Scams that target your retirement

The money that seniors have amassed is "usually irreplaceable," says Jacob Zamansky, a securities lawyer in New York City. "They can't afford to lose the principal, so they generally need to be conservative. Anything that doesn't meet that investment objective should be viewed very suspiciously."

Ed Wolfe hired Zamansky in 2002. A year later, after his case went to arbitration, he was awarded $310,000, including legal expenses. About 75 of his Rubbermaid colleagues also received settlements from Merrill Lynch. "Financially, we're pretty much back on track," Wolfe says. "But mentally, I'll never be the same."

Ignore the hype

Be suspicious of any sales pitch that promises unrealistic returns. "Anytime you're talking about average returns of greater than 12%, you're not in the ballpark," says Jim Eccleston, a securities lawyer in Chicago. In the BellSouth case, not only were investors led to believe they could earn about 12% per year, they were also told they could afford to withdraw 9% of their funds annually for 30 years.

Before doing business with a broker, check his or her background using FINRA's BrokerCheck tool. Look for disciplinary actions taken against the broker, as well as red flags -- for example, whether the broker has frequently changed firms.

If the adviser is a certified financial planner, check his or her credentials with the Certified Financial Planner Board of Standards. Also consult the Senior Investor Resource Center and the SEC's senior investor page.

Just checking whether the broker has a securities license can often keep you out of serious trouble. "Maybe one in 10 of our cases involve a licensed stockbroker," says Colorado Securities Commissioner Fred Joseph. Many of the most notorious purveyors of bogus investments never held a license.

In Wolfe's case, keeping good records made a difference in the outcome. So keep a copy of any mailings you receive from a broker or handouts you get at a sales presentation. Take notes during your conversations. Talk with the broker about your investment goals and ask him or her to summarize your discussion in writing, recommends Tom Grzymala, a certified financial planner and expert witness in securities cases.

"I want to see the account information about what type of investor you are," he says.

Losing money in the stock market doesn't necessarily mean there's been wrongdoing or that a crime has been committed, says Tracy Stoneman, a Colorado securities lawyer and co-author of "Brokerage Fraud: What Wall Street Doesn't Want You to Know." Securities law looks at whether the broker made investments that were suitable for you. To determine that, a broker needs to know your goals, risk tolerance, tax status and whether you need ready access to your money, FINRA's Schapiro says.

• Talk back: Do you think you'll have enough to retire?

In return, you should ask the broker to rate an investment's risk on a scale of 1 to 10 and to put the answer in writing. If the investment starts to lose value, ask for a written explanation. "Put the brokerage firm on notice that the losses make you uncomfortable," says Stoneman. Writing down your concerns and faxing them to the broker and his supervisor "is a wonderful protection tool," she says.

If you continue to have problems, don't hesitate to complain to the brokerage firm and your state securities regulator (find contact information from the North American Securities Administrators Association). But even the SEC and FINRA generally can't recover your losses. For that, contact a securities lawyer through the Public Investors Arbitration Bar Association to take your case to arbitration.

Beware of Ponzi schemes

Charles Ponzi was an immigrant who swindled 40,000 Americans out of $140 million (in today's dollars) between 1919 and 1920. Promising to double investors' money in 90 days, he paid off early investors with the money he collected from new investors, all the time living high on the hog.

Ponzi is dead, but his spiritual descendants live on. Just ask Nicholas Garofalo. In the mid-1990s he started investing with Peter Dawson, a financial adviser who had grown up near his community of Holbrook, N.Y. Over a number of years, Garofalo, 68, gave Dawson more than $300,000, including stock he'd accumulated while working at AT&T for more than 30 years and money from his savings accounts.

Many of Garofalo's Long Island friends and family members also entrusted their money to Dawson -- sometimes remortgaging their homes, at Dawson's suggestion, to raise cash. At first, Garofalo received account statements that appeared to be from well-known mutual fund companies, and he didn't suspect that anything was amiss. But in about 2003, the statements stopped coming, and Dawson became more difficult to reach.

When investors finally contacted regulators and securities lawyers, they accused Dawson of running a Ponzi scheme. Dawson is now in jail awaiting trial, charged with grand larceny and scheming to defraud, but the money appears to be long gone.

"Right now I have $15,000 to my name," says Garofalo. "I had to remortgage my house, and some of my relatives are trying to help me out."

To avoid falling prey to a Ponzi scheme, establish an account at an independent institution (typically a brokerage) to hold your money. Never write a check directly to an adviser -- only to the custodial institution, which must send you quarterly statements. And meet with your adviser at least once a year to review your account.

Be cautious with annuities

One night in 2005, Virginia LaValley called her son, Ken, and told him she had just made an investment that was paying 7% annually.

"I don't know a whole lot about investing," Ken concedes. Still, he thought his mother, then 75, was mentally sharp enough to make her own decisions. But when co-workers told Ken that earning a guaranteed 7% was unrealistic, he figured "something wasn't right."

When Ken started to investigate, he found his mother had been duped into buying unsuitable annuity products, the most common complaint insurance regulators handle. Florida's Department of Financial Services has 51 open investigations involving variable annuities, plus 105 investigations into equity-indexed annuities, a complicated product that ties payoffs to stock-market indexes while guaranteeing a minimum return.

Continued: Higher commissions often the motive

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