Drained Retirement, Maxed Credit Cards. How Scam Victims Start Rebuilding

18:38Sean Pyles:It's just going to be a really tough thing to do, especially if the money has been wired or the credit card charge has already gone through. That doesn't mean there's nothing you can do. There are actions you can take to recover from scams. It's really worth filing reports. So the Identity Theft Resource Center and the Federal Trade Commission are two places that people should be filing reports. Also have your guard up if you have been scammed, and especially if you've talked about it online, there are a lot of threads on Reddit where people share their scam stories. After that, sometimes scammers will actually reach out to scam victims and pose a scam recovery resources and make you pay money for quote unquote scam mitigation.

19:16Sean Pyles:And then guess what? You've been scammed again. So if romance scams are a certain type of evil, scam recovery scams are maybe even a more complex, insidious kind of evil because you've already been scammed and you feel so bad about yourself. And these people are taking advantage of you yet again. In terms of getting money back, it's just likely not going to happen. You could try to reverse a wire transfer, but just again, have realistic expectations that it's likely not going to happen. So heartbreaking. But life has to go on. The bills still keep coming in. So what are some ways to the bulk of the listeners question that their parent can maybe start rebuilding their finances, especially if they're on the older side?

19:56Sean Pyles:A first step to take would be hopefully stopping the financial drain. The tough part with our listeners question is that the dad doesn't think that he was scammed at all. So there's a chance that he could keep sending money to this person online. And honestly, we do need to acknowledge the fact that this might not be a scam. It could be a real person on OnlyFans abroad, and the dad is just sending a bunch, a bunch of money to this real person. Yes, they're probably being taken advantage of. That doesn't mean it's necessarily a scam, though. And there's a difference there. Why didn't I think about that?

20:27And I don't know if that makes it none of this is better or worse. But then truly, if the dad is paying for a service, how can you tell your dad to stop paying for the service? Yeah, it's not the smartest financial move to drain your retirement savings. But if that's what they want to spend their money on, that's what they want to spend their money on.

20:42Sean Pyles:I mean, that's the cost of connection for their dad. And that's a sad truth. But again, it may not be a scam. I think that it could well be just based on the amount of money that he sent. At the very least, it's some troubling behavior and it could actually be a sign of other health issues. One thing that stands out to me is when I've talked with scam experts about parents and elderly people sending money to strangers online, is that if this is a big change in their behavior or maybe a pattern of troubling behavior that's emerged, it could be a sign of some kind of cognitive decline, which is a whole other conversation to have.

21:20Sean Pyles:But that could be something to be aware of and maybe begin to set up some doctor's appointments to help sort out. So in terms of the dad rebuilding his financial life, he's going to want to get out of this credit card debt. I don't know what the interest rate is on this debt, but it's probably pretty high. So maybe he could get a balanced transfer credit card for some of what he's owing to get that down to a lower interest rate. That would help somewhat. One thing that really stood out to me as a potential hopeful opportunity is the two properties that he has. We don't know if they're rental properties, but if they're not, they could easily become rental properties, I imagine.

21:53Sean Pyles:And that can be an important source of income to help rebuild some savings and pay off this debt. I'm sorry to be extreme here, but I just think, well, where is the limit if we can't get dad to stop sending money to OnlyFans? Because it's not bizarre for someone on this trajectory to even sell a property to fund this. I don't want to call it an addiction, but to fund this habit. Something else that comes to mind as well that dad can do since dad is still working is contributing to retirement accounts. And because of their age, they can also utilize catch up contributions. So if you can't get dad to stop spending, at least get dad to keep saving and investing so there's more money coming in.

22:30Sean Pyles:And something else I want to focus on in our listeners' question is whether there are financial planners who can help scam victims specifically. And I'm not aware of a lot of planners who have a specialty in scammers per se, but financial planners, their bread and butter is helping their clients save for retirement and leverage their wealth and expand their money. So that can be something that they could work with a financial planner on. I would hope that this parent actually has already been working with some kind of financial planner, so maybe they can get in contact with them. But also, it seems like the listener wants to be more involved in their parents' financial life, so there are a few ways they can do that.

