Fixing a Pension Conversion That Went Wrong

Our client worked hard, accumulated some stock, and received a pension conversion. A broker persuaded her to leave her job, and to take regular equal distributions from her account, before she was age eligible to otherwise do so–under the 72(t) regulations of the IRS. She did so. At the same time, the broker seemed to stop watching or making any adjustments to her account. Then, the broker stopped returning phone calls. The account dropped and dropped, and the broker did nothing. The 72(t) program continued to withdraw large amounts each month, to replace the client’s earnings. Our client could not return to her job. Within a year and half of retiring and working with the stockbroker, the account hit zero. The client had no job and no retirement savings. Finally, she was able to find us.

We went after the brokerage house that failed to supervise the broker. The 72(t) program was totally inappropriate for this customer, who would have remained at her job for another 8 years, saving for retirement, but for the broker. The 72(t) program was set at a rate far too high for an account reasonably invested to fund. The accounts were invested in the most risky investments, and they lost value at the same time too much was being taken out. At mediation, the brokerage house paid to undo the damages.