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Don’t Let Your Retirement Get Scammed
By JLP | January 7, 2008
From the January 2008 issue of Kiplinger’s Personal Finance:
Ed and Ruthann Wolfe just wanted a safe place for their retirement savings. During his 32 years at the Rubbermaid plant in Wooster, Ohio, Ed had amassed more than $320,000 in his 401(k), all of it invested in low-risk Fidelity mutual funds.
After Newell bought Rubbermaid in 1999, early-retirement offers were made to more than 180 employees at the Wooster plant, including Ed, then 55. At the same time, many of his colleagues began attending investing seminars hosted by a Merrill Lynch broker, who was telling investors they could earn more money if they retired than if they stayed on the job. “There was a buzz going around the shop about how good this could be,” recalls Ed. “We thought we couldn’t afford not to do it.”
The Wolfes turned over their entire $320,000 in retirement savings to the broker, with instructions to keep their money in low-risk investments because they needed to start making withdrawals right away. So they weren’t concerned when the stock market tumbled in 2001.
Then they began hearing from friends whose investments had declined in value. Ruthann called the broker and was shocked to find out that they’d have to stop withdrawing money or go broke. Their retirement stash, which the broker had invested in high-risk Internet and tech companies, had plunged to less than $100,000. “I felt it could be the end of the world,” says Ed, who went back to work driving trucks for two and a half years.
Pretty sad isn’t it? There’s lots more stories out there just like that one.
Bottom Line: You CAN’T trust ANYONE but yourself!
It’s true. Even though you might have the best advisor in the world, you STILL have to keep an eye on things in order to make sure your account is being managed properly. That’s why I think it is important to keep things simple (and diversified). The simpler your plan is, the easier it is to manage.
Anyway, read the entire article as it is a real eye-opener.
Topics: Retirement Planning | 8 Comments »
January 7th, 2008 at 12:23 pm
This is definitely why you have to actively manage your own finances. It sounds like they gave the broker free license to invest, rather than controlling what the broker was doing. Feel bad for them, but at the same time, you simply cannot give money to anyone and let them manage without your oversight.
January 7th, 2008 at 12:35 pm
Sad. I think this is an especially difficult issue for seniors in the US right now. Many of them feel overwhelmed by new things like the Internet and managing their investments online and perhaps figure that handing their finances over to someone else to manage is the best bet, and ultimately many get taken advantage of.
January 7th, 2008 at 2:44 pm
This is a story I’ve heard over and over with different ‘bad guys’ – Primerica, Dean Witter (now Morgan Stanley); pick the Wall St. investment house.
Two words missing are from the investment industry vocabulary: fiduciary responsibility.
In the late 90′s I was working at the Teachers Retirement System of Ohio. There were ‘investment gurus’ like these Merrill Lynch scum who were convincing people to cash out of their pension plans (and the pension-paid health insurance) to invest in the then high flying stock market.
No telling how many people are Wal-Mart greeters due to some well dressed sales rep. At 6% commission (typical for the industry) someone earned $19,200 from Mr. Wolfe’s rollover.
January 7th, 2008 at 6:33 pm
I think I would cry if someone did that to me. Imagine all the hard work that guy put in to be there.
January 7th, 2008 at 10:24 pm
Not that I’m gung-ho about suing, but if he gave instructions for them to go into low-risk investments could he sue for having them misplaced? It seems like giving someone your money and telling them to buy one thing and having them buy another is a legal matter.
January 7th, 2008 at 10:35 pm
Mrs. Micah,
If I’m remembering correctly, the couple in the post did settle with Merrill Lynch.
January 8th, 2008 at 12:46 pm
That’s good, JLP. It seems like if I paid someone to paint my house and he painted my neighbor’s house instead…there would be some kind of legal recourse or settlement. I suppose $100-200k that they lost (not including potential earnings) wouldn’t be too hard for Merrill Lynch to cough up. Especially if they fired the scammer.
May 26th, 2009 at 6:10 am
The number rule everyone should note is never trust anyone from merrill lynch, they are greedy incompetent scum who will leave you poor.