Closing the Loophole That Costs People $17 Billion in Retirement Savings

620-FiDu-announcement-president-obama-aarp
President Obama at AARP headquarters a year ago.

We all rely on advice — from friends, family and, at times, complete strangers. Sometimes you get good advice and other times you get advice that is not in your best interest. But if you get advice from a professional like a doctor, a lawyer or a financial professional, you should be able to rely on knowing that it will always be in your best interest.

Unfortunately, that is not always the case when it comes to financial advice. While some financial professionals are held to a standard that requires them to give advice that is in your best interest, others are not held to that same standard. Because of this, some may put their clients’ hard-earned retirement savings into investments that may have higher fees or give higher commissions to the adviser. The White House estimates that this costs millions of retirement savers about  $17 billion per year.

How to achieve your retirement goals

Taking action on this $17 billion problem, one year ago today, President Barack Obama came to AARP to join members of the Save Our Retirement Coalition — including the Consumer Federation of America, Better Markets, Americans for Financial Reform, the Pension Rights Center, AFSCME and the AFL-CIO — to announce a proposed rule to close this loophole and protect workers’ and retirees’ hard-earned retirement savings.

On that day, the president said, “There are a lot of very fine financial advisers out there, but there are financial advisers who receive backdoor payments or hidden fees for steering people into bad retirement investments that have high fees and low returns…. They might even recommend investments with worse returns simply because they get paid to recommend those products.”

The rule that was proposed nearly a year ago would require financial advisers to do one simple thing, if they don’t already do it — ensure any advice they give is in the best interest of their client. In doing this, it would also update the regulations covering retirement advice that were enacted in 1975 — a time when more people were covered by defined benefit pensions and the IRA and 401(k) plan were just coming on the scene.

While it’s easy to get caught up in inside-baseball terms like “fiduciary,” fundamentally this rule is about protecting everyday workers who are saving their hard-earned money for their future and stopping a drain on their accounts that many weren’t aware of.

Since the rule was proposed, the Department of Labor has received more than 3,000 comments and 300,000 petitions from people representing every state in support of regulations to close the loopholes in current law.

Quiz: How much do you know about credit and debt?

After nearly a year of deliberations and thoughtful responses to comments, AARP is hopeful that the proposed rule will be finalized soon, helping Americans get access to the financial advice they deserve. They should know that the $100 they put away each paycheck is being invested with their best interest in mind, not Wall Street’s.

Go here to tell your member of Congress to support the Department of Labor’s regulations to close the loopholes in current law.

Nancy LeaMond, chief advocacy and engagement officer and executive vice president of AARP for community, state and national affairs, leads government relations, advocacy and public education for AARP’s social change agenda. LeaMond also has responsibility for AARP’s state operation, which includes offices in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.

You can follow her on Twitter @NancyLeaMond.

Also of Interest


See the  AARP home page for deals, savings tips, trivia and more.

Search AARP Blogs

Related Posts
December 11, 2018 10:07 AM
In an election year filled with partisanship and political fights, it’s no surprise that many Americans feel that their voices aren’t being heard or that the issues that affect their lives aren’t being addressed. But, many outstanding elected officials work hard every day to make a positive difference for their constituents.  That’s why AARP recognizes state legislators, governors, and other elected officials – from both sides of the aisle – who have stepped up and worked together to write, support, and advance common-sense policies that help older Americans remain in their homes and communities and retire with confidence. AARP is proud to announce our fifth annual bipartisan class of Capitol Caregivers, who fought this year to increase support for family caregivers and their loved ones, along with our fourth annual bipartisan class of Super Savers, who championed policies that enhance retirement security.
December 05, 2018 01:06 PM
Caroline is a mother of two children and a preschool teacher who unexpectedly became a family caregiver for her father after he suffered a major stroke. Her father, Tom, now deceased, lost the use of his right side and his ability to speak. Multiple surgeries and rehabilitation treatments later, he was able to live at home with the help of nurses. But it was up to Caroline to provide daily care, such as overseeing appointments and handling certain nursing responsibilities, like managing his medications. “I became the person my father could rely on more than anyone in the world,” Caroline said. “I became his safe place and his best friend.” In communities across the country, family caregivers like Caroline are caring for older parents, spouses and other loved ones, helping them to remain at home – where they want to be. Their tasks are done out of love and commitment, but are not easy. That’s why AARP is fighting for family caregivers and their loved ones in every state. In 2018, AARP advanced new policies to provide more help at home, flexibility at work, training, relief and more, which will benefit over 30 million family caregivers. Here are a couple highlights:
November 27, 2018 08:55 AM
A few months ago, I wrote a blog about the vital role that transportation options play in what we at AARP call “livable communities” – great places to live for people of all ages. Being able to get around is critical to earn a living, raise a family, contribute and stay connected to your community and enjoy life. And, having alternatives to getting behind the wheel of your own car is particularly important for older adults who want to stay in their homes and communities as they age.