Retirement - 401(k) - Where Did All The Money Go? Looted!

March 20, 2012: In recent months we came across some disturbing news about 401(k) accounts getting looted.

What on earth are you talking about?

Imagine this: You are about to retire in few months. You and your wife have made plans for some dream vacations that you always wanted to take. Then one fine morning you wake up and check your 401(k) account balance and discover it to be zero, nil, zilch!!!

For many it would be as devastating as the crashing of the whole world. All of your savings of over several decades of hard work and diligent investing, countless sacrifices made to ensure a financially secure retirement - all gone just like that. It is shocking to say the least.

The most unfortunate part is that such crimes have been committed by people we know and trust. Surprise! Yes our employers, albeit greedy and crooked ones, have engaged in such thefts. A Michigan worker was shocked to learn that his former employer had looted the 401(k) funds. He had $230,000 of savings from over three decades of hard work - all gone!

Companies with fewer than 100 employees are more vulnerable to such thefts. Unfortunately 20% of Americans work at such places. It seems there's no mandatory auditing of these small plans every year. As a result such embezzlements may not be noticed for a number of years. In many of the above cases there are civil lawsuits currently in progress. However that does not by any means guarantee recovery of the funds.

What measures can we take to prevent it?

• We should diligently verify that our 401(k) account balance is correct every quarter. Ensure that it matches with our payroll deductions. If necessary request our employer to issue quarterly reports. Be vigilant of late or irregular statements or drastic change in the account balance that can't be attributed to market conditions. Watch out for any unauthorized transactions.
• Keep alive our former professional network. Often they would have early information about any problems regarding 401(k) accounts or any forthcoming changes.
• It is a good idea to remain informed about our company's financial health. In some of the cases the employers have taken money from the retirement funds only to keep the company afloat in troubled times - good intentions but wrong way to do so.
  
• Frequent or unexplained changes in investment managers or 401(k) consultants, top executives getting fired, accounting scandal, our company getting audited by the feds, revised financial statements due to accounting errors - all of these are also red flags. We should find out what is going on.
• We can always contact our benefits administrator. If we are unsatisfied or need more information or have questions on health and retirement benefits we may call the following toll free number of department of labor's employee benefits administration: 1-866-444-EBSA (1-866-444-3272). The website for online information is Retirement Plans, Benefits & Savings page of US Department of Labor.
• The Pension Rights Center offers information by phone at (202) 296-3776) or online at http://www.pensionrights.org. We can also submit an online inquiry.

We hope the above information is useful for you. If you have any suggestions or tips please share it for the benefit of all.

Image Source(s): iStockPhoto

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