This Common 401(k) Scam Is Hitting Retirees Hard (Here’s How To Spot It)

You've spent your entire professional life building up your 401(k) and other retirement accounts. That's why it's essential to keep them safe from scammers who want to steal your money.

Unfortunately, the number of scammers targeting seniors has surged in recent years. According to the Federal Trade Commission's annual report to Congress released earlier this month, adults age 60 and older reported $2.4 billion in scam losses last year, which is an increase of 26.3% from $1.9 billion in 2023 and a 300% jump from $600 million in 2020.

To avoid wasting your retirement savings, here's how to spot and stamp out 401(k) and retirement account fraud so you can keep your savings safe.

Impersonation scams are targeting seniors

The truth is, it's never been easier for scammers to target older adults and their retirement savings. The uptick in artificial intelligence means criminals can now collect personal information at a much faster rate, and they're using more sophisticated methods of deception. This means you have to be extra careful when responding to any "urgent" messages for fund transfers.

What the scam involves

According to the FTC, these impersonation scams typically involve someone from a trusted government agency or business alerting you to an urgent problem, convincing you to transfer your money to protect it. But in reality, this person is stealing your retirement savings.

This could look like the individual claiming they're from your bank or organization that handles your 401(k), flagging suspicious activity on your account. It could also look like an individual claiming to be a government officer, flagging that your Social Security number is being used to commit crimes. You might also be bombarded with a fake on-screen security alert on your computer, and when given a number to call, the representative claims your online accounts have been hacked.

Seniors are being flooded with endless fraudulent claims about transferring funds to protect them, but be wary of any "employees" asking for your personal information for a funds transfer; it's all a ruse.

Why your retirement savings are at risk

Older Americans and those who have already retired are more at risk of being taken advantage of by scammers. Often, this is because they have large retirement accounts and are more susceptible to being deceived by criminals.

Younger generations have grown up on the internet and have learned to spot scams and ignore spam calls and emails, but that's not always the case for those nearing retirement age. Ultimately, their financial stability and accumulated savings are all too attractive to scammers.

Red flags to watch for

When these criminal spammers contact you, there are a few things that should immediately make you wary of their intentions. Any one of these red flags is an immediate indicator that the person on the other end of the line is trying to take your money.

Unsolicited contact

Suppose there is something seriously wrong with your account. In that case, you will often receive an official letter in the mail or from the government or your investment company, in addition to an email that contains the company URL in the byline.

Usually, you shouldn't receive a call unless you initiated a concern. If you're contacted out of the blue, treat the call with caution.

Pressure to act immediately

Scammers are hoping you'll panic and act quickly out of fear, forgetting to ask questions and verify information. But a legitimate government representative or financial company will never ask for immediate action to move your money or request payment.

Requests to pay with gift cards or cryptocurrency

Criminals will want to receive funds in gift cards or cryptocurrency, so it's harder to trace. No reputable organization would ask for a funds transfer in this manner. If they bring it up, that's an immediate giveaway that they are scammers.

Requests for personal information

No company or governmental official will ask you out of the blue for your personal information; they'll already have it on file. Requesting your Social Security number or account number is a significant red flag, especially if the request comes via phone, text, or email.

How to avoid impersonation scams

Luckily, there are some steps you can take to protect yourself financially from these scammers and keep your 401(k) safe.

Never move money under the guise of protection

The FTC warns seniors to avoid moving money to "protect it," especially in response to an unexpected call. The government or your financial institution is the safest place to keep your retirement money and other accounts, even if there are issues with it.

Verify the sender/caller

Email and phone scams can look official at first glance, but once you look at the email address or the contents of the message, you may notice some irregularities. It will be abundantly clear if you are receiving official communication or not, so if an official representative contacts you out of the blue, hang up and call back using a number or email you know is real.

Be skeptical of any unexpected communication

You get monthly statements from your retirement accounts detailing the growth and the total balance. If something suddenly were to change, you'd receive official correspondence, not some random phone call asking for your information.

Don't let your emotions overwhelm you

Many of these scammers will attempt to manipulate you emotionally and claim the urgency of safeguarding your money. The government or your investment company would never act in such a way, trying to get you to act instantly. These companies have safeguards in place to address suspicious activity.

Bottom line

Scammers are becoming increasingly sophisticated, particularly with the rise of AI, and older Americans with substantial retirement accounts are prime targets. By recognizing red flags such as unsolicited contact, pressure to act quickly, or unusual payment requests, you can protect yourself and your savings, leading to a stress-free retirement.

One more important fact: because most fraud goes unreported, the FTC estimates that older adults' actual losses in 2024 may have reached as much as $81.5 billion. Staying alert and skeptical is your best defense against becoming part of that statistic.

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