Be very careful .... when investing your retirement $$

19 years ago

I retired 8 years ago and transferred my 401K to Raymond James Investors. The broker guaranteed me, in writting, 6.5% return. I couldn't get my money out for 7 years but 6.5% guaranteed seemed like a good deal. I took a monthly draw on it for the amount the broker said I could without jepordizing the principle. Every month when my statement came the balance was going down much too fast. Every time I called and asked about it she told me the correct amount would show up at the end of the 7 year period. So,after 7 years nothing showed up and I got worried and told her I wanted to take my money out. Bottom line is ~ I made not one penny on my money for those 7 years plus I lost over $13K of the principle and they charged me $500 to write me a check. The same thing happened to numerous people in the area (and probably others that I don't know about). We are in a lawsuit now to try and recoup our money. Just wanted to caution you that "guaranteed" doesn't always mean it is.

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Comments (5)

joyfulguy
19 years ago
last modified: 11 years ago
Hi gajopa,

Into what kind of investment did they have your assets invested?

Did they discuss that with you before you made the investment?

I am very sorry that you had such an unsatisfactory result!

How unfortunate that so many people spend so little time and energy on learning how money and investments work, during the years of their lives!

And sometimes pay a high price as a result. I am sad that you suffered such a loss.

ole joyful
gajopa
Original Author
19 years ago
last modified: 11 years ago
Joyful, it was an annuity and she had it invested into 4 different stocks and at this point I don't remember what they were. The atty says they should have never issued a guarantee on an annuity. I've heard that one of the brokers is suing Raymond James for not training her correctly. My brain simply doesn't understand much about investments so that's why I liked the idea of a guaranteed amount. The broker is a very seasoned financial person so I felt confident letting her handle it. She has now lost her license. Thanks for your concern.
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Mush, If I were to inherit $100,000. I'd invest almost all of it - maybe have a little fun with some of it, in a way that would be a good memorial to the one from whom I inherited. As I have no debt, currently. I won't go into debt for consumer stuff, daily issues of living: I wait till I can pay cash for stuff that I use up now. I prefer also to pay cash for a car, and get older cars, usually at $3,000. - 4,000. or less. The last one, costing $2,700., operated for me for over 8 years - cost me substantial amounts for repairs toward the end, more in total than I'd paid to buy it. But I drove it for over 110,000 miles. When I ask an auto salesperson whether s/he can give me 100,000 miles for about $6,000., they just look at me, sniff, and say, "No way!". Ian in B.C. Given your offer from your employers, one could scarcely turn it down. And for folks who have a stay-at-home spouse, and who have a pension plan themselves, a spousal RRSP makes good sense, in order to develop a double income stream after retirement. I just said that I don't like them for myself. An RRSP, or a similar type of investment as preparation for retirement, should be in core investments, solid stuff that'll do well over the years, despite some ups and downs along the road. I have some solid stocks that I bought somewhere around 30 years ago ... with money on which I'd already paid the tax. They've grown well in value, over the long term - and I didn't get all bent out of shape when their value went down by about 20% or so over a short term, for they'd done well before, and I expected them to do well later: usually better than average for a while after there's been a substantial drop. On such stocks as some of our major banks, pipeline companies, oil and gas and mining shares (the biggie, long-term ones), Geo. Weston, Power Corp. or subsidiaries, e.g. Investors' Group, GreatWest Life, or other major companies, I'm not worried that they may go out of business. Tobacco and booze, if having them doesn't bother you for moral reasons. I suggest that you check David Stanley's articles in "Canadian MoneySaver" on the Canadian equivalent of picking the "Dogs of the Dow", which he has written about for the past ten years, and back-tested for a number of years before that, usually reporting in the July/August issue what he (supposedly) bought at the end of May, as that was the time at which the TSE 35 was set up, several years ago. Then it was the largest 60 on the TSE, now the largest 40. He ranks those 40 stocks of the largest Canadian companies in order of the rate of dividend that they pay, from the highest down. Then he picks the 10 that pay the highest rate of dividend and buys an equal dollar amount of each. Despite some loss years, he's made a nice rate of return in about 7 or 8 of those 10 years, usually 10% or more total, comprised of dividends of about 3% and current capital gain ... or better. One year he was up 40%. There's a sub-set where one buys the 5 paying the highest dividend rate, and another that omits the one paying the highest dividend (as a company possibly in trouble, and possibly about to cut the dividend rate), and takes a double load of the one paying the second highest rate of dividend. In a number of years, this choice has turned out the best performance. I don't mind borrowing some to invest in such companies: if I use stocks worth $10,000. as collateral, the bank will lend me no more than $5,000. If I borrow the full $5,000. and the value of the collateral drops, say 20%, to $8,000., I get a call from the bank telling me that they want $2,000. more collateral ... or $1,000. cash to reduce the loan amount ... *today* (or at the latest, tomorrow). When I worked as a financial advisor, I told my clients that I wanted them to be in a position so that they *never* got such a margin call. I don't want any such myself (have never had one - but I've seldom used the borrowing strategy), so I borrow quite a bit less than the full amount that the bank is willing to lend. And I use stock of several companies, so that if one takes a heavy hit, my total isn't reduced too