23:08Sean Pyles:One is to become what's called a trusted contact person on financial accounts. So if a financial institution suspects that the account holder is the victim of a scam or financial fraud, then they would actually reach out to this person, which would be the daughter in this case. Similarly, you could actually look into having shared accounts with your parents. That way you can monitor what they're spending their money on. That could be an invasion of privacy for some parents. They might not want to kind of relinquish that control or sense of autonomy, but that is an option. Again, you have to tread really delicately in how you have this conversation and not try to have your parent feel like they're being patronized to.

23:50Sean Pyles:But that's something that people could look into. So shared accounts are a tool that you could leverage, but not every parent is going to be open to that. I'm also thinking about a power of attorney. I know the dad would have to consent to his daughter being the power of attorney, but what about that option? With the power of attorney, you can manage someone's assets on their behalf if they are unable to do so. the parent has to be of sound mind when they're signing off on this. And there usually is some sort of event that springs the power of attorney into action, like they're mentally incapacitated.

24:20Sean Pyles:So if the father is still able to navigate the bank accounts and navigate to OnlyFans, that might not be a tool they can use quite yet, but maybe further down the road, that might be something they want to look into. And in fact, actually now might be a really good time to set that up and have that conversation while the parent is of sound mind. And it does make me also wonder whether the dad has an estate plan in place. Do they have a will? Do they have a trust? What's going to happen to their assets when they pass? Will it be given to this OnlyFans person? Who knows? Yeah. And that is something I was thinking about too in this conversation is just the emotional toll.

24:55Sean Pyles:The listener and any of their siblings, if they have them, are probably mourning whatever potential inheritance they might have had. Because this big financial shock of draining retirement accounts and racking up all this debt can have huge implications in terms of generational wealth and what's being able to be passed on. And that's also really stressful to grapple with on top of just seeing your parent do things with their money that you think are really risky and unwise. It's so stressful. And I encourage the listener viewer, if you are listening to this episode, to seek out a healthy way to express any frustration that you're feeling, whether that be therapy, close friends and family.

25:34I'm sure you're already talking to someone, but this can be a very heavy thing to deal with, especially because you just can't stop it. So I'm wishing you all, all, all the love.

25:43Sean Pyles:Yes, I agree. And one last thing I want to throw out is that there are resources for seniors who have lost all of their money, like government benefits in particular. We know there have been recent restrictions on SNAP benefits, but they're still available. People can also potentially get help covering things like utilities. And we don't really know what the listeners' father's whole financial picture is like and whether they actually be eligible for these, but it's still something to look into. What a sad topic. I don't know. Yeah, a bit of a bummer, but at least there's something that people can do.

26:16Sean Pyles:I mean, again, so much of this comes back to having those conversations with your parents regularly. And this is something that you and I have talked about, Elizabeth, as our parents are aging, is how we can be there for them financially. And this involves things like making sure they do have an estate plan set up, what their beneficiary designations are like, what they want to have happen after they pass, and how to stay safe from scammers while they're still around. Prevention is the best cure in this scenario. So I will be texting and calling my parents after we finish this and telling them not to open up anything spammy and send them some resources.

26:50Sean Pyles:So really the bottom line here is to have these conversations with your parents. so hopefully you can prevent them from getting scanned going forward. Up next, this week's money news where we dissect a hot topic. Interest rates are going up, so let's find out what that means for your finances.

27:10Sean Pyles:Today's episode is sponsored by Quince. You know, Elizabeth, I'm not big on trends, but I am big on clothes that feel good and last. That's why I keep going back to Quince. Their lightweight layers and high quality stables have become my everyday essentials. And actually, Quince has all the things that you want to wear this summer. It is super hot in Texas, so I appreciate the organic cotton silk polos, European linen beach shorts, and comfortable pants that work for everything from your backyard hangouts to nice fancy dinners. I've been loving using my European linen duvet cover every night. I'm such a warm sleeper, and in these hot summer months, I need it just to get to bed at night.

