Retirement Rip-off: Seniors Left Holding the Bag—and it's Empty.

New York, NYSeniors and individuals on fixed incomes relying on a retirement income stream generated by a certain basket of income products could be at tremendous risk of getting ripped off, given the reality that many of these products are tied to the dangerously under-performing mortgage industry.

In so doing, banks and brokers are passing the risk off to those who can ill afford to carry it.

In the old days, the extent of financial planning for most people was limited to working at one job all your life, paying into the company pension, and retiring in comfort, if not luxury. More involved financial planning was the bastion of the high-income earner, whose motivation had more to do with saving tax and preserving wealth, than making more of it.

That's all changed. Now, solid financial planning is not only a prerequisite for most people, it is vital in order to steer clear of under-performing products, or portfolios, which carry more risk than most people are comfortable with.

Unfortunately, too many investors blindly purchase a basket of products at the behest of a broker or vendor without knowing exactly what is in the mix, and what the liabilities are. Worse still, the proud owners of these portfolios never give them a second thought, lulled into a false sense of security that their retirement is assured.

At one time, mortgage-backed securities were a good investment. The old adage of 'you can't go wrong with real estate' was not only as familiar as an old sweater, it rang true.
The housing market was growing, people were working, paying their mortgages, taking care of an investment which for most people is the biggest investment--but an investment they will ever make.

Enter the sub-prime mortgage debacle. Mortgages are approved for people who really can't afford them, or quickly lose the capacity to afford them once hidden interest rate hikes balloon the payments to unaffordable levels.

Property values are unduly inflated to justify loans, only to crash back down to earth and disappear below the permafrost when the defaults start happening.

Suddenly, mortgage-backed securities are no longer such a good investment.

In an effort to mitigate and defer their risk, banks have been selling Collateralized Mortgage Obligations in the forms of notes, bonds and certificates of deposit that are supported by a bundle of residential mortgages, including the grievous sub-prime variety.

When these mortgages default, it drives down the value of the above-named investments, perhaps even wiping them out altogether. Worst-case scenario: the investment is suddenly worthless, and the investor has lost his money—money he was depending on for future retirement, or income integral to a current retirement income stream.

There's another bugaboo—these products are often linked to a commodity, index or equity that may carry substantial costs and fees, including substantial penalties for early withdrawal. It is alleged that in many instances these products are heavily promoted as low-risk and low-cost, without the investor acquiring a true picture of the risk, or cost involved.

And in so doing, the broker or vending institution is deferring risk to citizens who can least afford it.

The following companies are allegedly promoting and selling one, or more of these so-called structured products: Bear Stearns, Merrill Lynch, Bank of America, Goldman Sachs, JP Morgan, Washington Mutual, Deutsche Bank Morgan Stanley, UBS Financial, Wachovia, Wells Fargo, CS First Boston, AIG and Citigroup.

If you have purchased any of these structured investment products, or think you may have them in your portfolio, you should discuss your portfolio with a qualified financial advisor who carries no bias.

If you feel you have been taken advantage of, or feel that your retirement will be irreparably damaged at a time in your life when you are least able to make up any shortfall, a call to a legal professional to discuss your options would be prudent.