According to a recent article in the New York Times, a new wave of scams is targeting retirees

The ads are enticing. Turn tomorrow’s pension payment into hard cash today!  Want to buy a house? Get a “Lump-sum” payment on your pension and feel the wealth….well sort of.

What is not discussed is the interest rate charged by these companies and taxes are mentioned with terms like, “if you qualify”, “in most states”. When it comes to something as important as your pension you need to read the fine print, but also pay attention to what is NOT written.

John Wasik from Forbes writes:

I talked to a number of retirees who contracted with online companies to sign over their pension payments in exchange for cash. Many of these folks were federal employees or retired military personnel. Since it’s illegal for federal employees to assign their pension payments to a third party, the legality of these businesses is highly suspect.

Sign over you pension? That alone should scare the crap out of you.

Pension Funding LLC states that “You are not borrowing against your pension“, but that “it is an advance, not a loan”.  

For that reason this practice is not regulated.  They also state that The cost of money for this loan on pension averages 13 percent annually for qualified applicants.

So is it a loan or not?

At any rate, the lure of lump sum cash has been great enough for many to take the bait and sell a portion of their future for a premium.

And compared to mortgages and refi’s coming in under 5%, why on earth would you consider this scam?