10.5.1 Case study: Retirement account scam

Celeste loses her RRSP to a retirement scam.

 

Celeste had a pension fund from a former job in a locked-in retirement account (LIRA). She knew that she couldn't withdraw money from the LIRA until she reached the age of 55. She also knew that there was a limit to how much money she could take out each year and that she would have to pay tax on the money she withdrew. But when a flyer appeared in her mailbox promising that she could withdraw as much as she wanted from her LIRA without paying tax, she was intrigued.

Celeste phoned the number on the flyer. The person who answered told her that his company was offering a special Registered Retirement Savings Plan (RRSP) loan that would let her get around the tax laws and tap into her locked-in funds. To get the loan, he said, Celeste had to sell the investments she now held in her LIRA and then use the money to buy shares of his start-up company. In return, he promised to loan her back 60 to 70 percent of the money she invested, and keep the rest as a fee. Celeste would get ready cash, pay no tax on it and still hold a valuable investment in her LIRA.

The offer was too good to pass up. Celeste agreed. She cashed in her investments and bought shares of the company. Then she waited for her loan.

It never arrived. The investment she'd bought was worthless. On top of that, she had to pay tax to Revenue Canada for money she never received.

Lessons Celeste learned:

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