Feds Targeting Personal Retirement Accounts

White House looking to creep into 401(k)s

February 28, 2015

Last Monday, with Sen. Elizabeth Warren (D-Mass.) at his side, President Obama attacked Wall Street, again, for essentially helping in what the federal government and businesses can no longer provide — a decent retirement.

Under the false pretense of calling for new and tougher so-called fiduciary standards for financial brokers, advisers and retirement plan representatives, the White House once again horned in on Wall Street’s compensation formulas.

However, what the president surely knows is that a vast majority of retirement plans — IRAs and 401(k)s — are in simple fee-based products like mutual funds. The commission-based accounts are for those who prefer to direct their brokers in certain purchases inside some of their retirement products.

The key to the White House’s interference is in its nuanced language.


Currently, a broker may make a recommendation that must be “suitable” for retirement account assets such as 401(k)s and IRAs.

However, the president wants to take it a step further and mandate that it be in an investor’s “fiduciary best interest.”

The administration surely knows that commission rates and fees on Wall Street have never been better for the consumer, and to pretend to be able to offer even cheaper rates seems disingenuous.

It also opens a huge can of worms.

What if an investor who has been successful with Apple wants to buy 100 more shares of the tech giant for his or her self-directed IRA?

Does the administration really want a broker to interfere because in the broker’s opinion it isn’t in the “best interest” of the investor?

It’s all about control. It’s your money, America. The system functions quite well. Adding more pages of red tape will not improve performance, but it just may get your broker to drop your account, just as many credit lines were closed after Dodd-Frank passed.

Many on Wall Street and non-political economists feel one of the things holding back our economy is the ever-increasing creep of socialism and added regulation into our finances.

Just look at the mandated, innocuous-sounding Affordable Care Act, a k a ObamaCare. At its passage in 2010, we were promised a savings of $2,500 per family.

Well, look what happened. The average annual cost of a health insurance premium for family coverage was $13,770 in 2010; in 2014, it was $16,834, according to the Kaiser Family Foundation. That’s a 22.25 percent increase in four years.

Additionally, the average deductible for single coverage jumped from $917 to $1,217, an increase of 32.71 percent. And out-of-pocket prescription costs and co-pays rose as well.

Remember how Dodd-Frank was going to change banking for the better for the consumer and help the middle class get improved treatment?

Well, in the world of government overreach, it’s always the average Joe who gets hurt. Look no further than the checking and bank fees that eat into our accounts month in and month out.

In 2009, 76 percent of banks offered a checking account with no minimum balance and no monthly fee. Today, only 38 percent do, according to Bankrate.

Meanwhile, the minimum account balance to qualify for no-fee checking at banks has skyrocketed to $6,118, per the Heritage Foundation.

Oh, and it’s a lot harder and more costly for the average American to get a mortgage today.

So much for government intervention.

Furthermore, there are very few stories about brokers absconding with 401(k) or IRA funds, which was one of the reasons noted for this vague and misleading regulatory rule. And if there are creeps who try to rip people off, everyone is protected by the FDIC and SIPC, the SEC and FINRA regulations, and insurance.
And what about Social Security? Its future remains in question for those in their late 50s and under — and these same DC denizens want to run our private retirement accounts? Come on, IRAs and 401(k)s are the few savings products that actually do work in this country for everyone.

IRAs and 401(k)s are personal retirement accounts, not government pensions. Please keep your hand out of our pockets.

Obama to announce retirement account change

February 23, 2015

McClatchy - President Barack Obama will head to the AARP Monday afternoon to announce a change in policies affecting retirement accounts -- part of a series of moves the White House says is aimed at boosting the middle class.

Obama will call on the Department of Labor to develop a rule that would require retirement advisers to abide by a “fiduciary” standard -- mandating that they put their clients’ interest ahead of making a profit.

Unlike doctors or lawyers, financial advisers are not obligated to look out for their clients’ best interests, said Labor Secretary Tom Perez. He said the change would modernize a 40-year-old rule.

“Consumers deserve to know that their adviser is working for them,” he said. 

Currently, advisers recommendations for retirement plans, including 401(k) plans, must be considered “suitable” but the White House says that can mean high costs and low returns. A report by the White House Council of Economic Advisers estimates that conflicts of interest cost middle-class families who receive “conflicted advice” an average of 1 percentage point lower annual returns on retirement savings. It estimates the losses at $17 billion a year.

Consumer advocates, including AARP have championed the move, but the industry has resisted the plan since the administration first proposed it in 2010. The Securities Industry and Financial Markets Association said the proposal could raise the cost of savings and hurt those trying to save for retirement.

"We have ongoing concerns that the DOL and the White House have completely ignored the existence of the robust regulatory regime under SEC and FINRA, and this re-proposal could make it harder to save for retirement by cutting access to affordable advice and limiting options for savers,” said the group’s president and CEO Kenneth E. Bentsen.

Jack Bogle, the founder of Vanguard, however, told reporters on a White House conference call that the rule could work.

“Bogle has built a business model to serve income levels that run the gamut,” Perez said. “People with modest income and those wealthy all should benefit from a regime where you have minimized conflict advice.”

Related: 

• Will the U.S. Government Seize Your Private Retirement Accounts?
• Get Ready for a Stock Market Crash Because the Feds Want Our Private Retirement Assets Converted into Government Annuities to Fund the National Debt