Retirement Investment Scams And How To Avoid Them

People who are about to retire often find themselves faced with a million different brokers who have a million different great ideas about what they should do with their savings. It can be overwhelming, but Kiplinger has a great article about shady investment scams and how to avoid them.

The most common schemes are over-hyped investment returns, unsuitable annuities, and Ponzi schemes, and the most important first step to avoiding all of them is to do a little background check on the broker you’re considering. If you’re going to be scammed—at least have the decency to be scammed by a licensed stockbroker!

From Kiplinger:

Be suspicious of any sales pitch that promises unrealistic returns. “Anytime you’re talking about average returns of greater than 12%, you’re not in the ballpark,” says Jim Eccleston, a securities lawyer in Chicago. In the BellSouth case, not only were investors led to believe they could earn about 12% per year, they were also told they could afford to withdraw 9% of their funds annually for 30 years.

Before doing business with a broker, check his or her background using Finra’s BrokerCheck tool. Look for disciplinary actions taken against the broker, as well as red flags — for example, the broker has frequently changed firms.

If the adviser is a certified financial planner, check his or her credentials with the CFP Board of Standards. Also consult the Senior Investor Resource Center and the SEC’s senior investor page.

Just checking whether the broker has a securities license can keep you out of serious trouble. “Maybe one in ten of our cases involve a licensed stockbroker,” says Colorado securities commissioner Fred Joseph. Many of the most notorious purveyors of bogus investments never held a license.

The article also recommends getting everything in writing, including making notes of any and all conversations you have with your broker. You can also ask the broker to provide you with a written summary of your discussions.

You should also make sure to open an account with an actual financial institution. Don’t just write a check to “Bob Awesomebrokerville.”

Protect Your Retirement From These Investment Scams [Kiplinger]


Edit Your Comment

  1. Myron says:

    Repeat after me: If it sounds to good to be true, it is.

  2. HRHKingFriday says:

    This is why I’m concerned about the boomers retiring. My boyfriends parents think Check-n-to-Cash is a bank! Pensions were probably our last best hope to avoid complete dependence on social security.

  3. savvy999 says:

    It takes a real scumbag to scam money from retirees and/or the elderly.

    Like the Comcast HammaGramma, I’m all for octogenarian vigilante justice.

  4. forever_knight says:

    @HRHKingFriday: haha.

    your boyfriend will be taking care of his parents for a long time.

  5. darkened says:

    Previously being an insurance agent, reading the last line about asking the agent to be put on speaker phone with the state insurance commission, I would have gladly agreed to it if they were immediately available as most insurance sales are made 5-10PM.

    Just keep in mind while all insurance agents are there to sell you insurance, they are required by their appointed states insurance licenses to sell you insurance that offers benefit to you. Agents will not try to coerce you into making bad decisions, especially for replacing insurance since it makes us personally liable for finical harm. Most agents will never even truly replace a policy, when i did, i would never replace it in the home, i made sure my clients would apply for the insurance and get their actual coverage and tell them to review it and make sure it all fits their needs, to call me if they have questions and then if they so choose to, cancel their other existing coverage.

    The other thing to know annuities can be an incredible investment if you make informed thought out decisions on buying them. Most annuities can greatly increase and guarantee your income if you roll over your IRA into an annuity.

  6. startertan says:

    @forever_knight: I don’t know which is worse getting scammed or doing it the way my parents do…hiding it under the mattress.

  7. Snarkysnake says:

    You’re being scammed again if you read the shill comments that will undeoubtedly be placed here by insurance agents,crooked advisors and ignoramuses that hover around your retirement savings like flies around dung.

    Look,people…Unless you are paying “fee for service” for your financial advice,there is no such thing as unconflicted advice.These commissioned “advisors” are cooks with just one recipe:Buy what I am selling you right here,right now.They know that the vast majority of people are ignorant about the mechanics of these things like annuities and mutual funds. They are preying on you (and even worse,your parents or grandparents) so that they can take part of the money that they/you worked so hard for .When these snakes slither up to your door (or mom and dad’s door) and try to sell you a product that you haven’t asked for and don’t understand,find out what they are getting out of the deal.Don’t be shy.If they are evasive,or deceitful or vague-toss the money grubbing bastards out in the street where they belong.
    Now. Some financial advisors make perfect sense.These are the ones that you pay and know that they will not be getting a commission based on what they tell you to invest in. You know which side of the table they are on.Do they make mistakes ? You betcha. But you can always change if they are total fuck ups.If you are locked into a commissioned contract with back breaking penalties and surrender fees,you are just stuck.I don’t care what these jerks that will write in after me try to tell you-STAY AWAY FROM THE MIDDLEMEN THAT SELL ONLY ON COMMISSION.
    One more thing-If you absolutely must have an annuity or whole life insurance,Vanguard sells low or no load annuities that will do the same thing for you without the crushing fees that these other assholes demand.Bet your “advisor” won’t tell you that .I just did.Google “No load life insurance” or “low load life insurance” and you may be surprised at how you have been getting ripped off by the fees and charges these things have.

  8. BigNutty says:

    That’s why when they get older, the kids better take control of the money if they are not idiot’s themselves.

    My aunt and uncle hid their money in the walls. I was just waiting for them to go on vacation on a cruise, have a titanic experience, then become a millionaire overnight.

    Don’t worry, I would always tell them this to get them to put their money in a bank but it still didn’t work.

  9. vastrightwing says:

    1) Stay away from all retail brokers. They make money buy selling you useless junk.
    2) There is a big difference between retail brokers and institutional brokers even though they share the same name and logo. The retail arm is there to provide capital to the institutional side.
    3) The training retail brokers get is how to sell consumers their products. They know little about the products they try to sell.
    4) Retail brokers don’t know your situation and don’t have time to know what’s best for you. Even if they did know, if they don’t offer the right product, they can’t help you.