The Impostor Scam Strikes Again

If you were a victim of investment fraud, watch out

Watch out for con artists who claim to be with the Securities Investor Protection Corporation (SIPC), a very real Washington organization that helps clients of failed brokerage firms recover their money.

Here's how the often two-step scam works:

First, you're phoned or emailed by a supposed SIPC rep, who promises recovery of money you lost in fraudulent investments. But first you need to send a "recovery fee."

If you comply, all you can expect is more requests for money, until you wise up.Second, if you're wise enough to give nothing, you may be contacted a few weeks later by another SIPC impersonator. This time, you're told that the assets of the company that defrauded you have been seized, and your vanished money is going to be returned.

This time, you're not asked to send a fee, just to fill out an application form that — surprise — asks for your Social Security number and other personal information. Perfect for identity theft or future scam attempts.

A spokesperson for SIPC tells Scam Alert that the corporation learned of this scam in mid-June from numerous people who'd received the calls. Most had previously lost money in investment fraud. "But we also heard from a few who in the past had been approached, but never invested in what later proved to be a fraudulent investment," the spokesperson says.

The SIPC says it has no information on how the impersonators identified their targets.

But in a similar scam last year that zeroed in on people who'd lost money in Bernard Madoff's infamous Ponzi scheme, it was clear how the names were obtained. They'd been made public during the long official investigation of Madoff.

Many of the now-imprisoned financier's victims were contacted by people claiming to be, not from the SIPC, but from a bogus sound-alike agency — the International Security Investor Protection Corporation, or ISIPC, supposedly based in Geneva.

For a while there was a website bearing this solid-sounding name, inviting Madoff victims to file claims for restitution. To do so, they had to provide detailed personal information. Of course, no restitution ever appeared.

Such schemes are variations on the classic impostor scam. The scammer variously poses as an official from a government agency or a company you do business with. Even your own grandchild may be impersonated. In each case the goal is the same: to get your money or personal information.

Perhaps the most frequent impostor scam involves email that purports to be from the IRS. Typically it asks you for personal information under the guise of getting a tax refund or "fixing" an improperly filed return.

The lessons of all these schemes: Never provide an upfront fee or personal information to anyone who comes to you unsolicited. If you think such a request might be real, first check out the claims by contacting the group that the person claims to represent. To do that, don't use any phone numbers or Web addresses that the person may provide — look them up yourself.

If you called the SIPC, a non-profit corporation chartered by Congress, you'd find out that it doesn't deal with investor fraud. If a brokerage firm fails, owing customers cash and securities that are missing from their accounts, SIPC acts as trustee or works with an independent court-appointed trustee in a brokerage insolvency case to recover funds. 

And, says SIPC President Stephen Harbeck: "When the liquidation of a brokerage firm is handled by SIPC, investors with missing stocks or cash do not pay a fee for recovery of those assets."

If you think you've heard from an SIPC impostor, email the organization at asksipc@sipc.org or call 202-371-8300.

by: Sid Kirchheimer Sid Kirchheimer is the author of Scam-Proof Your Life, published by AARP Books/Sterling.

Retirement Planning: 5 Common Mistakes

One bad decision can ruin a lifetime of good ones

One of the earliest lessons in life is that actions have consequences, and boy is this true in the final third of life. If you're at or near retirement,the decisions you're about to make will have consequences for decades to come. Unfortunately, it only takes one bad decision to ruin a lifetime of good ones. So what are the biggest mistakes to avoid?

1. Retiring based on your birthday instead of your bank account.

Imagine that I wrote the name of a city on a piece of paper and sealed it inside an envelope. Giving you the envelope, I said: "Without looking inside, drive to the airport and buy a plane ticket to anywhere in the world. When you arrive, open the envelope and see if the place matches with the destination that I wrote on the paper." What are the odds that you would end up in the right city? Not good, right?

As ridiculous as it sounds, that is how most people plan for their retirement. People save; they just don't do it with a great deal of deliberation or a clear understanding of the end goal. They do it with a completely random series of401(k) and IRA contributions.And they may end up far from where they need to be.

If asked when you'll retire, your answer should be a dollar amount, not a year. Retirement is about independence, not simply age, and money is critical to independence. You need to know exactly how much you need to save to fund the retirement you want.

2. Not properly managing your risk.

Risk is a necessary companion to investing. When you're in your 20s and 30s, you can afford to take greater risks in hopes of receiving greater returns. If you lose money, you have decades to recover. Not so as you approach retirement. You can't afford to operate at the same risk level. As you age, you need to progressively shift out of potentially volatile investments. During retirement, large losses in your portfolio are extinction-level events. They are like meteors to dinosaurs.

Consider the mathematics of loss. Imagine you had a $1 million portfolio that lost 50 percent in a given year, dropping to $500,000. If it gains 50 percent the next year, you're not back to even, you're only at $750,000. To get back to even you would need a 100 percent increase. So, the bigger the loss, the more difficult the recovery.