27:48Sean Pyles:And it's so soft, so comfortable, and the color is delightful. I have only just realized that there are levels to towels. I got my first set of classic organic Turkish cotton bath towels, very fancy. And I must say they are so soft and fluffy. And honestly, it's changed my perspective on buying cheap ones. But Quince is helping us live our domestic bliss. I love that. Stick to the staples that are going to last with elevated essentials from Quince. Go to quince.com slash smart money for free shipping on your order and 365 day returns. Yep, that's all year. That's q-u-i-n-c-e dot com slash smart money to get free shipping and 365 day returns.

28:32Sean Pyles:Quince.com slash smart money. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18+. All right, let's get to our weekly Money News Roundup, where we break down the latest in the world of finance to help you be smarter with your money.

29:07Sean Pyles:Our news colleague, Anahil Hoski, is here with the latest from the Federal Reserve. Yesterday, the Fed's Open Market Committee raised what's called the federal funds rate by 25 basis points, which means that in all likelihood, interest rates are on the way up. Hey, Anna. Hey, Sean. Today I'm speaking with Brian Kutzinger, an economics professor at Florida Atlantic University, about what the first rate hike in three years means for Americans and the economy. Brian, welcome to Smart Money. Great to be with you, Anna. Thank you. Now, a federal funds rate hike was the consensus expectation going into this meeting, But what do you think tipped the Fed toward raising rates rather than holding?

29:42If you look at the recent price data, and Chairman Warsh mentioned this during the press conference yesterday, he doesn't see the trend moving back to the Fed's 2 % target quickly enough. He was careful to point out that he doesn't look at a single data point because a single data point doesn't make a trend. But he emphasized during, I believe it was the Q &A specifically, that he just does not see the trend moving in the direction that he thinks it needs to be seeing for the Fed to get inflation back down to its 2 % inflation target as quickly as he and the other committee members would like.

30:12Now, let's talk about how this decision fits with the Fed's dual mandate. Now, first, please explain for us what that is.

30:17Sean Pyles:And then was this move driven by inflation concerns, labor market strength or something else? What was dominant? The Fed has a mandate from Congress. It's actually a triple mandate, but no one ever talks about the third one. So it's stable prices, maximum employment and moderate long-term interest rates. That's the one that is frequently never discussed. But the Fed usually emphasizes those two, the price stability side of the mandate and the full employment side of the mandate. Now, the way in which the Fed interprets that full employment or the maximum employment side of the mandate is not that we want to have 0 % unemployment or everybody in the economy working, including children and retirees and whatnot.

30:57But instead, what they're emphasizing or what they're looking at is the maximum sustainable level of unemployment. Sometimes economists call this the natural rate of unemployment. What they'll look at is their estimates of what that natural rate is, and then they'll compare that to what the current unemployment rate is. And if the current unemployment rate is meaningfully above what they think the natural rate or the rate of full employment is, then that would signal to them that, OK, maybe the economy is a bit weaker than we would like and perhaps it needs some additional monetary stimulus. The price stability side of the mandate basically just says the Fed should pursue price stability, but Congress has largely left that up to the Fed to interpret themselves.

31:36So in 2012, the Fed actually adopted an explicit inflation target of 2%. Before that point, they did not have an explicit inflation target. But again, they imposed that on themselves. That didn't come from Congress that the Fed targets 2%. So what the Fed is doing when they talk about both sides of their mandate is they say, on the one hand, we're supposed to pursue price stability, And at the same time, we're supposed to pursue maximum employment. And so if we see that the labor market is doing quite well, and in fact, yesterday during the press conference, Chairman Warsh did point to the recent labor market data suggesting that it is doing quite well.

