Loneliness, risk-taking makes older Americans prime fraud targets, Finra says

A recent study by the Finra Investor Education Foundation highlights key social and behavioral factors that increase the likelihood of older adults falling victim to financial fraud.

The research, which surveyed 905 individuals identified as fraud victims by the US Postal Inspection Service, found that engaging in certain routine activities, such as answering unknown calls or entering sweepstakes, correlated with a higher number of fraud incidents.

The study examined five common types of fraud – romance and imposter scams, charity fraud, investment fraud, product and services fraud, and prize or grant fraud. Researchers found that nearly half of respondents, 49 percent, reported falling victim to prize or grant fraud, while 43 percent experienced product or services fraud. Investment fraud accounted for 31 percent of cases, followed by charity fraud at 20 percent and romance or imposter scams at 12 percent.

“Older age, loneliness, financial or emotional precarity, and risky financial preferences and behaviors... were associated with more forms of fraud victimization,” Finra's study stated.

According to a February research report from TIAA, the number of fraud cases reported to the FTC $10 billion reached 2.6 million in 2023, more than doubling from 2019. At the same time, the reported losses tripled to $10 billion. It also found that older individuals tended to experience outsized losses, with those between 70 and 79 years old experiencing median losses of $803 compared to between $450 and $500 for younger age cohorts.

While Finra found fraud exposure increased with risky behaviors, the research also found frequent online activity was linked to fewer fraud incidents, casting doubts on the widely held notion that less digitally literate seniors are more likely to fall for scams.

The study applied the Routine Activities Theory, a criminological framework that examines how crime occurs when a motivated offender encounters a suitable target without the presence of a capable guardian. According to the report, individuals who engage in activities that increase their exposure to fraud – such as responding to marketing mail or engaging with telemarketers – are more likely to be targeted.

“Given that many fraudsters perpetrate scams by telephone and through the mail, engaging in these behaviors may pose a risk to individuals by increasing their exposure to scammers,” researchers noted.

The study also found that financial risk-taking behaviors played a role in victimization. Those who preferred high-risk financial activities, such as participating in lotteries, were more susceptible to fraud. Researchers suggested that scammers may take advantage of these tendencies by promoting deceptive investment schemes that promise high returns.

Additionally, loneliness emerged as a significant risk factor. “Adults who are lonely have unmet needs for social stimulation, emotional validation and companionship that might increase their susceptibility to fraud,” the report stated.

Still, social engagement and living with others weren't enough to significantly reduce fraud victimization. As Finra noted, the quality of relationships may be more important than the number of contacts in protecting against fraud.

The findings suggest that fraud prevention efforts should focus on educating older adults about behaviors that increase their exposure to scams. The report recommended targeted outreach, including financial literacy programs that help individuals identify persuasive tactics used by fraudsters. Additional strategies include blocking unsolicited calls, being cautious with sweepstakes and lottery offers, and providing resources to address social isolation.