Retirement Plans: Last Week Tonight with John Oliver (HBO)

money, you know what everyone likes to think is good despite the evidence provided in every episode of the Suze Orman show. Tina, what do you want to buy? Hi Suze, thank you for taking my call. I would like to buy a Mercedes s550. about $1,400 a month that's true they deny you oh i want to sneak out the time to believe p.m. bag so Jenai ain't even funny I'm going to deny you again I'd like to buy a study abroad in Iceland I want to go to the famous moose school and weigh Kovac and get a certification like Elsa Potter this is what I'm denying you yeah Of course, it's because no one should spend $4,000 to get an elf detection rating.

In fact, if you go to

last

week

tonight

, don't worry, right now you can print a free official elf detection certificate that I promise is just as valid. as the most expensive elf sensing education now go get some elves now whats one of the main reasons Suze Orman denies so many people is because she thinks we should all be saving for our

retirement

and before moving on its important recognize that there are people who just don't have the money to do that for systemic reasons that we've addressed on this show before and will no doubt address again on giannios sad tastic' the circus of misery and math but

tonight

let's talk about those Who can bird for

retirement

, the target audience for ads like this, we asked people how much money they think they'll need when they retire, then we gave each person a tape to show how many years that amount

last

s. a little more, yeah I was trying to stretch it a little more, I hit 70 years old.

I'm going to have to rethink this, which is actually quite a creepy announcement because it's basically people walking towards their own death date. The only way it could have been creepy is if at the end of his tapes he said exactly how each person was going to die, but look, it's true, it's true that since we're all living longer, you should absolutely say for retirement if you can and many do. We currently have about $24 trillion in retirement assets and that number doesn't even include the wealth that we have in stock piles so let's call it $24 trillion and $32 and a lot of that money is held by financial services. compa nies so let's talk a bit about how they work which I know sounds boring but as a favor to your future self it's worth watching this for 20 minutes because you could easily make little mistakes that could seriously cost you down the road, so let's start with financial advisors they're the sane friendly faced experts you see on apps like this think chase wait that's a clear example of false advertising because no one invites their financial advisor to a wedding if cousin barbara finds out that he did not receive an invitation. but the guy who chased her she's going to turn it on you but there's something you need to know about financial advisors even their name means less than you think the Financial Industry Regulatory Authority warns clients to be aware that financial analysts financial adviser financial advisor financial planner investment consultant or wealth manager are generic terms or job titles and can be used by investment professionals who may not have any specific credentials, so financial analyst is just a term fancy which doesn't really mean anything as a brand ambassador or the nonsense

john

oliver

effect completely nonsense but even many well reputable financial advisors take a commission so if they recommend something to you it may be because they can make money in fact, they are sometimes actively incentivized not to act in their best interest, to take annuities now certain types those can be very complicated investment products that have high fees and would only be appropriate for certain types of portfolios but some financial advisors push them hard just look at how Suze Orman reacts when a person who has just inheriting $80,000 asked for advice, we talked to a financial advisor and he recommended that we invest it in an annuity.

I was going to say wait wait let me tell you I can tell you what the financial advisor said today that advisor also told you that if you put that $80,000 in there. I'm going to earn about $4,000 in commissions. Did he or she tell you that too? Oh he or she, thank you Susie Orman for pointing out that fake financial scammers can also be women. Annuities may not just make money last year, Elizabeth Warren published a report on sales perks in the annuity industry ranging from free cruises to luxury watches, and this is true. It's easy to spot running backs you shouldn't be working with hey nice ring I'll win but I guess you didn't understand that playing running back for the Green Bay Packers now, in general, it's currently legal for financial advisors to put their own interests ahead of yours unless, and this is interesting, they are what's called a fiduciary because not all financial advisors are required to act in your best interest, but fiduciaries are, which is kind of weird.

It's like finding out that only certain restaurant waiters are forbidden to ejaculate in your soup. Why is it up to me to ask you what type you are? I return this soup to you. I do not take risks. You pay it back, but financial advisers do. just a part of this if you're lucky your job offers a 401k retirement plan and if so you should probably take advantage of it but you should also know that they can be a gold mine for financial services companies and although it's not unreasonable getting charged for providing a service there can't be many different fees there are legal fees trustee fees transaction fees administration fees accounting fees finder fees and the list goes on and on I honestly wouldn't be surprised if they also had an elf detection fee , but remember thanks for your recertification you don't have to pay for it anymore find some leprechauns and I'll see me the seemingly small fees can really add up thanks to something called compound interest now whenever retirement companies like Prudenti when mentioning that they always it is positive that if you start with a really small investment by the time you are ready to retire there will be grown substantially it's hard to imagine how something so small can help with something so big but if you start by putting that into your retirement every