much. If I borrow, say $4,000. and give the stocks that I buy to the bank as additional collateral, they have somewhat less than $14,000. collateral, which means that they're willing to lend up to about $7,000. If the stocks take a hit of 30%, and it's doubtful if those heavy dividend payers would, even if the market as a whole went down 30%, that's a drop so that my total collateral would be under $10,000. But the bank would be willing to lend me something under $5,000. in those circumstances ... and I only owe them $4,000. You may have heard that the Canadian market has been going down for the last few months? About 3/4 of the stocks that Stanley picked in May this year are higher now than they were then. I can give you current particulars if you wish - which you can calculate for yourself if you check July/August 2006 "Canadian MoneySaver" and check current prices. Can give the record over the past 10 years, if you want them. When I receive dividends on Canadian stocks, I get a tax credit that means that I pay tax of peanuts on them, and use some of the income from the stocks that I own as well as those that I bought with the borrowed money to pay the interest on the loan - which currently, on my fully secured line of credit, would cost me 6%. If I can borrow at 6% that's fully deductible and buy stocks that earn about 3% now, taxed at a low rate, and use some of the dividends from stocks that I owned previously to pay the interest, I end up with little tax liability. Also, as the interest payment is deductible, I end up paying almost no income tax on that current income. Further, I make at least 2% or so annually on inflation (and some of us figure that the actual rate is higher than the 2% or so that the gov't. publicizes). When I pay interest only on the loan as I go along, the $10,000. that I might have borrowed 15 years ago would have bought a nice car - not now. But all that I'm required to pay the bank is the amount that I borrowed - $10,000. But it'll buy a lot less now than it would have, then. I've had a long-term time horizon, over the years - and continue to do so, even though I'm crowding 80. Thankful to be in good physical health - don't think that I've taken a pill in 30 years at least. Same for the mental component ... I hope. Have a great week, what's left of it. ole joyful
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Greetings cactus catie, The problem that many folks who invest have is that when the value goes down a little, they don't get too worried ... ... but when it's gone down quite a lot - they get scared ... and sell. Some investors set rules for themselves - when a fairly non-volatile stock goes down 10% - they sell. Once it's gone down quite a lot, if it's a quality stock, sometimes/frequently it may be a time to buy more, rather than selling. As one mutual fund manager used to tell us mutual fund sales guys/gals, some years ago - he liked to get a Dollar for 60 cents ... that is, a stock where the value he assessed, after some investigation, to be worth a dollar, that he could buy after a market drop for about 60 cents. A stock that I bought 45 years ago for $4.15 - 20 (paying about 10 - 12 cents annual dividend) had gone up, down and sideways for many years, and the dividend had usually been between 3 - 4%. In about June of '07, I could have sold it, paying annual dividend of $3.08, for $107.00 or so ... and in the summer of '07 they increased the dividend to $3.48. That bank was substantially involved in the meltsdown of the U.S. financial fiasco, and the share price dropped to about $40.00. I shoulod have been watching it closer and have sold it after a slight drop, but didn't. Didn't buy more at about $40.00, either ... and it has since recovered to about $75.00 or so ($76.84 at today's close). I've been considering buying another Canadian bank ... but haven't, yet. I'm not too enthused about mutual funds - as many of them, despite their claims of their managers' superior skill at investing, don't produce any better results than the segment of the investment systemm in which they operate. Part of the reason is that they buy and sell quite a lot, with fees payable each time ... and they charge a management fee of usually 1.5% per year, sometimes more, as long as they manage their clients' money - and in Canada, most of them charge about 2.5% (or more) a year. While I paid a commission to buy that stock, 45 years ago, I haven't paid anyone a cent to manage it, since. Big difference! Having lived in 22 places in my 80+ years, and for a number of those years having lived in accomodation provided by my employer, I've never owned a home. While I may be over 80, I feel comfortable having something like 80%, sometimes more, of my assets in common stocks of (mostly) quality companies. Part of the reason being that I feel that I should finance my retirement to age 100 ... in that they tell me that most folks would rather run out of days before they run out of money ... rather than theother way around. When I was 70, I thought that to be six blocks of five years each. And, as most of us need a larger fund for probable health care and possible retirement or nursing home accomodation, I'd probably have a greater need for money later in that period ... and inflation means thatthe pricedes of things go up, which owuld mean a larger need for money, later. So _ I'd better stretch the eating of that first five-year block to 10 years ... which would mean 5/6 (83% or so) of my assets intact after 10 years. As many advisors suggest that many well-chosen, quality stocks tend to develop growth, despite interim fluctuations, over 10-year or longer periods, I like the prospect of possible growth in the number of my invested dollars ... and when I pay tax at regular rate on only half of that growth ... andnot until I sell - I like that scenario. Much of the increase comes in theform of dividends, to keep me afloat in the meantime ... and in a number of situations, I pay a low tax rate on them, but interest income is taxed at top marginal rate. That should be enough for now - and the library closes in (now, under ) five minutes. Good wishes for increasngly skilled investing. ole joyfuelled (with a bit of help from a dollar or two,, here and there)
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joyfulguy
19 years ago
last modified: 11 years ago
Hello again gajopa,