If markets have taught us anything during the last 10 years, it's that you need a plan to manage your risks and avoid large losses.

The same is true for a whole host of new risks that come with growing older. A serious medical condition, the death of a spouse, getting laid off, entering a long-term care facility or getting divorced could all significantly impact your emotional and financial well-being. The goal is to consistently identify and manage your risks in order to increase your odds of a rewarding retirement.

3. Retiring with too much debt.

When the history of the 2008-2009 market collapse is written, I have no doubt that debt will be the central theme. Sadly, many of the 78 millionboomers approaching retirement got caught up in the frenzy along with everyone else. Now, as they approach a time that is supposed to be about enjoying life and living their dreams, they instead find themselves beholden to their jobs and struggling to make ends meet.

An increasing number of people are entering retirement age with nopension, inadequate savings, a big mortgage (sometimes two), an average of about six credit cards, and debt on one or more cars. Work is not a choice at that point any more than it's a choice for a 30-year-old with all the same obligations and a growing family to feed.

Having debt adds risk and reduces cash flow. Your primary goal should be to retire debt-free and have your income at your disposal. If you retire with debt, you will spend a long period paying for the purchases of yesteryear instead of using your income to live the life you've dreamed of.

4. Not getting professional advice.

Preparing for retirement is all about accumulation — saving and investment performance are your primary concerns. But in retirement, your primary goal becomes much more complex: to continue to grow the pie while simultaneously eating it. Going without a competent adviser at this stage could be a big mistake.

5. Fumbling your distribution strategy. Improperly converting your savings into an income stream, taking too much too soon from the wrong account or in the wrong markets could be the difference between retirement bliss and retirement blunder.

A distribution strategy typically occurs in two phases. Phase 1 involves moving the money from preretirement accounts, for example, your 401(k), to postretirement accounts. Phase 2 involves creating an income stream from those postretirement accounts.

The ideal time to begin working through your distribution strategy is a year or so before retirement. You should be thinking about how much you need, where it's going to come from, and whether your nest egg is up to the task.

When you retire, your portfolio takes over the job that the payroll department handled during your working years, namely to send you a paycheck every month. If you retire when you're 65 and live until you're 85, it needs to cut you 240 monthly checks. There are a host of variables that will affect its ability to do that, such as the distribution rate you choose, investment returns, inflation, how long you live — and good old-fashioned luck.

Some things you can control and others you can't, but having a well-conceived, sustainable distribution strategy will help ensure that your money lasts as long as you do.

by: Joseph HearnJoseph Hearn is the author of The Bell Lap: The 8 Biggest Mistakes to Avoid as You Approach Retirement.

Will Your Life Insurer Pay Promised Benefits?

Prepare now to ensure your heirs will receive their benefits

For years, you've dutifully paid life-insurance premiums in hopes of providing security for your family after you're gone. But ensuring that loved ones enjoy those benefits in the future requires careful preparation today. That's particularly true now that sweeping investigations are raising questions about whether life-insurance beneficiaries are receiving all the money they're due.

Insurance regulators in a number of states are examining life insurers' possible failure to pay death benefits to beneficiaries, even in cases where the companies knew of the death of the policyholder. Regulators are also questioning whether companies failed to turn over unclaimed death benefits to the states as required under unclaimed property laws.

Industry representatives say insurers are holding up their end of the bargain. "The fact is, life insurers pay on average $1.6 billion to policyholders, beneficiaries and retirees every day, a clear demonstration that life insurers are fulfilling their promises," says Whit Cornman, spokesman for the American Council of Life Insurers.

Policyholders

You can improve the odds that your insurers and loved ones can find each other when you're gone. One place to begin: Start talking. While many people are reluctant to tell family members that they have a life-insurance policy, "my advice to insured people is don't leave beneficiaries in the dark," says Steven Weisbart, senior vice-president at the Insurance Information Institute.

"If you don't tell them anything, they're not going to get anything, and the whole point of buying insurance is down the tubes."

Be specific when naming beneficiaries, giving the Social Security number, relationship to you and address, Weisbart says. Update the information if beneficiaries change their names or if you change beneficiaries.

Keep the insurer informed of any changes in your mailing address and phone numbers, and ask for an annual policy statement. The statement can help you keep track of changes in the company's name, headquarters or contact information — and help the company keep track of you.

People who no longer owe premiums — perhaps because their policies were purchased with a single premium or limited number of payments — can fall through the cracks. "A person can stop paying premiums and within several years after that, the company has no idea where the person is," says Joseph Belth, editor of the Insurance Forum newsletter.

Keep a copy of your policy at home and another with a relative, lawyer or accountant. Compile a list of all death benefits that might be available to your beneficiaries, including those linked to former employers, professional associations and credit-card accounts.

