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Beware of retirement scams

By Jennie L. Phipps ·
Monday, November 28, 2011
Posted: 4 pm ET

The Securities and Exchange Commission has released a very straight-forward and useful guide to retirement planning scams.

If you are within shouting distance of retirement, chances are you've been approached by someone promising you the moon. Probably, you've been smart enough to say no and run the other direction. But the scammers get better all the time at offering convincing scenarios.

Here's what the SEC says to definitely avoid:

  • "Phantom Riches. 'These gas wells are guaranteed to produce $6,800 a month in income.' If it sounds too good to be true, it probably is.
  • “Source Credibility. The story goes like this: 'Believe me, as a senior vice president of XYZ Firm, I would never sell an investment that doesn’t produce.'
  • Social Consensus. Leading you to believe that other savvy investors have already invested. 'I know it’s a lot of money, but I’m in -- and so is my mom and half her church.'
  • “Reciprocity.  'I’ll give you a break on my commission if you buy now -- half off.'
  • “Scarcity. 'There are only two units left, so I’d sign today if I were you.'"

If some of these tactics sound familiar, it's because sometimes legitimate salespeople use them. How can you tell the difference? It isn't always easy, but the SEC offers these guidelines:

  • "Any investment that consistently goes up month after month -- or that provides remarkably steady returns regardless of market conditions -- should raise suspicions, especially during turbulent times.
  • "Avoid anyone who credits a highly complex investing technique for unusual success.
  • "If someone tries to sell you a security with no documentation -- that is, no prospectus in the case of a stock or mutual fund and no offering circular in the case of a bond -- he or she may be selling unregistered securities. The same is true of stocks without stock symbols.
  • "Unauthorized trades, missing funds or other problems with your account statements could be the result of a genuine error -- or they could indicate churning or fraud.
  • "Pushing you to make an immediate decision. Even if no fraud is taking place, this type of pressuring is inappropriate."
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November 29, 2011 at 9:53 am

Social Security is another type of retirement scam.

How do we "beware" of that one?