The Solution

The Department of Labor (DOL) is trying to update the rules that apply to retirement investing so that your retirement security is better protected. Those rules haven’t been changed in 40 years, even though the way Americans save and invest for retirement has changed dramatically. Reliable pensions that once took the worry out of retirement planning are disappearing, and workers and retirees today have to manage their own 401(k)s and IRAs to make ends meet in retirement. With so many complicated investment choices to make, Americans need reliable advice they can trust.

Fiduciary Duty

Although the updated rules have not yet been released, the DOL has said its goal is to make sure that all financial professionals have a legal obligation to put the interests of their customers first when they offer retirement advice. That legal obligation is known as the “fiduciary duty.”

Consumer First

If the Department gets the rule right, you won’t have to try to figure out whether your financial “adviser” is really a salesman looking out for his or her own interests or a true adviser looking out for yours. A good rule will ensure that all financial professionals who offer retirement advice must make recommendations designed to serve your best interests by keeping your costs low, recommending sound investments, and protecting your retirement nest egg from unnecessary risks.

That means:

If you leave a job and need advice on whether to roll your 401(k) over into an IRA, the financial professional will have to analyze your former employer’s 401(k) and the available IRA alternatives to determine whether rolling over your money is best for you.

Any advice you receive about how to invest the money in your 401(k) or IRA will have to be based on sound investment principles and your specific financial situation. In short, it will have to be based on what is best for you, not what earns the most in commissions and fees for the adviser.

If financial professionals put your interests first, your costs should come down and your investment performance should improve. Over the long term, that could add up to tens or even hundreds of thousands of dollars in additional retirement savings.