Beneficiaries

You may need to do some detective work to track down all the benefits you're owed. If you have the policy itself, check the application, which should be attached. The application should list all other policies owned at the time it was made.

If you believe you're the beneficiary of a policy but have little information, state insurance departments may help. You can get contact information for these departments through the National Association of Insurance Commissioners' "life insurance company location system." The insurance departments should have records of insurance-company mergers and name changes, and they can help identify insurers that might have written the policy. You can then contact those insurers.For benefits that may have been turned over to the state as unclaimed property, check MissingMoney.com. Also, check with the National Association of Unclaimed Property Administrators.If you've exhausted free sources of information, consider MIB Solutions'Policy Locator Service. For $75, the service searches for life-insurance applications dating back to December 1996. It provides contact information for insurers that accepted applications from the individual. You can then contact those companies and ask about any policies written on the deceased.

by: Eleanor Laise, Associate Editor 

Copyright 2011 The Kiplinger Washington Editors

Eight Baby Boomer Money Mistakes You Should Avoid

Baby boomers have been receiving a lot of criticism in recent months for their collective contributions to our country’s economic problems.  First, we are blamed for an extreme amount of debt driven consumption that inflated highly leveraged real estate and credit bubbles.  Second, we are now being blamed for an excess of saving when many so-called economic experts are calling for increased consumer spending.  In general, boomers are probably guilty on both counts.   I have a suggestion.

Instead of wasting energy hurtling insults at financially irresponsible baby boomers, why don’t we make a list of all of the money mistakes that were made by the boomer generation.  The younger folks can read the list then pledge “never again.”   I hereby volunteer to start the list of boomer mistakes.  Here we go:

ASSUMING THAT WHAT GOES UP, WILL CONTINUE TO GO UP

This seems like one of those “duh” lessons that should not need to be taught.  Apparently not, because boomers bought homes – upsized McMansions even – during the go-go years, often using highly leveraged, unconventional loan products.  The premise was that this was a low risk activity because equity would be built from continued real estate appreciation.  Not.

The times of continuously increasing real asset values, stock markets, and even bond yields are likely over, perhaps for years or decades.  Boomers didn’t figure this out in time.  Your investment and retirement planning should be adjusted accordingly.

USING HOME EQUITY AS A PRIMARY RETIREMENT NEST EGG

For many boomers who used home equity as a retirement plan – Californians in particular – that nest “egg” is now an egg shell, empty and cracked.  Homes are not investments except to the extent they are paid for and providing you tax-free shelter services.

FAILING TO DIVERSIFY

This is related to mistake No. 2 but further includes being inattentive to proper allocation of investments into non-correlated asset classes.  This takes study and thought, two financial planning characteristics in short supply among my fellow baby boomers.  We have been oblivious to risk or were busy chasing yields from the hottest funds, or both.

IGNORING LIFE EXPECTANCY

Yes, it’s hard to believe that a generation of mostly overweight and out of shape Americans can be guilty of forgetting how long they will live, but it’s true.  Perhaps the best evidence is how abruptly and massively boomers pulled money out of the markets in response to negative conditions.  ”Sell low” we cried, forgetting that our investment horizon still spanned 20-30 years.  A lot of us think those stable value funds and CD’s will sustain us until the end.  Maybe so, if we plan on living in a van down by the river.

SACRIFICING RETIREMENT FOR OUR CHILDREN

So often I have read about boomer parents maxing out a HELOC or borrowing from retirement accounts to pay college tuition or to send adult children extra living money.  (“Gee Mom and Dad, I just have to live in Manhattan.  Don’t make me move just because I have negative cash flow.”)   You didn’t sign up for that obligation.  If you can afford to help the spoiled little darlings, go ahead.  Just don’t get guilted into it.  If you do, make sure you are prepared to turn the tables on your kids when you are old and broke.

ADDICTION TO STUFF

Take a poll of baby boomers you know.  I will bet that most will tell you that one of their immediate goals is to simplify their lives, including shedding themselves of a lot of the “stuff” they accumulated over the years.  Wouldn’t it be nice if we could figure out that “stuff” is more trouble than it’s worth before we acquire it all?  Now that you know how you will feel about it later (because I told you), you can implement stuff-avoidance strategies now.

WORKING FOR MONEY

Don’t start making faces at me.  I know we need money and work is what generally provides it.  But there is that old work-life balance thing that baby boomers still haven’t figured out.  The trick is to maintain control of the outgo ledger so that you have choices on the income ledger.  Once you become accustomed to car payments and such, you are at risk of being stuck in a work life of quiet desperation, waiting for weekends and vacations that come and go but never satisfy.