Learning how money works usually pays good dividends: neglecting to do so can be painful.

Most annuities legitimately called so are issued by insurance companies.

You give them a pot of money, and they guarantee that they'll pay you a given amount, for whatever number of years, or for the rest of your life, or for the rest of the lives of both the buyer and the spouse, usually. Often with a guarantee that, should the original contractors not survive 10, 15 years, or whatever, they'll continue to pay through the rest of that guaranteed period.

Some people have been hurt by such, when the insurance company that issued the contract fails ... but not often. In some cases, various insurance companies have stepped in and continued to pay at least part of the benefits that the failed company had promised.

Whne interest rates are low, the rates that are offered on annuities aren't high, so in recent years of low interest rates, many people didn't like to choose annuities as a worthwhile way to fly.

Too bad you hadn't known where to find a financial planner who wasn't selling financial stuff. And made use of that person's skills.

A few dollars invested there might have saved you not only a substantial number of dollars ... but a good measure of heartache, too.

Most financial planners can sell usually only a few of the large number of systems that are available.

I prefer to manage my own money.

Good wishes for better results in future.

ole joyful
dreamgarden
19 years ago
last modified: 11 years ago
I am sorry you lost your money to a corrupt broker. At least this woman lost her license. I hope you are able to recover some of your money.

Thank you for mentioning the name of the brokerage. I have a friend who is invested with them. I will share this information with them.

When we first came into some money, we had little experience with stocks, etc and looked for an advisor. We made appointments to talk with several different types of "professionals". Brokers, CFP's, accountants. Before we contacted anyone, we tried to educate ourselves as much as possible so we would know what to expect (and avoid). We read many financial books and surfed the internet for information before making our first appointment. It was interesting.

The source of information that proved the most helpful was the book "Brokerage Fraud-What Wall Street Doesn't Want You to Know"-by Tracy Pride Stoneman and Douglas J. Schulz.

The authors have experience as a)securities attorney/Judge/NASD-SYSE arbitrator and b) expert witness for securities fraud cases. The sleeve of their books states " Very often, financial services professionals fail to tell you about the dark side of the brokerage firm business, the investments they recommend, the handling of your accounts, and what you can do about it. The secrets and insights presented in this book will help ensure that you become a better-and better invested-consumer."