week

let it grow over time or 20 to 30 years that retirement challenge might not seem so big after all holy Is it just me or did that last domino fall real hard that might be the most disturbing commercial involving dominoes that doesn't involve the phrase Kali Chicken Bacon Ranch, but compound interest works both ways, which means that as your money accumulates, your fees can really add up to assume you are invested in a fund that is earning a 7% gross annual return they charge you a 2% annual fee for 50 years the difference between your net 5% red line and what you would have earned without the fees the green line is amazing its lost almost two thirds of what you would have had two thirds of what you would have had is gone so think of fees as termites they are tiny, barely noticeable and can eat up your future king and one place where your 401k can be crawling with termites is the funds themselves, generally speaking you can choose from low fee index funds that basically just try to match the average returns of the stock market or for a higher fee you can get an actively managed fund with experts picking stocks for you trying to beat the market and companies selling active funds really believe in themselves at MF investment management we believe the active management can protect capital long-term active management can take calculated risks active management can try to get better results because active investment management is not reactive it is active that's okay that's not so much business coherence as it's a game of drink where you do a shot every time he says the word active but the problem with active management is that even many Wall Street experts find it difficult to consistently beat the market, and there is sometimes embarrassing evidence of this, such as when a group of professionals faced off in a stock pick challenge against a cat named Orlando.

Orlando's method throws a toy mouse into a grid of companies. year, Orlando photos returned nearly 11 percent, while the pro got just 3.5 percent. Oh gosh, let's all agree that the wolf of wall street would have been so much better starring that cat because you know instead of drugs there's a rut because instead of drugs would come the downfall of him. when someone pulls out a laser pointer in a meeting, but that cat wasn't a total anomaly, there's mounting evidence that, over the long run, most managed funds don't do any better, and often do worse than the market , it's basically the plot of Charlie and the Chocolate Factory, if you stand around doing nothing while everyone around you will win a lot and the thing is, this is not a secret, even some of the people. charging those fees i know this is the reality one of the last dirty secrets in the fund industry is that many people who run other fund companies own index funds in their own accounts and don't talk about it. unless you put a couple of beers on them Wow sometimes I invest in index funds might be the least interesting secret someone died fake won't run it's right up there with my favorite movie it's the constant gardener and once in college I know got totally drunk and read the whole wikipedia page looking for rope so don't tell nobody don't tell nobody so between high financial advisor fees and underperforming active management the whole industry of retirement

plans

is a potential minefield and you have to pay attention and the reason we know about this is that earlier this year we decided that we wanted to set up a 401k for our employees and you may want to learn from our experience because this this is what happened: we contacted the production company mpany behind this show avalon television and asked them to take care of it a couple of months later they told us they have We went over his plan, it was provided by John Hancock and we said ok and went back to work, I mean, we went back to Google teacup pigs eating ice cream, but then in March, reps came to our office and told him they gave our staff presentations on the Nu plan its the kind of thing no one in their right mind wants to sit down honestly most of us spend on our phones googly cup of tea pig eat top hat eat shopping eat beer and boom boom we won the jackpot, but unfortunately for John Hancock our investigation is starting to go through the documents and he started adding up the fees which came to a combined 1.69 percent and that was before we paid a fee of $24 per person per year and the fees of our funds, so they asked John Hancock why the fees were so high and he told us it was normal for a start-up plan and a new company and Hancock gave us a l The lowest number that it would drop to over time when we said okay okay that sounds good and our researcher said wait no that's not okay that number is still higher than what experts have told us we want it to be look let this figure it out why don't they google again pigs in teacups or whatever they do all day and we said oh my gosh it's a thing that exists and yeah that was the rest of our afternoon, TRUE?

Meanwhile, our investigators took Hancock's contract and sent it to financial experts who noted a 1% broker fee for the first year and a half percent after that and remember it could add up. We did some very rough estimates and with 35 employees. contributing just six thousand dollars a year after 30 years half the percentage could Apter could add up to about a million dollars that number was so high you'll never guess what happened Janice in accounting actually gave us serious Caesar going after one of them she bo Had cupcakes for the big kitchen yesterday and she adopted a kitty she named him tuppence so anyway we asked who this broker is and it turned out he was some Avalon guy who agreed to pay to help them set up and support our plan and we asked him why didn't he present us with low cost low cost

plans

like Vanguard and why are we paying him so much and he said well in the first place our plan was probably too complicated for Vanguard and that he did a lot of things for us like act as our financial adviser, although as we now know the term doesn't necessarily mean much, in fact if you visit our website right now you can print a free official financial adviser certificate and there you have it congratulations and although our broker has other credentials when we asked if he was a trustee unsurprisingly he said no as to hisrates, he said they would go down and last night he sent us an excel spreadsheet showing how they might go down as our fund assets grew woefully.