32:07The unemployment rate remains near the maximum level and remains relatively low. Then they're going to start looking at the price stability side of their mandate. And they're going to start looking at, well, is it time to start raising rates and pulling back some monetary stimulus to try to get the growth rate of total dollar spending in the economy to slow down and therefore bring the growth rate of prices back down to the Fed's 2 % inflation target.

32:31Sean Pyles:Following the decision, Fed Chair Kevin Warsh spent a lot of his time emphasizing the strength of the economy, kind of like you said, stronger hiring, robust credit, productivity, capital investment. Does that change how we should think about this rate hike? Is the Fed essentially saying that the economy can handle higher rates right now? Yeah, I mean, there's a couple different ways to think about this. So oftentimes, and for obvious reasons, if you're a consumer, you think of higher interest rates as being bad. And in some sense, you can see why, right? Like if you're going to go buy a car, you're going to buy a house.

32:59And if you're financing it, you care about what that interest rate is. But if you think about a technology like AI, what is this doing, right? AI is creating a massive demand for capital investment, and that's going to put upward pressure on interest rates. And I don't necessarily regard that as a bad thing. And so if the economy The economy is doing very well. It doesn't follow that we should have low or relatively low interest rates. In fact, the more the economy is growing, we would actually expect rates to be rising somewhat. If you look at what Chairman Warsh said, it's exactly that. He says, look, the economy is doing quite well.

33:32There's really no concern here that monetary policy is being restrictive or holding the economy back in any way. In fact, it might be too accommodative, as evidenced by the fact that the in-trend inflation is not coming back down to where the chairman and the rest of the committee would like to see it. And so basically, I think what he's saying is, yes, the economy is doing well. We can raise rates a little bit here, see if that eases price pressures somewhat. And as long as we don't see a threat manifesting in the labor market to the other side of that dual mandate, then OK, we might actually raise rates again at our next meeting.

34:04And in fact, if you look at the FedWatch tool from the CME group, it does look like the market is potentially projecting another rate hike later this year. The October meeting, it's mixed, but by December, we might actually get another rate hike this year. Now, on the consumer side of things, how soon could this hike actually show up in things like credit card, auto loan and mortgage rates? That's an interesting question because what the Fed primarily controls is not the long end of the yield curve, to use the jargon in economics. That is, they're not going after or targeting the rate on the five-year treasury note or the 10-year treasury note or the 20-year, the 30-year treasury bond.

34:43Instead, they're looking at the rate at which banks lend money to one another overnight, which is the federal funds rate. They have a lot more influence over that short-term rates rather than long-term rates. Now, that said, after the decision, I did go and look at what happened to both the five and the 10-year note after the decision. And those yields did go up a little bit, but not by very much. So for frame of reference, just after the Fed's press conference, the five-year yield increased by 0.051 percent. So very small, much smaller than the actual increase in the Fed's target for the federal funds rate.

35:17On the 10-year note, the increase yesterday afternoon was around 0.024 percent, right? So a very, very small increase relative to the 0.25 % increase that we saw in the Fed's target. So in terms of affecting car loans, home loans, and the like, I don't know that this decision has much of an effect. There, the primary factor driving rates higher for car loans and home loans and so on down the line are two things. One, an increased demand for credit for the AI buildout. So there's a real increase in demand for credit by the private sector to build out to meet AI demand. And the other is the federal government borrowing more, right?

35:59So the federal government is essentially competing with private sector investors who are trying to borrow for AI buildout and the related infrastructure that goes with it. And at the same time, the federal government is itself competing with those demanders for loanable funds. And that's going to push interest rates higher, even in a world where inflation is well in line with the Fed's target. So there, I think the primary thing that's making credit more expensive for consumers is not so much monetary policy as it is real factors that are driving rates higher. The AI build out and the federal government borrowing a great deal.

