This past Friday, President Donald Trump ordered the Department of Labor to reconsider the Obama administration’s retirement savings protections due to begin taking effect in April, with an eye toward revising or completely eliminating them.
Remember, these protections are based on two core ideas. First, if you are a retirement investor, your best interests should come first—they should not take a back seat to the financial interests of your financial adviser. Second, how your adviser gets paid cannot conflict with your best interests.
How likely is the Trump administration to cut back on these retirement protections? Based on the comments of White House press secretary Sean Spicer, it sounds like they already have made up their minds either to cut or eliminate them. Spicer called the rule “a solution in search of a problem.”
What could eliminating these protections mean for you?
1. You may lose hard-earned retirement money. The Labor Department created the new retirement investor protections because lots of evidence showed working people and retirees were paying a huge price for conflicted investment advice through higher fees and worse returns. If you continue to live with that conflicted advice, you could end up with about 25% less in retirement money over 35 years of investing than if you were getting recommendations from someone who is paid to work in your best interest. This easily could amount to tens, if not hundreds, of thousands of dollars less for you when you retire. Or, you might have to work longer to make up for it.
2. You won’t automatically be able to trust your retirement investment adviser. Trusting the wrong person to help you make good decisions about your retirement investments can cause you deep and permanent financial harm. If the Trump administration gets rid of or weakens the retirement investor protections, it will continue to be your job to figure out whom you can trust—that is, who is a “fiduciary” legally required to act in your best interest versus who is just a salesperson getting paid with commissions and kickbacks.