were going to end with good news. This is all good news because we have time to prepare. I’ve been a CPA for almost 25 years now, and I’ve never seen the opportunity like we have today. We know taxes are going up. We know the best option is to get into the zero percent tax bracket. We also know there are advisors out there who understand what we need to do and can help us develop multiple streams of tax-free income. 

During this time of historically low tax rates, we know the exact day taxes are going up January 1, 2026. What more could we possibly want or need? Knowledge is power. 

READ MORE

Picking the right state for retirement

When it comes to picking a place to live in retirement, taxes very seldom hit the top five reasons of any published list. In fact, the top five reasons most people choose to live where they do in retirement are the following: 

Number one is neighborhood safety. Retirees want to make sure they live in a place they can feel safe. They’re at a point in their life where they don’t need any more drama, and drama often comes with many of the unsafe neighborhoods. 

Number two is familiarity. Retirees want to live in an area they feel comfortable getting around, and this is why most retirees will choose to retire in the same place they live during most of their working years. 

Number three is healthcare. As we age, healthcare needs increase, and we all want to make sure we’re getting the best care we possibly can for the health issues we’re facing. Retirees will choose to live in an area where they feel comfortable that the local health system will meet their needs.

Number four is access to shopping and activities. Retirement is all about getting out and enjoying your life. Therefore, retirees pick areas to live in that have the amenities they enjoy. 

And number five is social opportunities. We’re social beings; we’re created to be around other people. And retirees want to be in an environment where they’re surrounded by like-minded individuals. This is why there’s so many retirement communities build up across the country. 

Now, as important as each of these items are, many individuals are in a financial situation where they need to start considering the effect taxes are going to have on their future retirement. Because when you can get to a zero percent tax bracket prior to retirement, this one item alone could cause you to run out of money anywhere from 5 to 15 years faster than you otherwise would.

When we look at states that are naturally known as no tax states, what are some of the states you think of? If you’re like most people, Nevada often is at or towards the top of any list. Other states that often come to mind are Wyoming, Florida, Alaska, South Dakota, Texas, and Washington. Now, why is this? Because these are the seven states that impose no state income tax on the residents. But when it comes to taxes, we can’t just look at the current state income tax rates if we want to choose the right state to retire in. 

We also have to look at other taxes such as property taxes and sales tax. In addition, we need to take into consideration the possibility states will have to increase their tax rates in the future to meet unfunded liabilities. By now, we have a number of states that are having major financial problems. Many of them already have very high state income tax rates, like California and New York. But not all states with budget issues have used state income tax rates to solve the problem. 

Some of these states have chosen to have higher sales tax and property tax rates. But what about going forward? Well, some of these lower income tax states that are having budget issues have to change their tune in order to solve the budget problems they’re facing. What I found is that the government doesn’t seem that interested in cutting spending. For many of these states, including high income tax states, like California and New York, their only option will be to increase state income taxes as part of an overall plan towards getting to a balanced budget. 

Now, during your working years, you may be okay with living in one of these high-income tax states, because you feel you have the money you need to pay the taxes. But what happens when you get into retirement and taxes start going up? If you live in one of these states where taxes are increasing, your spending power is going to be reduced proportionately because you’ll be forced to pay more of your retirement income out in the form of higher taxes. 

So what is the worst state to live in for a retiree if they’re trying to avoid taxes? For most of you who answered the question, you’re going to be surprised to find out you were wrong. The two answers I usually get when asked this question are California and New York. Now one of these isn’t even on the top 10 worst list of unfriendly tax states, and the other one is at the bottom of the list. 

The state that’s not on the list is California. California, by no means, made it to the list of Top 10 most tax friendly states either, but it also did not end up on the list of Top 10 worst tax states. The main reason is because we’re including other taxes in our analysis besides state income tax. We’re also including property taxes, sales tax, and how each state taxes retirement benefits such as social security and tax deferred distribution.

What is the list of Top 10 least tax friendly states for retirees?  Let me go ahead and go through these 10 states now. Number 10 is New York, then Illinois, New Jersey, Rhode Island, Vermont, Minnesota,Wisconsin, and Kansas comes at number three. I was a little surprised when I first saw this list had number two as Connecticut. And number one, the state in the country that is the worst for taxes is Nebraska. Now, my guess is that nobody gets that. 

Remember, if you live in one of these states, I’m not here trying to tell you that your state is bad. All I’m trying to point out is that when you look at taxes retirees have to pay, these are the most costly states when you take into consideration all forms of state tax. 

Now you know what the worst states are? Does anyone want to guess possible states have made it onto the list for the top 10 most tax friendly states. Let me go ahead and give you the answers to this. 

Number 10 is Arizona followed by Georgia, Florida, Mississippi, Tennessee, South Carolina, Alabama, Delaware, Nevada,  and the best state in the country for taxes is the state of Wyoming. 

Now this second list probably isn’t as surprising as the list of worst states, but here you have it. Let’s talk about a couple of disclaimers regarding these two lists first. These states were ranked based upon the overall tax burden of the one specific couple. That means that since your facts and circumstances will be different, this list may not be in the exact order it would be for you and your family.

Second, these two lists are only taking into consideration taxes. There’s no calculation for the cost of living. Therefore you can live in, let’s say, Delaware and at the cost of living was substantially higher than Kansas, you still may have less money to spend even though your taxes in Delaware would be much lower than they would be if you were to be living in the state of Kansas. 

Now you know where you should live if you’re trying to save taxes in retirement. What if you’re not yet in retirement, and you’re trying to get to the zero percent tax bracket before you hit retirement age? 

If you want to get to the zero percent tax bracket by retirement, and you want to take advantage of historically low tax rates, your best option is to be in a state that has no state income tax. That way you can do Roth conversions without additional costs or having to pay the state income taxes. 

I realize this is easier said than done. If you’re living in a high income tax state now, it may be almost impossible to pick up and move to a low income tax state for a five year or so period of time until your Roth conversions are complete. But just because it’s hard to do, it doesn’t mean we shouldn’t discuss it. 

There will be some who will be in a position where they can move states and take advantage of this strategy. What about those of you who are living in high income tax states, maybe such as New York, but want to spend your retirement years in a no income tax state such as Florida? Does this mean you should wait to do any Roth conversions until after you move? Not necessarily. 

For some of you, you are currently in the 24% tax bracket. When we hit January 1, 2026, your tax rate is going to go up from 24% to 33% overnight. This is a 9% increase. Your effective state income tax rate may not be this high, which means that converting to a Roth even during a time you live in a high income tax state may be better than waiting and delaying the option until you move, especially if it means you’re going to miss out on the historically low federal tax rates we currently have. And it’s my belief that this initial increase in January of 2026 is just the beginning of continued tax increases we’ll see for many years to come. 

When it comes to your retirement, you are faced with a lot of decisions, and I get that it can be very overwhelming. However, the best way to solve the issues facing your retirement is to plan for them. You need to consider what you want your retirement to look like, not only from a quality of life perspective, but also a financial perspective, and then start working on a plan to provide you with the retirement you expect to have. Because if you don’t, you may find that you’re going to have to sacrifice some of the personal benefits you never thought you would during your retirement years. 

READ MORE