Before you entrust ANY more money to brokers, etc., you might want to check this book out from your local library as well as visit the following person's website for some very good information about keeping control of YOUR money.

Forbes.com Best of the Web
E.F. Moody Jr. www.efmoody.com. With 3250 pages and 1650 links, the site bills itself as the "largest and most comprehensive independent financial site ...
www.forbes.com/bow/b2c/review.jhtml?id=456 - 24k -
(read the link-How to Find a Financial Planner)

Here is a story that recently appeared in the Motley Fool. Best of luck to you and thanks for sharing your story.

Beware of Brokers Bearing Annuities

By Buz Livingston, CFPWed Jul 25, 5:12 PM ET

The first baby boomers are making plans for retirement, with their 401(k) plans stuffed with savings. In response to the pending onslaught of soon-to-be retirees, the insurance industry has metamorphosed into "retirement planning." However, it's promoting marketing techniques designed more to generate sales than to expand investors' holdings.

Companies offering variable annuities, including Hartford (NYSE: HIG - News) and the John Hancock division of Manulife (NYSE: MFC - News), often add extra features, also known as riders. Agents like these provisions, since they sound good and help win over risk-averse customers. But they often prove completely unnecessary, adding nothing to the value of the annuity or its eventual payout.

For instance, one type of rider is called a guaranteed minimum accumulation benefit (GMAB). It promises that the value of a variable annuity will rise by at least a certain percentage -- often 6% -- over time. Sounds nice, doesn't it? But there's a catch.

The troubles with GMAB
For beginners, the fees to add a GMAB can be obscenely expensive. If you add mortality and expense charges, administrative costs of the variable annuity, and the extra GMAB fee, you could easily pay expenses topping 3% each year.

That wouldn't be so bad if you actually got something from it. But the odds are good that you'll never need such a benefit. Some annuities tied to the stock market use a long timeframe -- such as 10 years -- to apply the GMAB. That means that in order to get a benefit from the GMAB, the market would have to earn less than 6% annually over a 10-year period. Historically, the last time that happened was 1984 -- a period that included the tail end of the 1973-74 bear market. The GMAB feature isn't likely to cost the insurance companies anything close to what they'll make on it.

Pensions and annuities
Another marketing ploy annuity salespeople trot out is the benefit of annuitizing 401(k) rollovers. They argue that the rollover will be taxed as ordinary income, so why not buy an annuity with it? That line of reasoning is true. Yet often, the annuities they recommend -- especially equity-indexed and variable annuities -- are unsuitable investments for retirees.

Retirees who want to replace a salary or create a pension-like cash stream should consider an immediate fixed annuity. Although it often won't pay a death benefit to your heirs, it will usually offer higher payouts during your lifetime. Check out low-cost providers such as Vanguard or Integrity Life for options on immediate annuities. In addition, if you want a beneficiary to get back at least what you paid for the annuity, you can choose a return-of-premium benefit.

Zealous annuity marketers will sometimes misrepresent an annuity's fees and commissions. (I've heard them do so myself.) Don't fall for it! Except in rare cases, the higher costs for annuities simply mean that you're giving more of your hard-earned money to your broker. Most of the time, comparable mutual funds in a rollover IRA make much better investments.

Fool contributor Buz Livingston, CFP owns none of the stocks listed and appreciates your feedback. He believes investors will benefit from professional advice. The Fool's disclosure policy is always on your side.

Copyright 2007 Motley Fool
Copyright Â© 2007 Yahoo! Inc. All rights reserved.
joyfulguy
18 years ago
last modified: 11 years ago
In Canada we can choose to mature our tax-deferred retirement fund into a Registered Retirement Income Fund that offers a number of choices of investment, including a self-managed system.

Many choose this maturity option.

And one can choose to put some of it into an annuity, should one choose, at any time during the life of the investment.

One is required to withdraw a portion annually, about 7 - 8% at age 71 and an increasing percentage to 20% annually required at age 90 and beyond.

ole joyful

Be very careful .... when investing your retirement $$

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Be very careful .... when investing your retirement $$

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