5 ways to protect yourself from financial scams

Now that most baby boomers have begun hitting their golden years, they have become a golden target for financial scammers. Government officials expect 2011 to be a record year for scams against those 50 and older, so here's a list of 5 things to do to protect yourself.

The oldest of the roughly 77 million baby boomers (25 percent of the nation's population) will begin to turn 65 this year. Changes in pension structures have made most of them dependent on 401(k) payouts for their primary retirement income (other than Social Security), according to a study by Deloitte. Because these 401(k) payouts are typically lump sum, these retirees have to invest this money without the automatic benefit of professional money managers that comes with defined benefit pensions.

The North American Securities Administrators Association (NASAA), a group of state financial regulators, saw the number of enforcement actions involving investors age 50 or older double last year and expect it to hit a new record in 2011. The economic downturn has ravaged a lot of retirement funds and left people more desperate to find a way to recoup their losses. In addition to that, they are doing this at a time when their financial abilities are on the wane. According to a study by the Boston College Center for Retirement Research, a typical person's ability to make effective financial decisions peaks around age 53 and then goes downhill.

With that in mind, here are a few ways to protect yourself:

1: Don't rely on your broker - whose interest is in making money from you - and instead work with an Independent registered investment advisor who works on a fee-only structure. RIA's are required by law to put the financial interests of the client ahead of their own.

2: Beware of anything or anyone who has the "secret" to bigger and faster profits. There are no secrets. The facts are this: This is a lousy time to be saving money. Interest rates are rock bottom and anyone who tells you they have a "safe" stock is either a liar or a fool.

3: Don't think that it can't happen to you There's an old saying in poker: If you're sitting at the table and don't see any suckers, then you're it. A lot of the people who became victims of Bernie Madoff's Ponzi scheme knew a lot more about finance than most people. They knew so much that they didn't think there was anyway they could be fooled.

4: Stay away from unsolicited offers Scammers are very good at making their scams look legit. They'll set up websites, telephones sometimes even offices. (Remember The Sting?) They will be very nice, and explain how they are looking out for you. If an offer shows up out of the blue then triple check it. Better yet, ignore it. Remember this key rule: If it sounds to good to be true, it is.

5: Don't take anyone's word for it - especially family or friends. They may be right or they may not, it's up to you to find out which. Just because you don't know the ins and outs of high finance doesn't mean you can't check someone's facts. There are a lot of online communities where you can ask questions and get good answers. Motley Fool is one, and there are many others. Email us at asktheexperts@moneywatch.com.

Both the Securities and Exchange Commission and FINRA (Financial Industry Regulatory Authority) have numbers to call for help, in addition to online resources.

SEC: (800) 732-0330

FINRA BrokerCheck: (800) 289-9999 

Also, you can find a complete list of state financial regulators at the NASAA web site

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    Constantine von Hoffman is a freelance writer and writing coach. His work has appeared in outlets such as Harvard Business Review, NPR, Sierra magazine, Brandweek, CIO, The Boston Herald, TheStreet.com, CSO, and Boston Magazine.