Retirees Suffer as 401(k) Rollover Boom Enriches Brokers Kathleen Tarr says AT&T Inc. employees looked to her as “their de facto 401(k) expert.” Visiting their homes and offices, she advised them on their retirement plans as they called up balances on computer screens.
Actually, Tarr worked for Royal Alliance Associates, a brokerage firm owned by insurer American International Group Inc. She encouraged hundreds of departing AT&T employees to roll over their retirement money into the kind of risky high-commission investments that Wall Street’s self-regulatory agency warns against on its website.
Tarr and her business partner reaped hundreds of thousands of dollars a year in commissions and trips to the Bahamas and Florida resorts. Not all of her clients fared as well, and 37 of them have filed complaints against her, according to Financial Industry Regulatory Authority records reviewed by Bloomberg News. Tarr and Royal Alliance say the investment choices were appropriate.
“It’s scary,” said Maria Lew, a former AT&T administrative assistant and Tarr client whose account balance has fallen to $100,000 from $390,000. She fears she will lose her home, and her kitchen ceiling has a gaping hole because of a leak that will strain her budget to fix. “There are days when I go to sleep and I can’t stop thinking about it.”
The complaints against Tarr and other brokers illustrate the underside of America’s retirement rollover boom. Former employees shifted $321 billion from 401(k)-style plans to individual retirement accounts in 2012, up about 60 percent in a decade, according to Cerulli Associates, a Boston-based consulting and research firm. As a result, IRAs hold $6.5 trillion, more than the $5.9 trillion in 401(k)-style accounts.
A three-month Bloomberg investigation found that former employees at major companies such as Palo Alto, California-based Hewlett-Packard Co. and United Parcel Service Inc., as well as AT&T, have complained that sales representatives lured them into rolling over their 401(k) nest eggs into unsuitable IRA investments. The investigation was based on interviews with retirees and brokers, confidential arbitration records and other documents.
I Used to Dodge Debt Collectors & Now I Have a Great Credit Score Hiding the car from the repo man and renting a private mailbox so he didn’t have to provide a home address were just two of the ways Dan Nainan was trying to deal with his debt a decade ago. But the collectors were persistent. One showed up at the mailbox rental location and told the owner of the business that Nainan’s parents had been in a car accident and he needed to get in touch with him immediately to donate blood. Another time, Nainan returned from a trip to learn that the repo guy had found out where he lived and had been banging on his door. Nainan had run up a considerable amount of debt “buying stupid stuff trying to be like your typical materialistic American,” he says. He was having trouble managing his debt and his credit scores were terrible.