The pitch: Retire early. The catch: Brokers want (to ripoff) your cash

After 30 years of toiling in oil fields, Ray Lirette was told in 1997 that he could retire at 52 and buy a camper so he and his wife could travel across the USA.

Lirette says he trusted the advice because it came from an investment broker used by other Chevron workers. That's why he turned over his retirement savings — $335,000 — to the broker to manage, bought a camper and truck, then borrowed against a nearly paid-off mortgage to pay off credit card bills and auto loans.

"He showed me this projection that I'd have $1.3 million in 10 years," Lirette, 63, said as the sun glinted off the 28-foot camper parked on his lawn. "I thought, 'I guess we can retire.' "

Retirement didn't last long. Lirette says his nest egg shrank to $43,000 over eight years as his portfolio — concentrated in fairly risky stocks — plunged. The broker, he says, still guaranteed returns of 15% and said the market would rebound. About five years ago, Lirette and his wife were forced back to work, into jobs paying a fraction of what they used to earn.

http://www.usatoday.com/money/perfi/retirement/2007-11-04-retirement-scams_N.htm

especially since I worked in a brokerage firm about 20 years ago. Granted, it was a small house, but it makes you wonder what the differences REALLY are between the big boys and the Blindem and Rob'emsoms. :shrug:

morgan stanley was not telling this broker to promise these people returns of 15% a year

you can do your due diligence by reading the prospectus and looking to see what is there IN WRITING

a chrostmas card promising a 20% return as a joke and the rest of it is "he said, she said" might not play as well in court as the victims believe

if your broker is telling you something significantly different from what the firm is willing to put in its published materials, i say run for your life and maybe a letter to someone higher up at the firm wouldn't be uncalled-for either

in louisiana law, in theory, an oral contract is just as binding as a written one, in reality, the oral promise is usually worth the paper it's written on

when you get the paperwork, notice, it will never have any written promise of this ridiculous returns, that will be told to you verbally, while the paperwork will say that returns can't be predicted or guaranteed

i know that from 20 yrs. ago. My broker has never guaranteed ANY return, to his credit.

the financial industry is fairly dishonest but telling someone they can retire at age 52 with only $335K should have set off some common sense flags -- when you're not eligible for medicare and you've got to fund 13 more years of health insurance for yourself and your family, how the hell can your bankroll go anywhere but down?

no one can guarantee a return of 15% in stocks, the historical return of the stock market is around 10% and includes the rapid growth stage of the usa economy through the mid to late 20th century, we now have a mature economy and there is no way to even expect that kind of return

my brokerage says to expect 6% returns from the stock market in the early 21st century overall, and i'm more confortable planning on 4% -- either way, any "gain" is easily knocked back by inflationary costs for food, fuel, and medicine -- you can't expect the bankroll to continue to grow once you quit adding to it, your aim is to keep from losing ground

similarly what respected broker advises you to take more than 4% a year out of your retirement bankroll? and it should probably be a lot less if you're in your 50s, considering the money has to last you so much longer than if you were an older retiree

most financial advisors go the other way and to get you to keep working and forever putting more and more and more funds into their investments, claim you need $3 or $4 million to year (which being unattainable, means you keep working forever)

so this particular scam is new to me and to be honest it's so outrageous i'm surprised they went for it and sorry they're going thru this -- it looks like these bad brokers and scammers were preying on people in the oil and gas industry in southeast louisiana, i heard of a different scam, promising 20% returns, but fortunately the fbi caught up to the scammer (who committed suicide) before my good friend was roped in, admit i was quite worried about it

Nobody can gurantee any rate of return but 10% is a good rule of thumb for stocks. The average annual gain for the S&P 500 for all years, 1977 thru 2000 (Carter thru Clinton) was 11.86%, based on closing prices on the last trading day of each year. Junior's average is about 4% so far. But your longer term worst case assumption of 4% is low. You could do better than that if you were to just put everything into bonds.

It might be true that US stock returns will continue to be lower, due to lingering damage brought about by the current administration, the state of the economy's maturity as you mentioned, and/or other dynamics. But opportunities are not limited to US equities, and investments elsewhere are more promising. This is particularly true when you consider non-US stocks are not based on the US dollar, which will continue to fall against other currencies. More specifically, I wish you would consider making international stock mutual funds part of your portfolio if they are not already.

It seems odd that your brokerage firm seems to have neglected mentioning this, and I wonder if they are trying to manage your expectations so that you won't contemplate better results than they actually deliver. You might consider talking to another firm to see if their advice differs.