Dont Fall for 401(k) Scams: Be Prepared

Published on 30 September 2023 at 04:19

401k Scams: don't fall for them. You have undoubtedly heard that 401k plans are a great way to save for retirement. But watch out for scammers who prey on those looking to save. They'll offer outrageous returns that seem too good to be true, and unfortunately, they are just that: too good to be true. Stick with reputable investment firms and always do your due diligence before investing. Don't let greed blind you to the reality that there are no shortcuts to financial security. So, if you receive a call or email from someone claiming to have the next big thing in 401k plans, be wary and investigate the opportunity thoroughly. Your retirement savings are worth it.

Some Lessons from the history:

In the years 2021 and 2022, Wells Fargo, a well-respected financial institution, was embroiled in a case that outlined how employees' 401(k) retirement plans were manipulated for the gain of a select few. The instance is one of many cases that have come to light in recent years, sparking concern. An in-depth look into the allegations revealed that Wells Fargo was charging employees high rates for company stock in their retirement accounts, highlighting a significant issue in the management of retirement assets. The accusations raised pertinent questions about Wells Fargo's fiduciary responsibility to oversee its employees' retirement savings, further highlighting the risk associated with the 401(k) retirement plans.

The federal government demanded that Wells Fargo settle the allegations, resulting in a hefty compensation of $145 million to make amends for the financial harm inflicted on the employees. The seriousness of the settlement emphasizes the weight of the situation, and the bank acknowledged its wrongdoing.

Financial exploitation of retirement assets was a concern that emerged in a significant case involving Labcorp - a corporation within the healthcare industry. Mismanagement allegations covering Labcorp employees' 401(k) plans specifically, suggested the company of imposing overboard recordkeeping fees. The accusation raises concerns that employees' retirement assets may have been unfairly drained by unreasonable charges. Similarly, it wasn't the only case of its kind.

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Warning Signs and Best Practices for Monitoring Your 401(k) Account


The vulnerability of retirement accounts to fraudulent activities has recently been underscored by concerning incidents involving even reputable organizations accused of mismanagement. This highlights the urgent need for individuals to exercise vigilance when it comes to safeguarding their 401(k) funds. Taking proactive steps to ensure their security and appropriate management, including monitoring activities and reporting any suspicions to the proper authorities, is critical. To protect their financial futures in retirement, people must stay informed and cautious by understanding the details of their retirement plan and mitigating potential risks.

Detecting potential issues with your 401(k) is important. Here is a list of warnings signs and best practices for monitoring your 401(K) account


  1. Investment Performance or Account Balance Changes: If you notice significant changes in your 401(k) account's investment performance or balance that you can't explain, it could indicate issues with how your investments are being managed.
  2. Online Account Monitoring Challenges: If you have difficulty accessing or monitoring your 401(k) account online, it may suggest technical problems or security concerns.
  3. Unexpected Communication: Receiving unexpected communication related to your 401(k), especially if it requests personal information, could be a sign of phishing attempts or other security issues.
  4. Unexpected Withdrawals or Transactions: Unexplained withdrawals or transactions in your 401(k) might signal unauthorized activity or errors in managing your account.
  5. Difficulty Getting Help: If it's challenging to get assistance from your company's HR or benefits department regarding your 401(k), it could indicate administrative issues.
  6. Inconsistent Investment Options: If the available investment options in your 401(k) lack consistency or appear disorganized, it may indicate poor management.
  7. High Expenses and Fees: Be wary of unexpected expenses and fees associated with your 401(k) account, as they can eat into your retirement savings.
  8. Questionable Requests for Information: Watch out for suspicious phone calls or emails requesting personal or account information, as these could be attempts to steal your identity or compromise your account.
  9. Change in Management Team: If your 401(k) plan unexpectedly gets a new management team, it may raise questions about the continuity and quality of your investments.
  10. Unauthorized Personal Information Tampering: Your 401(k) account could be at risk if someone tampers with your personal information without your authorization, potentially leading to identity theft or financial fraud.
  11. Allocations Unexpectedly Changed: Sudden changes in your investment contributions without prior notice could indicate unauthorized actions.
  12. Phishing Attempts: Be cautious of phishing attempts that use 401(k)-related topics to trick you into revealing sensitive information.
  13. Lack of Communication: The absence of regular updates and communication regarding your 401(k) can be a concern, as staying informed is crucial.
  14. Unusual Login Activity: Unexplained login activity or lockouts could suggest unauthorized access or errors.
  15. Beneficiary Designation Changes: Ensure that your designated beneficiaries remain unchanged, as unexpected alterations could pose issues in the future.
  16. Unexpected Trade Confirmations: Be vigilant for any suspicious trading activity in your account that you didn't authorize.
  17. Missing Contributions: If your contributions from your paycheck go missing, it may signal a problem with your employer's payroll or the 401(k) provider.
  18. Difficulty Accessing Documents: Difficulty accessing important documents related to your 401(k) plan can hinder your ability to understand its terms and provisions.
  19. Delays in Updates: Significant delays in account updates or transactions might indicate operational issues or fraudulent activities.

