Net Gains: Beware Early Retirement Scams
Some brokers tricked people into thinking they could afford to retire early.
April 30, 2008 — -- Retire early, cash out your retirement plans and live off 12 percent annual returns.
If there's a financial advisor pitching this scenario to you, I have just one recommendation: Run away — fast.
Securities regulators are offering the same advice in the wake of at least two schemes targeting longtime employees of two major corporations. In both cases, brokers used unrealistic investment projections to convince the workers they could retire comfortably while still in their 50s.
These scams allowed the perpetrators to earn investment fees and commissions on millions of dollars that otherwise would have been locked up in company retirement plans. In some cases, the participating brokers persuaded the workers to surrender a guaranteed monthly pension benefit and instead collect a single lump-sum payment.
The Financial Industry Regulatory Authority (FINRA) says that additional cases are now under investigation.
The agency last week launched an effort to educate both employers and workers to be on the lookout for early retirement schemes "that promise more they can deliver."
FINRA published two online brochures — one for employers, one for workers — that offer suggestions on spotting retirement schemes. Both brochures are available on the investor information section of the FINRA Web site, www.finra.org.
"Companies don't want to unwittingly help scamsters lure their employees into cashing in their retirement investments early with misleading promises of big financial returns — and comfortable retirement lifestyle — that simply can't be sustained," FINRA chief executive Mary L. Schapiro said in launching the effort.
FINRA is an industry self-regulatory agency that oversees securities firms and brokers. It was created last year from the merger of the regulatory arms of the New York Stock Exchange and the National Association of Securities Dealers.
FINRA advises employers to check out the backgrounds of advisers offering retirement seminars to their employees, review seminar materials and confirm advisers have their firms' permission to offer such events. FINRA also is offering to review seminar materials brought to them by skeptical employers.
