Posted on 02/24/2015 11:49:45 AM PST by Kaslin
Government’s involvement in healthcare has been such a rousing success, Obama is now thinking about getting more involved in regulating the retirement of Middle Class America. Hooray… Proposing new executive regulatory rules (because going through Congress is too cumbersome and democratic), the President has claimed that he is riding to the rescue of average American investors with the heavy hand of government oversight. According to theState.com:
The proposed rule, which Obama can put in place without congressional approval, would impose a requirement on some financial advisers to act as what the law calls “fiduciaries” for their clients, meaning that when they recommend or sell investments, they would be required to put the clients’ interests ahead of other factors, such as their own compensation or company profits.
Oh and by the way: If you like your financial advisor, you can keep your financial advisor.
So, let me get this straight: Obama wants to make sure that the financial well-being of investors is put before the profitability of investment firms, or the enrichment of financial brokers… In other words, he will codify that “clients are put first”? Who is going to define what is in the best interest of the client? Are we leaving that up to the same folks who think an 85 year old woman should be required to purchase health insurance that includes maternity care?
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.
Right. Because advisors always make money off of unsatisfied clients, right?
Currently, brokers and advisors are required only to provide their clients with “suitable” investment options. Of course, there’s a reason for that: It’s easy to explain why a 25 year old client can have substantially more risk in their portfolio than a 72 year old retiree… It’s not quite as easy to explain to regulators why a client took a loss in the last downturn, but the firm made a nice commission off of their decision. With government determining what advisors “should” or “should not” be suggesting, portfolio performance will soon be replaced with litigation avoidance (AKA: the most unimaginative, conservative, risk adverse, and low-yield investment options available).
Congratulations, Obama. You’re bringing Obamacare to the investment world.
More important than the impact of Obama’s misguided populist regulatory scheme, is the fact that his endeavor appears quintessentially quixotic. After all, it’s not private retirement accounts that are the problem. I don’t really see private 401k’s dipping into the red, or suddenly declaring insolvency… That seems to be happening to public sector retirement plans.
If you want to save the middle class from malinvestment, mismanagement, and over-promises, maybe we should address the insolvency of public sector employee pension accounts. Private retirements (while they surely suffer some losses during economic downturns) are positively the envy of public sector budgets, which are currently buckling under their projected (and unfunded) liabilities.
So while teachers, firefighters, and the entire public-sector workforce of Illinois watch their socialistic pension plan slip further toward bankruptcy, Obama is concerning himself with “solving” the problem of private sector employees being taken advantage of by “Wall Street sharks”. (Ya know: The same “Wall Street sharks” that donated to his campaign, and are protected by Elizabeth Warren’s major donors.)
I’m sorry, Mr. President: But I like my investment advisor, and I like my investment plan… Unlike my health insurance, I would like to keep both of them.
The picture says it all: I’m lying. I’m pretending to help you while I pick your pocket. Aw shucks, aren’t I clever?
My experience says not many. Additionally, I read recently the “new” safe withdrawal rate is 2.8%. Kind of scary if you really think about it. Very pessimistic.
The other gottcha in all of this are the economic radio entertainers. While much of their general advice is just fine, if you earn above national average, their advice becomes insufficient, if not bad. What might be right for a median income household, by definition, isn’t right for half the country. This is where CPAs and licensed financial professionals really help.
If he says so, you can be sure it’s the beginning of the end.
Here you go.....one of Holders people recently promoted from Obamacare Navigator to "fiduciaries":
I checked your voting record here....and here.....
so I have a special line of special mortgage backed government bonds for you....
Other uses for annuities: if one is going to leave money to a charity or college etc a later-in-life annuity can be a good way to be sure it gets there. Another situation is if someone really doesn't want relatives to get assets and doesn't want them trying for it in courts.
The problem with anything financial is that the hype never ends. I love intellectual play, and listening to these spiels is fun. When I take notes, telling them ahead of time I always check my facts before committing to anything, most of them get either insulting or arrogant about THEIR knowledge.
One thing that would help is an informative booklet impartially spelling everything out about the various choices.
Another thing....those reverse mortgages. As I understand it, they're a line of credit that doesn't have to be paid back until a senior moves from that house. But it's an attachment on the deed, even if it's only the minimum taken out to keep the line of credit open. It's pretty expensive to open, and it's made painless by using the line of credit to pay the fees. The lady who spoke to me (after I gave a cold call rep a earful about targeting seniors) said the line of credit increases by a few percentage points each year, until it reaches the assessed value of the house. For me, it wouldn't make any sense. For senior fraudsters, more rules are being written on them to stop people from maxing out that line of credit and not maintaining the property.
I think I'll call my state rep today with a suggestion (she's actually a listener). There should be courses offered in senior centers for free, from impartial instructors, about senior finance.
