How to keep your retirement fund safe while identity theft is on the rise
Spurred by more electronic record keeping, and a greater illegal demand for personal information, identity theft is a crime that is sweeping the nation, wreaking havoc in its wake. According to the Federal Trade Commission's 2006 Identity Theft Report, there were more than 685,000 reports of identity theft in 2005,, resulting in losses and damage of over $680 million dollars.
A growing form of identity theft affects assets contained in employer contribution retirement plans, such as 401(k)s. Led by identity thieves and dishonest employees, 401(k) asset theft has increased dramatically in the last decade. In 1995, only 34 cases of retirement plan theft were found in one year. In 2006, the Department of Labor said it handles about 1,500 cases a year of employers allegedly diverting employers' retirement money.
So why the increased thievery of late? The increase can be largely attributed to the growing number of workers who make contributions to 401(k) plans. Just like identity theft, with more electronic records and increased technology use, the risk rises. The ever-growing number of accounts, combined with record contributions to them, means more chance for dishonesty and fraud.
The only way to combat 401(k) theft is to be prepared. You can do this by taking a few simple steps:
Work with a financial professional to keep a watchful eye on your 401(k) statements - It may not seem vital when you receive them, but careful observation can usually help you catch abnormalities right away. Make sure the right amount of money is making it into your account. You should also check your account online as much as possible, or request to receive account summaries more often to review with a financial professional.
Keep an eye on your employer and your plan administrator - Most 401(k) theft takes place when companies are in poor financial shape. Watch for drops in your account total, especially ones not related to the stock market's performance.
Consider rolling over your 401(k) into an IRA as soon as you retire - In several cases of 401(k) theft, employees of companies that had been stealing, had their accounts frozen even though their assets had been un-touched. Now the retirees are stuck without their hard earned savings until the legal system sorts everything out and the insurance company makes a decision on the effected accounts (which could take months or even years).
401(k) theft can reach the lives of even the most un-suspecting account holder, but there are certain steps you can take to shield yourself from financial disaster and in the process, attempt to lessen the loss, or catch it immediately. A watchful eye is by far the best defense to help you protect your nest egg.
1-Kelly Greene, "A New Retirement Concern: 401(k) Theft is on the Rise," The Wall Street Journal, March 8, 2005.
Lawrence D. Sprung, CFP of Mitlin Financial Inc., is a Registered Representative with Securities America, Inc., a Registered Broker/Dealer, member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc., a SEC Registered Investment Advisory firm. Lawrence D. Sprung, Investment Advisor Representative. Mitlin Financial Inc. and Securities America are unaffiliated. He can be reached at (631) 465-2017 or by e-mail at lsprung@mitlinfinancial.com. Feel free to forward any questions, or future topics you would like to see discussed to info@mitlinfinancial.com and put longisland.com in the subject line.