What You should do If you think your 401(k) account is compromised?


If you encounter an issue with your 401K, you might want to consider taking certain steps to address it. This could include;

  • Reviewing your account statements to look for any discrepancies,
  • contacting your employer's HR department to inquire about your plan, or
  • seeking advice from a financial advisor.

It's important to take swift action to ensure your retirement savings are preserved and your financial future is secure. Don't hesitate to reach out for support if you need it.

Swift and decisive action is crucial if you suspect anything is off with your 401(k) account. Your financial future hinges on this account, making it imperative to address any potential issues promptly to lessen the risk of damages and loss.

If you have any apprehensions, the first thing to do is contact the proper authorities. The IRS and EBSA are the two main governing bodies in control of 401(k) plans in the United States.

  • The safeguarding of worker and retiree benefits is a priority of the Employee Benefits Security Administration (EBSA), a branch of the U.S. Department of Labor. EBSA enforces and administers fiduciary, reporting, and disclosure provisions for most private-sector retirement plans, such as 401(k) plans, under the Employee Retirement Income Security Act (ERISA). Bringing to their attention suspicious activity potentially leads to an investigation of malpractices or violations within 401(k) plans. An important responsibility of EBSA is the assurance that retirement plans are managed to benefit plan participants.
  • Tax laws compliance is crucial when it comes to maintaining the tax-favored status of retirement plans, and the Internal Revenue Service (IRS) is the regulatory body primarily responsible for overseeing the tax aspect of 401(k) plans. Ensuring compliance with the Internal Revenue Code is the IRS's primary responsibility, and reporting doubts or concerns to them could initiate an investigation into possible incidents of fraud linked to your 401(k) account. The IRS's vital work ensures the overall integrity of retirement plans in the United States.

Your watchful eye can lend invaluable assistance to the fight against fraud in the retirement savings system when you report suspicious activities to regulatory entities. This effort safeguards your interests and the interests of others, as well as the overall faith and authenticity of retirement plans.

Channels for reporting suspected account compromises or fraudulent activities are available through EBSA and the IRS, who also provide guidance on how to proceed.

Below is a good link to look at from IRS:

How Do You Report Suspected Tax Fraud Activity?


Maintaining your 401(k)'s long-term financial security and protecting your retirement savings depends on swift reporting to these regulatory bodies when necessary. Remember to act promptly should any potential issues arise.

Actionable Tips & Steps to Safeguard your 401(k)

Protecting your 401k account is important for your financial future. Here are some tips: · 


Actionable Step 1: Regularly Monitor Your 401(k) Account

  • Set a monthly calendar reminder to review your 401(k) account statements for any discrepancies.
  • Create a secure digital vault or physical file to store important account information.
  • Research and install reputable anti-phishing software to protect your personal information.
  • Explore different investment options and consider diversifying your portfolio by allocating funds to various assets or funds.
  • Schedule a meeting with a certified financial advisor within the next month to discuss optimizing your savings strategy.


Actionable Step 2: Strengthen Account Security

  • Change your 401(k) account password immediately to one with a combination of numbers, letters, and special characters.
  • Set a reminder to change your password every three months.
  • Create a list of unique passwords for each of your financial accounts, ensuring they are not reused.
  • Activate two-factor authentication (2FA) on your 401(k) account if available.
  • Invest in a reputable password manager tool to keep track of your secure passwords.


Actionable Step 3: Stay Informed and Protected

  • Dedicate 30 minutes each week to educate yourself on common retirement account scams and fraud tactics.
  • Subscribe to financial news updates or newsletters to stay current on potential threats.
  • Take notes on key information and tactics to recognize and avoid scams.
  • Share what you've learned with a friend or family member to raise awareness.
  • Report any suspicious emails or communications to your 401(k) plan administrator immediately.


Actionable Step 4: Seek Expert Financial Guidance

  • Research certified financial advisors in your area or seek recommendations from friends and colleagues.
  • Schedule an initial consultation with a chosen financial advisor within the next two weeks.
  • Prepare a list of questions and topics to discuss during your consultation, including your financial goals and risk tolerance.
  • Request a personalized investment strategy and savings plan tailored to your specific needs.
  • Set a recurring quarterly meeting with your financial advisor to review and adjust your investment strategy.


Actionable Step 5: Utilize Employer Resources

  • Contact your HR department to request detailed information about your 401(k) plan and its benefits.
  • Block out time on your calendar to thoroughly review the provided materials and resources.
  • Make a list of questions or concerns you want to address with your HR department.
  • Save the employer's hotline number in your contacts for quick access.
  • Commit to reporting any unusual account activity or issues to your HR department as soon as you notice them.


For a well-secured future for your retirement, it's essential to take preemptive steps. By availing yourself of resources provided by your employer, seeking professional advice, staying vigilant, continuously educating yourself, and using strong authentication techniques, you can prevent potential fraudulent activities and enhance the safety of your 401(k) account.

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