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The government proposes new protections for retirement savers
koowipublishing.com/Updated: 03/11/2023
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The rule is aimed at conflicts of interest and junk fees
of ConsumerAffairsPeople who retire usually get a party at work, maybe a gift from the boss and then roll over their 401 (k) retirement account into an individual retirement account (IRA).
The latter can come with some hefty fees and the U.S. Labor Department is taking a closer look at how much the fees are and what theyre for. Its proposed a rule that would hold fund managers, financial advisers, brokers and insurance agents to the fiduciary standard meaning they would have to act in the best interest of the client.
Under federal law, companies that sponsor employee retirement accounts are required to meet that fiduciary standard in the management of those accounts. However, the same does not extend to IRAs or rollovers.
The updated definition of an investment advice fiduciary would apply when financial services providers give investment advice for a fee to retirement plan participants, IRA owners and others. The Labor Department said the rule is aimed at some financial advisers who put their interests before their clients interests.
Self-serving advice
Department officials say that self-serving advice and junk fees can reduce the performance of the retirees accounts. They say a review of just one investment productfixed index annuities suggests that conflicted advice could cost savers up to $5 billion per year for this product alone.
For too many workers, the road to lifelong financial security is unnecessarily paved with uncertainty, said Acting Secretary of Labor Julie Su. This rule ensures that savers of all income levels can work confidently with investment professionals to grow their nest egg and prepare for the joyful retirement they deserve.
The Labor Department is also proposing amendments to the list of related existing administrative prohibited transaction exemptions to make sure investors rights are protected.
The government said the changes will increase retirement investors' financial growth by as much as 1.2% a year. That may not sound like much but over a lifetime it could increase an accounts value as much as 20%.
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