Introduction

Madison: Hello, everyone, and welcome to Not Just Numbers, Honest Conversations with a Financial Advisor and Lawyer. I am Madison Demora, and I’m here with Mike Garry. Mike is a financial advisor and a CFP practitioner and the founder and the CEO of Yardley Wealth Management. He is also an estate planning lawyer, and his law firm is Yardley Estate Planning. Hey, Mike.

Mike: Hey, Maddie. How are you?

Madison: I’m good. How are you?

Mike: Beautiful day today.

Madison: Yes. All is good. All right, today we’re referencing an article from The New York Times titled “Mailed, Stolen, and Cashed: $114,000 in Retirement Checks,” written by Ron Lieber. It tells a story of a man who lost his entire $114,000 401k rollover. Not to market volatility or poor planning, but because the check was mailed, stolen, and fraudulently cashed. Mike, I know you’ve seen a lot in your years as an advisor, but this one feels particularly frustrating. What’s your reaction?

Mike’s Reaction to the Fraud Case

Mike: Yeah, it’s tough to hear, Maddie. I mean, it’s not an isolated incident. I hadn’t heard of this before of, like, actual fraud like this, but checks are mailed in this industry all the time. And, you know, the last couple years, we’ve heard all about the mail fraud and people stealing checks, you know, and people, like, not putting them in their mailbox anymore. Not sending anything through cash. But still, in our industry, retirement accounts routinely get mailed out as physical checks. You know, it’s totally outdated, and it puts people’s life savings at risk.

Avoiding Risks in Rollovers

Madison: For those who haven’t read the full story, this involved a man named Mr. Handy. Paychex mailed his 401k rollover as a physical check, and thieves intercepted and cashed them. Only one bank reimbursed a small portion. Paychex and the other bank didn’t resolve it, and now Mr. Handy is suing. Mike, how do you help clients avoid risks like this?

Mike: So, in this situation, right, there were four different mailings going on. He had his pre-tax and his Roth, and they were from different places, and they were going I guess to different places. And so he received the checks, and then he mailed them. Right. So it’s two different times. You’re sending two different checks in the mail. And it just really increased the risk a lot. And something happened. Right. And so, like, the big key is, if you can avoid mailing paper checks, please do so whenever possible. You know, we guide clients through a direct rollover. And what we really hope is that the money goes, you know, from the old retirement plan electronically to the IRA, with no physical checks, no middlemen, no making the client get them and mail them. Unfortunately, it still happens all the time. You know, they have to do it because the system doesn’t allow the electronic transfer. And it’s crazy because some of the big custodians, like Fidelity’s a big 401k plan, they can move money electronically, but the plan has to be set up to do that. And, you know, I don’t know why plans are not set up to do that. It’s so much quicker, so much safer. But they don’t. So, yeah, it’s very frustrating.

Why Companies Still Mail Checks

Madison: Why are companies like Paychex still relying on mailed checks for something as important as retirement transfers?

Mike: You know, I think it’s just inertia. You know, it’s a big company with probably a million 401k plans. And, you know, they will say, well it’s our internal systems and regulatory concerns, and that, you know, they want to make sure that you have your tax forms and compliance document all followed. And so that’s how they have set things up, and they’ve been doing it that way for years. And, you know, they like to think of the paper checks as a way to control that. But, you know, it’s clearly outdated. And in this case, it’s bad. This guy lost, you know, it was $114,000. I think the one bank reimbursed him like $14,000, but as of right now, he’s still out $100,000.

Questions to Ask During a Rollover

Madison: So let’s say someone’s in the middle of a rollover. What questions should they be asking their provider?

Mike: The first is, is there a digital transfer option? And if there is, use that. That’s the best case. If not, you know, ask who the check’s going to be made out to. You know, it should be made out to your IRA account or your Roth IRA account. And so it should be the name of the custodian, for benefit of you. So, for instance, if, say you’re rolling over your 401k, it would be, Schwab IRA for benefit of Madison Demora. And with your, you know, mailed out. And then if you can’t get it digitally done, then you should send it, like, certified or through FedEx or UPS. And yeah, that they might charge you something for that. Do it and get the tracking number and track it. Know when it’s deposited, and check with both custodians. So one day you’ll see the 401k have a zero balance, and your IRA should have the amount that was deposited. And stay on top of it the whole way. The whole way.

Client Experiences with Rollovers

Madison: Have you ever had a client run into a similar situation with rollover fraud or delays?

Mike: Well, we haven’t had the fraud, so we’ve been fortunate. I’m going to knock wood as I’m saying that. But we’ve seen delays. We’ve seen checks, made out wrong. We’ve seen checks made out, well as I said, made out wrong, but then, like, delivered to the wrong address. And I don’t know how that happens because, you know, the process of initiating the rollover is really a, can be a tedious process. You know, fortunately, you know, we have people in here are ops people take care of that. And it’s almost always Sandra. So Sandra will take care of that. And she knows how to deal with these custodians because she’s done it, you know, probably hundreds of times. And, you know, the way that they verify everything, it just seems impossible that somehow checks get sent to the wrong address, but they do. Or there’s some delay. For some silly reason we had that happen a month ago. I forget exactly the reason for the delay. But, you know, it took a couple of weeks. You know, two checks were sent out. One was received pretty quickly, and the other one, you know, it just came later. Makes no sense. Anyway, it’s something, you know, digital if you can, tracking if you can’t. And stay on top of it the whole way.

Verifying Check Arrival and Processing

Madison: Right. Is there anything people can do to verify a check has actually arrived and have been processed?

Mike: Yeah. You know, once you get the tracking notification that’s been delivered, call the receiving custodian, Schwab, Fidelity, Vanguard, wherever, and ask if it’s been deposited. You know, don’t assume, like, no news is good news. Just need to follow up until it’s confirmed. It’s just, you know, it’s sad that it has to be that way, but it does. You know, and take the extra steps. I know we’re all busy, but it’s, you know, keeping track of your money. So it’s important.

Final Advice

Madison: All right. This whole situation really highlights how important it is to be proactive during these transitions. Do you have any final advice?

Mike: Sure. So with the custodian, where you’re taking the money from, to the custodian that you’re putting the money in, like, don’t be afraid to ask questions, and if you have an advisor or an advisory relationship, don’t be afraid to ask them questions. And don’t assume that the default process is the safest. Right. You want to be on top of this. It’s your money, and protect it, you know, and it does help. Like I said, you know, we’ve had Sandra process hundreds of these, so she knows what to do, what to look out for. She knows when one of the custodians is doing something that they shouldn’t be, and she’ll hang up and call back and get a different operator. And, you know, unfortunately, it’s just learned experience, right, that sometimes dealing with this process, it doesn’t go smoothly. So it’s definitely work, and you have to stay on top of it.

Closing Remarks

Madison: Very well said. Thanks so much, Mike. And thank you all for tuning in. If you have any questions about rollovers, retirement plans, or protecting your money, we’re always here to help. For more information on Yardley Wealth Management or Yardley Estate Planning, you can visit our websites at yardleywealth.net and yardleyestate.net. You can also follow us on socials at Yardley Wealth Management. Don’t forget to subscribe to our YouTube channel. This podcast has been produced by Madison Demora and Mike Garry, with technical and, artistic help from Poe Productions.