Retirement Funds Tanked by Wachovia

Birmingham, ALGeorge knows stocks; he works in the business and has kept a close eye on those stocks lining his retirement nest. Then Wachovia bought his company and the shares he accumulated plummeted, taking with them a million dollars worth of retirement funds.

"I've worked for this company since 1981," George explains, "and have been accumulating stock in the 401(k) plan all along. When Wachovia bought the company in 2005, our stock became Wachovia stock.

"For a year and a half it did well, then suddenly it tanked. I was worried it was going to zero, which it hasn't yet, but it's gotten real close. Since I work in the securities business I obviously followed the stock closely. Plus I also had a significant amount of my company stock/Wachovia stock outside the business.

There wasn't much I could do when it lost value. I'm not at retirement age even though I did take early retirement as of the end of 2007. I could have sold the stock inside the 401(k) at the time but there is an IRS rule that allows you to take stock out of the 401(k) at cost basis, and this prevented me, basically, from doing anything with the stock. It was for tax purposes. I had to leave the stock alone or potentially incur a higher tax liability if I took it out at a profit. As it turned out, the profits all disappeared. I felt trapped in the 401(k) stock while potentially I could have liquidated it, turned it into cash, bought a treasury bill or something with it.

So I did nothing; I left it alone. But I was watching it, like at three o'clock in the morning. My entire net worth was in company stock and because of Wachovia retirement rules at the time, and benefits that were set to expire in 2007, I chose to take early retirement. That allowed me to take advantage of health insurance benefits I wouldn't have if I retired later. I ended up feeling as if I needed to retire because of the Wachovia rules but Wachovia tanked my stock until I didn't have any money left.

Since then, the stock has continued to go down until about two weeks ago, and although it's in reversal now, it's still significantly below my original cost basis. When Wachovia bought it, it was worth $30-something per share and it went down to $9, then the other day it went back up to $14-15. So basically Wachovia ran my retirement into the ground with their aggressiveness."

George blames Wachovia's performance on their purchase two years ago of Golden West Finances. Concurring, The Times Online reported on July 23 that Wachovia's second quarter losses of $8.9 billion is related to Golden West's $121 billion portfolio of home loans. About 70 percent of these loans were funneled into home purchases mainly in California and Florida, two states hardest hit by the subprime mortgage crisis.

"Ironically," George adds, "Wachovia's shares rallied today after the announcement.

"I'm not sure what I can do now. They've fired the CEO Ken Thomson and I suspect they brought in Bob Steele [former US under-secretary of the Treasury for domestic finance] to sell Wachovia to someone else. If I sell my stock now, any potential there might still be if they sell the company would disappear."

In total, George has lost a million dollars--on paper. As far as taking legal action, George has considered joining a class action suit.

"It's a tough situation," he says. "I just turned 54 and after 26 years total with the company, my whole security for the rest of my life has just disappeared in one fell swoop with the change of ownership."