Overreaching for Yield
Dear Trust Officer:
I’m retired, and I’m having a hard time keeping up with inflation. I’ve recently learned about a great sounding investment that could be the answer I’m looking for. The guaranteed yield is 15%, and the principal is insured, so there is no downside. I’m considering rolling most of my IRA money into this investment, it would set me up for life. What do you think?—REACHING FOR YIELD
Dear REACHING:
I think that investments that sound too good to be true are not, in fact, true. The cleverest investment con-men no longer promise quick riches, they instead promote steady, safe, above-market returns.
The investment you’ve described sounds very much like one that Richard Whitacre invested his entire 401(k) money in, as detailed in The Wall Street Journal [“ ‘I Don’t Know Where to Turn or What to Do,’ His $763,094 Retirement Fund is in Limbo,” November 22, 2024]. He thought he was buying a 15.25% guaranteed return. Instead, he is getting no payments, and the company that sold the investment has been dissolved. The insurance company denied providing any coverage, saying “the paperwork and signatures of our officials were used fraudulently.” It is unclear how much of his investment Mr. Whitacre will recover, and it is possible that whatever he receives will be a taxable distribution from the terminated IRA. The SEC and some state authorities are now looking into the matter.
I recommend that you investigate further before you invest. Be confident that you understand how that 15% return will be generated, and the bona fides of any guarantee of your principal.
Do you have a question concerning wealth management or trusts? Send your inquiry to contact us.
© 2024 M.A. Co. All rights reserved.