36:31And what does this mean for people who are putting money away rather than spending it? Could they see better yields on their savings accounts or CDs? Absolutely. In fact, it's funny that you mentioned this. As soon as I saw the decision, I went and looked at what the federal money market rate was on my account where my wife and I keep our rainy day fund to see if it had gone up. But of course it hadn't. You should expect to see this reflected in money market mutual fund type accounts, money market accounts, checking accounts, savings accounts, to the extent that these are paying interest. We should see these go up a little bit.

37:00Before the decision, I think the federal money market rate that Vanguard was paying, for example, on VMFXX, which is their federal money market account, was like 3.63%, give or take a few points. I would expect that to go up a little bit in response to the Fed raising its policy Because, again, that rate that Vanguard is paying on VMFXX reflects what's going on on the short end of the yield curve in the T-bill market. If that rate is going up because the Fed is pulling back some liquidity out of that T-bill market, you should see the rates on those T-bills rise. And so any account that you have that's, again, money market, mutual fund, money market account, checking account, savings account that uses that short-term money market as sort of a baseline for the rates that they pay, you likely would see these rates go up somewhat.

37:42One last big picture question. How much does yesterday's decision change the outlook for the economy and financial markets? The big picture here, I think, is that it opens the door to subsequent rate hikes. So I think the decision to raise rates yesterday was the right decision in my own view. The bigger picture is that it signals to markets that the Fed is likely to take further steps this year to continue to pull back some of that accommodation that you referenced earlier to try to get aggregate demand or total dollar spending in the economy back down to be in line with their own inflation target.

38:16I don't think it really signals anything about, well, what's going on with the real U.S. economy, like Chairman Warshad. And I agree, I think the real economy is doing quite well. The primary problem that the Fed faces right now is how do they get total dollar spending back down to be in line with their inflation target? And the decision yesterday to raise rates by 25 basis points, I think, opens the door to another rate hike either in October or December or potentially both if the FOMC, the committee that sets monetary policy, does not see inflation come back down to their trend. And again, I don't think we're going to see it come back down to 2 % this year.

38:50I think what they're looking at is, are we moving in the right direction so that by 2028, you know, inflation is coming back down to 2%. Now, that said, if you look at the Fed's summary of economic projections, because we got a release of projections yesterday and those come out every other FOMC meeting, they do have inflation remaining elevated all the way until 2029. So it probably is going to take some time for inflation to get back down to the Fed's target, which signals to me that the Fed is likely to raise rates as we move forward. But I think they're going to be very cautious as they do so.

39:21I don't think they want to overreact in the other direction and raise rates too quickly. They would rather just ease that accommodation slowly and maybe the proverbial soft landing. They might hear economists use. I think that might be what they're trying to aim for. All right. Brian Kutzinger, economics professor at Florida Atlantic University. Brian, thanks for breaking that all down for us. Hey, thanks for having me, Anna. It was a real pleasure.

39:41Sean Pyles:Thanks, Anna. That's all we've got for this episode. Remember, folks, our job as nerds is to answer your money questions, so keep sending them our way. You can leave us a voicemail or text us on the nerd hotline at 901-730-6373. That's 901-730-NERD. You can also shoot us an email at podcast at nerdball.com or leave us a comment on Spotify or YouTube, whichever you prefer. Join us next time to hear about investing in real estate. Follow Smart Money on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes. Also, if you guys are more visual learners, you can catch us on YouTube where we have full video episodes.

40:18Sean Pyles:We also have those on Spotify too, if that's your jam. Here's our brief disclaimer. We are not your financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. Some companies mentioned in this episode may be NerdWallet partners, but does not influence how we talk about them. And with all of that said, until next time, turn to the nerds.

40:43Push your limits, train with precision, see the results. At Equinox, that's high performance loving. Iconic spaces that inspire. Personal training backed by real data. Unlimited group fitness classes from yoga and Pilates. to strength and conditioning. Elevate your post-performance ritual with saunas, steam rooms, cold plunges, and more. Everything you need to lock in and unlock your potential at Equinox. Start today at equinox.com.