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Last-Ditch Bush Rule Would Threaten Retirement Security |
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In a last-gasp effort to reward its corporate friends, the Bush administration—on the very day of Barack Obama’s inauguration—proposed a new regulation that could reduce Americans’ retirement security by allowing firms to give financial advice to workers who participate in their 401(k) plans on products where they have a financial interest.
Current laws prohibit such conflicts of interest and the Obama administration has put the regulation on hold.
At a congressional hearing last week, Rep. Robert Andrews (D-N.J.), chairman of the House Education and Labor’s Subcommittee on Health, Employment, Labor and Pensions, said:
If workers receive investment advice, it should be independent and free of conflicts of interest. During a time where American workers have already lost $2 trillion in assets due to last year’s market downturn, exposing their hard-earned retirement savings to greater risk by allowing advisers to offer them conflicted advice is irresponsible and imprudent.
Barbara Easterling, president of the Alliance for Retired Americans, agrees:
The U.S. Labor Department should permit the education of retirees generally about investments, but should stop short of allowing specific recommendations when there could be a conflict of interest.
“The effect of legal protections for conflicted advice is quite predictable,” Mercer Bullard, president of Fund Democracy and associate professor at the University of Mississippi School of Law, told the panel.
Rather than promote the providing of independent financial advice to participants, the [new regulation] will promote conflicted advice, higher fees and lower investment returns.
The U.S. Government Accountability Office (GAO) examined Security and Exchange Commission data on pension plans and found that undisclosed conflicts of interest could lead to low returns—and less secure retirements—than those plans that properly documented any financial interests. GAO’s Charles Jeszeck told the panel:
The threat posed to participants in account based retirement plans like 401(k)s, now the primary plan design in the United States, is quite direct. Since workers largely bear the risk of investment under this plan design, any factor, and decision that reduces the account’s rate of return can have potentially irreversible consequences for the participant’s retirement income.
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Another sleazy way to extract more money from middle America. Mutual funds are the worst investment you can make, they only make money for 15% of investors. The rest just manage to break even or lose money, even while the fund managers are raking in the dough at our expense. You have to do your own research, because you certainly can’t trust anyone else to look out for your best interest in this greedy era. Check out Yahoo Finance to find out how funds have done over the years. Check out ETFs - exchange traded funds, that spread your investment out over a whole segment of the financial world like a mutual fund, but don’t charge you the fees of a mutual fund. Do the research and do what is best for YOU.
When I left a job 13 years ago, I was advised to transfer my 401K into a mutual fund for “safety, security and growth.”. In 13 years, the fund has gone down 80%. Even a savings account at 2% a year would have done much, much better. Do the research and learn before you invest in anything, there is a world of sharks out there who will gladly take your money…..