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Financial Regulatory Reform

Avoiding Bad Financial Advice

Do your homework and learn how new regulations can help protect you

At 51, Adela Pena decided to follow her financial adviser's advice and retire early from her job in inventory and warehousing at AT&T after nearly 30 years.

Slightly nervous, but convinced by her adviser's assurances that she would never run out of money, Pena collected $320,000 through a company buyout and by cashing in her 401(k) account and invested it in a variable annuity.

The arrangement started off well. Pena, who's now 63 and lives in San Jose, Calif., received a $2,300-a-month allowance from the annuity. Her total investment soon grew to $700,000, but the plan went downhill from there.

By 2007, when Pena switched to a new financial adviser, the value of the annuity had dropped to just $202,000. She reinvested the money in a new annuity, hoping to recover some of her losses and agreed to lower the amount she withdrew monthly to $1,700.

Within a year, however, the value of Pena's new annuity declined further to $49,000. Today, she subsists on her $1,892 monthly Social Security check and help from her children. Pena is now taking legal action against her initial adviser in hopes of recovering some of the money she lost.

"She made it sound like we were going to have money for the rest of our lives," says Pena, who says she gets depressed thinking about her lost savings. "It's inconceivable that someone can do that."

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