Dear Mr. Berko:
I'm single and retiring at the end of the year from Alcatel-Lucent. The company has offered me a lump payment of $181,000 or a guaranteed monthly income of $1,020 when I retire. What to do? Three stockbrokers are very persuasive and advised me to take the lump sum, saying I could earn much more than $1,020 each month on that money. One broker, at J.P. Morgan, insists he could earn $1,700 each month using an options technique. His fee is 1.5 percent yearly. It sounds complicated, but his explanation makes it sound simple to do. Please help me make a decision.
-TG, Joliet, Ill.
Dear TG:
Alcatel-Lucent will guarantee a monthly income of $1,020, or $12,240 a year, even if you live to be older than Methuselah, Noah's grandfather. If you take a $181,000 lump sum payout, then your broker, every single year, must earn a minimum of 6.78 percent-after fees of 1.5 percent-to earn $12,240 a year. Considering the skills of most brokers, I don't believe that return is possible-and certainly not from a J.P. Morgan brokster. Take the guaranteed monthly income, but tell those broksters, especially the J.P. Morgan bum, to take a long leap from a high alp. J.P. Morgan's management team is a thieving, disingenuous and crooked lot, which I believe sets the tone for other employees.
You are among the dwindling number of Americans who have busted their tails at the same employer for most of their working lives. You've occasionally been jerked around by management-sometimes fairly, oftentimes unfairly. But you've kept that grindstone close to your nose and your mouth shut. You've done that because you've made a fair wage and because the company's pension guarantees you $1,020 a month for life.
I know it's tempting to take that $181,000 lump sum, which is more money than most of us have ever dreamed of having at one time. But stay the course! Thank Alcatel-Lucent for its kindness, and say you'd prefer to get monthly $1,020 checks until you turn toes up. Lump sums are tempting, and on average, 64 percent of employees take the buyout because most brokers are terrific salesmen and convince them they can do better. Few can, and over the years, I've heard horror stories so egregious that the brokerage firms reimbursed the clients without arbitration. It's difficult, even for knowledgeable investors, to get trustable and suitable investment advice when broksters' bosses set the example for probity.
J.P. Morgan, Bank of America, Morgan Stanley, Citigroup, Goldman Sachs et al. have paid billions and billions of dollars in fines to avoid criminal prosecution for figuratively raping their clients. If you think the commission salespeople at these firms will always give you a fair shake, then you may still believe in Santa Claus and the Easter Bunny. I'd rather write nice things than bad things, but there are some brokers we call incompetent articulates. They're smooth as licorice, and their hearts are blacker than the wings on a rain crow. They have ice water in their veins, and many strive to become images of their CEOs-Brian Moynihan, Jamie Dimon, Lloyd Blankfein, etc. These are the executives who enjoy slapping babies and kicking little puppies for fun. Investors must be careful out there because finding a trustable, wise, experienced and caring broker is more difficult today than it was a decade ago.
Unless you have a knowledgeable friend or know a professional whose opinion you can trust, finding the proper broker is like finding a proper spouse. For many of us, selecting the right spouse takes years of trial and error before we pop the question. And about half of us wish we hadn't. Many folks divorce and start over again, but the costs are often crippling to their finances and their psyche. And so it can be when picking the wrong broker. Therefore, I've written an easy-to-read common-sense guide that eliminates most of the guesswork. It won't ensure that your account will rise in value, but it will ensure that your investments will be suitable. Send me an email and I'll email it to you.
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Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
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Published: Tue, Oct 20, 2015
