Four Ways To Protect Yourself From Retirement Scams

NEW YORK (MarketWatch) -- Despite denials by the venerable economist Milton Friedman, there is such a thing as a free lunch. Only now it's more likely to be a free dinner, served as a come-on by brokers attempting to recruit new investors, notably seniors in or nearing retirement.

But be cautious before calling the phone number on the brochure that asks, "Are you worried about outliving your savings?"

"The free lunch seminar is definitely an issue," says Kimberly Lankford, author of a Kiplinger article about retirement schemes in the January 2008 issue of the magazine. "It prompts people to say, 'Oh my gosh, that's exactly what I need.' It preys on their wishful thinking." Lankford found that in a check of free-lunch sessions, the Securities and Exchange Commission discovered unethical business practices in almost half of them.

Here are four strategies from Kiplinger to help you protect your assets from retirement rip-offs.

Be wary of promises of unrealistic returns.
"Anything that talks about average returns higher than 11% should be treated with suspicion," says Lankford. "If the broker goes from saying 'averages' to 'guarantees,' be ready to walk away." Because retirees typically prize having the option of immediate access to their money, high, short-term returns seem particularly appealing.

Check a broker's professional background.
Using Financial Industry Regulatory Authority's Broker Check at www.finra.org, you can find information on approximately 660,000 currently registered brokers and 5,100 securities firms. If the adviser is a financial planner, check credentials with the CFP Board of Standards (www.cfp.net). Also refer to the Senior Investor Resource Center and the SEC's senior investor page. Verifying something as simple as whether an agent is licensed can keep you out of serious trouble.

Keep records of meetings.
Take notes when speaking with a broker about your investment goals, or ask for a summation of your discussion in writing. Requesting paperwork can discourage an agent in search of an easy mark.

Set up an account.
When paying for investments, never write checks directly to individuals. Open an account with an independent financial institution. That way you'll also have leverage if your investment starts to lose value, or if you discover your broker has rated the risk it carries below its real potential.

By Marshall Loeb