Ruined by 401[k] Predators

By Mara Der HovanesianThu Jul 3, 8:08 AM ET

Stan Morrill was confident his nestegg would provide for him and his wife for the rest of their lives. After all, the Eastman Kodak (NYSE:EK - News) veteran, a factory worker for 31 years, had attended the free financial seminar recommended to him by co-workers. Morrill says the host, Michael J. Kazacos, one of Morgan Stanley's (NYSE:MS - News) top brokers, dazzled him with a plan that would let him retire at 49. Morrill just had to roll over his pension and 401(k) into a tax-deferred account managed by Kazacos. After that, he could safely withdraw $36,000 a year -- plenty to cover his bills -- without ever touching the $320,745 principal. "I saw no reason why I should stay and work," says Morrill, who signed on in 1998.

But he says the strategy, which assumed unusually high investment returns of up to 14%, didn't pan out. Morrill's balance now stands at just $57,559, and with little other savings, he's scrambling. At 59, Morrill doesn't yet qualify for Social Security benefits, so he has taken a job as a janitor at a local school paying $9.50 an hour. In April 2007 he and his wife, Cathy, sold the five-bedroom Victorian house in a suburb of Rochester, N.Y., where they had raised their two kids, and unloaded some inherited land in Florida. Now they own a modest ranch house on the outskirts of town. "It's all gone," says Morrill. "I've had thoughts of suicide."