There are a lot of people quite senior to me around here who've worked their whole lives, saved, and are getting pressured from all sides. I wonder how many people realize they represent something. That would be the decimation of financial security to be passed on to another generation. I can't imagine how the US EVER fully recovers what's happened to individual wealth for the middle class.
Depending upon age, and a number of factors, “taking the growth” out of a 401(k) and putting it into an annuity, may be a good idea. There are a number of variables, so each case is different.
In general, the one tool to give a charity the most money is a cash value life insurance policy. Many colleges and some charities already have plans in place with guidlines, etc.
Annuities are good because they bypass probate and go to a named beneficiary.
While I like the idea of a booklet, because the choice of financial products is based on any number of variables, it is best to work with a professional. They don’t necessarily need to be fee-for-service, so it doesn’t have to be an out of pocket cost.
I am personally against reverse mortgages.
It is a bad thing right now, given that Yellen and the Fed will soon be compelled to raise rates (or the bond market will do it for them) and drive the principal value of debt holdings down.
Of course, people thought that four years ago, but Bernanke nailed the accelerator to the floor and the Fed hasn't let up since. It made a monkey of the marketarians (and a semi-pauper of me) and turned technical analysis into a joke. When the only technical indicator is what Helicopter Ben had for breakfast this morning, all market advice is worthless except that which is based on inside information (such as Goldman and a few other "near-perfect information" supercomputing warehouses possess to our exclusion) about what the Fed is going to do this afternoon.
That's what I meant, in part. The rest of it is, this can't go on, and Treasury prices are dramatically overextended (in a sane world). Like CMO's, seven years ago.
Satisfied?
I wonder, since this is a place for wondering out loud, whether everything we've seen for the last 15 years, since the dot-com [Spellidiot wants to rewrite "dot-com" as "do-gooder" ... What on earth causes idiocy like that?] bubble burst, as a wilful, top-level, Bush-family-assisted, Fed-managed, NWO looting of the US middle class to keep themselves in Maybach Zeppelins and 80-meter yachts? To drive the market value of a human being to zero and starve out the "surplus" (defined so as not to include Maybach mechanics and chauffeurs) world population?
Now there's insecurity for you! :p But what if it's true?
Ouch. Good post.
I suspect it’s true.
I generally agree with most of what you said.
Something is good or bad, when compared with something else. A fixed annuity is probably not the right choice for a 22-year old starting a retirement account. However, if a pre-retiree wishes to take the gains from the market and use them for guaranteed income without market risk, then a fixed annuity might be the ticket.
The same is true for CDs. Unfortunately, during periods of high interest rates, there is usually high inflation. People just don’t realize their purchasing power has been lessened by inflation.
I would respectfully challenge you on the fixed annuity or the CV's, unless the latter were very short-term, like six months.
We are already experiencing inflation carefully masked by the Fed and its henchboys at Labor, Treasury, and Commerce. The only place you can see it is in the grocery store, when it's too late.
Persons still working need to keep working to index themselves, if they can, to the present inflation, or else they'll end up eating dog food, like that senior I saw in a grocery store in 1973 or 1974. Two in the morning, nobody in the checkout lines, and there he was with his four cans of (I think it was) Pard dog food.
Think I was horrified? I remember it vividly, 40 years later.
The point is, fixed cash inflows are systematically looted by the Fed, both to fund congressional rapacity and to drive seniors back to work* (for nothing) in what is euphemistically describable as the "secondary labor market" (scab or scut labor). They may be skilled workers, but they're no longer able to use their skills (I think it's a scam, but then I'm a designated scam-ee like everyone over age 50).
This is what pension reform in 1973 bought us. Stroke of the pen in a back room while the bright lights were all dedicated to burning Richard Nixon out of office, and hundreds of millions of people were screwed for good by an invisible hand of the Lobby.
Young people, and people still working, listen up. This is what is waiting for you. This is what you are really being made to work for, not the future you imagine.
* This driving people back into the labor market, to take pressure off social-insurance and pension schemes, and also to bandage up falling fertility rates in Europe (here, we have immigration schemes) was the cover issue of a number of The Economist in either 2013 or 2014.
I was not clear with about CDs. And yes, inflation is definitely a risk for fixed annuities. However, some contracts allow for an exchange into a higher producing annuity.
In general, I am not a fan of CDs, except in very specific cases.
Another huge issue is our national debt. While “entitlements” are eating up the budget, with fewer workers in the workplace, and fewer workers per benefit collector, very soon, our debt servicing will be the highest budget item. That is unsustainable.
Neither party seems to have any desire or real leadership to address this in a meaningful way. Not to mention the millions of benefit-driven voters.
Govt. spending is unsustainable.
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