Recently, in that spreadsheet, he made an error, which meant that the interest on our funds was not compounded correctly and when we pointed this out, he sent a second sheet showing that his original calculations had been off by more than $10 million, which is uninspiring. confidence in the man who, as he repeatedly reminded us, was helping us navigate our very complicated plan now our attorneys at this point say I have to tell you that both the broker and John Hancock claimed their fees would be reduced because they are competitive within the industry and worthless for the services they provide, although you should know that early on we decided to pay almost all of our employee fees because we were so embarrassed about the situation we put them in and we're leaving. both Hancock and the broker and I guess they've seen this show and will be happy to let us go just so you know we're going to replace them both with that stock collecting cat because he seems to know the whole corner telling you this is if you don't pay close attention to All this. it can really take away from you, but here's the good news, it actually doesn't have to be that complicated and it could get simpler in April the Department of Labor issued a final rule requiring all advisers who handle retirement accounts to act as trustees starting next year and that's great because the financial services industry fought hard against this rule they even put out terrible hack ads you may have seen one like this on tv it's these new regulations they're pushing in Washington the ones I care about want to make it really hard to get advice from a financial advisor no more help from a even with our IRA and 401k savings only if we want to pay a lot more I will never get the information we need let's call our senators ok ok to be honest my only takeaway from that ad is that that guy is definitely a non-threatening wife character a and it's so obvious you should let it kick it to the curb and while the rule has been followed anyway, financial services groups have filed five lawsuits attacking it and House and Senate lawmakers have passed a resolution seeking to overturn that fiduciary rule, although just a few days ago the president vetoed it and by the way, I think it's something we'll probably see a lot more of because the president Obama's last year in office seems to be moving from a bipartisan solution to bye-bye Felisha and, Look, I'm not saying all of this isn't complicated, we spend weeks trying to figure out our own 401k plan, but for the average person trying to save for retirement.

It doesn't have to be that confusing the truth is as long as you remember a few key things you'll probably be fine and we wanted to summarize them for you so when you're ready or able to go for retirement please come back and play this video from this exact spot enjoy hi I'm Billy Eichner and I'm here with a bunch of King tapes and I'm using them to show people how much money they need to save for retirement Look at you, oh, you're so precocious. A little thing. These are the rates. That is your record keeping fee.

That is your final rate. That is your monthly participation fee. That's your 12b. that's your fee for not knowing about a fee and this is what you have left to retire and try ribbon dancing you look like an idiot in this the problem is idiots like Karen here make bad decisions when it comes to what to do with their money Karen if you had four thousand dollars you would invest it in your 401k or go to elf school in reykjavik out of school you dont plan your groove 1k idiot the only elf you should be studying is kristin chenoweth she is a delight come on here real kristin chenoweth I love home and who wouldn't want to go to Reykjavik ok its not the Tony Awards go go go that was Kristin Chenoweth the point is the best advice most experts can give you is to do five things , number one, start saving now, in fact.

Start saving 10 years ago, invent a time machine, use it to go back and start saving money, then kill it. Be Hitler. alone you should check it as often as you google if gene hackman is still alive about once a year and he is still alive is he writing novels now third if he has an advisor ask if he is a trustee if they say don't run if they say they yes but they are wearing a tacky super bowl ring if they say yes what they are wearing is a class ring that has nothing to do with this i just think its very strange when a grown man is wearing a class ring due to trustee number four like me you get older gradually switch your investments from stocks to bonds this is a way of remembering it every time they pick a new james bond gradually switch more of your stocks to bonds and then you come back to wonder if daniel Craig is really hot what do you think Doris oh he's so bread no no no he doesn't look like a blonde chimp and a tuxedo and you know it oh I wish this was a hoot finally try to keep your rates c I eat your milk below 1% because just like interest compounds, past due fees and even 1/10 of 1% can really cook you so Kristin watch out oh that reminds me of one last piece of advice don't forget to die Billy I'm not dead Kristen you're even shorter now oh stop coughing disgusting excuse me retirements no christian channels for wronged on the set of this piece you