MARRIAGE RECYCLING

I will be the first to acknowledge that Mr. ToughMoneyLove is not a relationship expert.  In fact, just the opposite is probably true.  I have to credit Mrs. ToughMoneyLove for keeping me around for 31 years.  But money experts will tell you that one of the worst financial disasters a person can experience is a divorce.  The older you are, the worse it is.  So do what so many boomers have not.  First, choose wisely.  (As I used to tell our sons, when evaluating a woman as a life partner, be sure you are thinking with the correct body part.)  Then work hard to maintain that marriage.  Your spouse and your net worth will love you for it.

by Mr. ToughMoneyLove  

A rise in jobs, but news is mixed for older workers, who remain unemployed longer

The jobs growth engine picked up steam in July as employers created a higher than expected 117,000 positions, nudging the unemployment ratedown a tenth of a point to 9.1 percent, the government said Friday. But the good news had little impact in calming rattled financial markets.

For older workers, the news was mixed. The unemployment rate for men 55-plus fell to 7.4 percent in July from 7.9 percent the previous month, according to the report by the Bureau of Labor of Statistics.

For women, the rate rose to 7.3 percent from 6.3 percent.

And older workers as a whole had a tougher time landing a job than younger adults, a story that has played out month after month. The average length ofunemployment for workers 55-plus was up slightly to 52.7 weeks as of July from 52.4 weeks in the previous month's report.

For people under 55, it also rose, to 36.5 weeks from 35.6 weeks.

"The continuing very high unemployment rate for people 55-plus is very disturbing," says Sara Rix, senior strategic adviser for AARP.

"No matter how you slice it, things are not likely to look up anytime soon. Most troublesome is that the longer one is out of work themore difficult it is to find employment."

The dip in the unemployment rate from June's 9.2 percent wasn't only due to gains in employment. More than 200,000 unemployed workers left the labor force — often because they had grown too discouraged with their prospects for finding work — and were no longer counted by the government as unemployed.

Overall, the jobs number for July pleasantly surprised economists, following a string of reports signaling a stalled recovery and new financial turmoil in Europe.

In early trading, markets appeared to welcome the news, gaining back some of the ground lost Thursday when the Dow Jones industrial average plummeted 513 points in the worst day on Wall Street in nearly three years. 

But it proved to be a turbulent day. Later in the morning, those gains were erased as stocks headed sharply down and kept going—before rebounding as news spread of potentially helpful market moves by the European Central Bank. The Dow closed 61 points higher. 

'A step in the right direction'

Ryan Sweet, a senior economist at Moody's Analytics, calls the numbers in the report "a step in the right direction."

"But it needs to be put in perspective," he adds. "Expectations were set very low" concerning job growth.

"The economy is still improving in fits and starts," says Sweet. "The health of the economy will hinge on the labor market improving. Hopefully, this gets the ball rolling and we'll see stronger gains over the next few months."

In July, job growth was focused in health care, retail and manufacturing, while local and state governments continued to shed workers. Of the 37,000 government jobs reported lost, most were due to the Minnesota government shutdown, the Bureau of Labor Statistics reported.

Unemployment, by state

Despite the jobs gain, unemployment remained stubbornly high — 13.9 million people remained out of work in July. Of them, 6.2 million (44 percent) had been unemployed for six months or more.

The unemployment rate varies state to state. To see how your state has fared, look at the "pain index" map.

Heidi Shierholz, a labor market economist with the Economic Policy Institute, says she's concerned that the latest economic indicators are "very weak." She cited a recent government report that the economy grew by less than 1 percent in the last six months.

"We're either headed into another recession … or we are just going to stumble along at low levels of job growth and high levels of unemployment," Shierholz says. "There's nothing resembling robust jobs growth anytime soon.

"We need more fiscal support from the federal government, and Washington is going in the opposite direction," she says. "Cutting spending will make this jobs situation worse."

Republican leaders in Washington counter that bringing government spending under control and reducing the deficit will help give private employers more faith in the future and lead them to begin hiring in big numbers.

Obama: 'Focus on jobs'

President Obama has urged his administration to redouble efforts to create jobs and boost the economy, now that the recent debt ceiling drama is behind him. He has expressed support for continuing the 2 percent payroll tax cut for workers and extending emergency unemployment benefits — both programs are slated to expire at the end of this year — as well as investing in more infrastructure projects.

Obama told his Cabinet Wednesday to "focus on what matters most to the American people, and that is, how are we going to put people back to work?"

A spokesman says the president will hit the road in a campaign-style bus tour through the Midwest between Aug. 15 and 17 to listen to people's concerns about jobs and the economy.

The number of people who applied for first-time unemployment benefits last week fell by 1,000 to 400,000, a government report said. Economists look for initial claims of under 400,000 as a signal the economy is improving.

The average over the last four weeks, considered a more accurate gauge of employment trends, declined by 6,750 from the previous four-week period to 407,750, the lowest level since mid-April.

by Kerry Hannon | Jobs Expert