The Retirement Gamble (full documentary) | FRONTLINE

Mar 10, 2024

On the front lines of America's

retirement

crisis tonight, it's hard to really care about

retirement

right now. I guess plan b would be to keep working. My retirement plan I'm crossing my fingers and praying basically, even if you have a 401k or ira, will you have the money you need to retire? If you earn a hundred thousand a year you need a million and a half to be well, many 401k programs are terrible, you put in 100 of the capital, you assume 100 of the risk and you get 30 percent of the return, investigates correspondent Martin Smith Keep it simple, that's a question that can only be answered by what your risk appetite is, if you don't want to keep it simple, well I wish it were simple, if you want to

gamble

with your retirement money, be my guest tonight on the front lines of the retirement

gamble

More and more cash-strapped Americans in this bad economy are borrowing as the number of workers borrowing from their accounts has reached the 10-year mark. The number of workers now let's start with a simple fact: America is facing a retirement crisis and the statistics are a grim tax code that could reach 401,000, half of all Americans say they can't afford to save for retirement, the average retirement fund has lost 12,000, a third have almost no retirement savings, meeting the need for many Americans to work longer and save more for retirement. I just don't know if I will be able to save that much God willing, social security will still be there for someone like me, it will probably be enough to keep me out of poverty, the retirement fund is cut, diced and divided into a wall. street to play now I'm going to have to somehow find a way to save 10 of my salary or 15 of my salary, which is probably what I need to save to have any chance of retiring, you know, not on food. stamps yeah, I don't know, I hope I can retire recently.

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the retirement gamble full documentary frontline...

I have started researching how to make more money, how to increase my income and at the same time continue teaching. It's hard to really worry about retirement right now because I know it's up to now and I know that worrying and stressing is an easy thing to do, but I also have the mindset that as long as I don't have too many bills or too much debt, I could basically live off what I can. be. I understand, I guess plan B would be to keep working, but I really trust plan A. Otherwise, yeah, no, I don't have a plan B.

It's hard to imagine, even at this point in my life, being retired, just I do not see it. You know, living the American dream of having your house and being able to retire, no one has a pension anymore. It was no longer like in the 60s or 70s, when people worked for you, you knew good companies and they had a pension plan. I think it's a The harsh reality for a lot of people, I think and I think we will definitely be working until we will definitely be working until probably mid 70's. I would if I had to make a unless we can make up a lot of ground soon, you know.

I consider myself middle class. I can't afford to save a couple million dollars. The cost of living increases. Your water bill increases. Your utility bill increases. their savings their savings do not produce any income so everyone is wondering where they are going to make ends meet. I'm lucky to be able to live at a higher standard because I have a little bit of savings in my retirement savings, but others are at the poverty level since I'm almost 65 years old. I started saving for retirement when I was 20, but along the way I dipped into my savings not once but several times, so this is my ire. and 401k, which will be phased out over a certain period of time and now like millions of other baby boomers I don't have enough either, the key to making your retirement work is having enough return on your assets, most of my savings went to pay for my children's education, well, this is where the fees would really hurt you a lot.

This is where fees would seriously hurt you. A divorce and the 2008 crisis didn't help either. It seems like my own personal fiscal cliff that I now plan to work off of as much as possible, so this whole plan is based on working

full

time until I'm 70. Yeah, and at 70, from 70 to 75, I've got you Working part-time these days, many baby boomers are planning to delay their retirement, some may never stop working. It's hard without knowing exactly how long you're going to live, it's hard to guess how much you need to save, most people seem to feel that at retirement, to be well off, you need a salary of 10 or 12 times and maybe 15, so that if you earn a hundred thousand a year you need a million and a half to be well you need to save more you need to start earlier you cannot start working when you are 20 or 22 years old and you decide to take this seriously at 40 the ship has sailed, so what can we do today?

Americans entrust more than $10 trillion to thousands of financial services providers, large and small. Okay, click, I just bought stocks, you just saw me buy stocks, it's no big deal with expensive marketing, but there are so many options it's hard to understand that when it comes to mutual funds, it's often hard to know what you're in. seeing instead of a system. It's more like a pitched battle. I don't really see it as a real system. I see it maybe as a retirement disaster. is a better word for looking for real-life answers to your retirement questions if you're lucky to have a 401k plan.

About half of companies offer a 401k plan if you work for a small business. You may not have access to that plan. something that some companies then offer other supplements and then of course there are things that you can do on your own, like the individual retirement account, so it's completely confusing, where do you start? Let's talk about that 401k you acquired in the 80s, around 60 million. Americans have enrolled in their company's 401k plan. These are your 401k election forms. As you can see, there are numerous options to choose from and remember that this is your retirement, so make your selections care

full

y, but most people remember their first 401k meeting as somewhat disconcerting.

I had no idea. I was so confused. I walked out of that meeting and thought, "My God, it was just overwhelming to me the knowledge you had to have to invest. I really had no idea. I didn't know." what I wanted to invest in I really didn't know anything about it I had learned it somewhere something I had heard something about if you are young you should be more willing to take risks you have time so other than that I really didn't know anything and That's one of the best aspects of this morning. I showed them the plan.

They had options between aggressive, moderate or conservative investing. They know there was no one there managing my money. It was all up to me, so traditional pensions don't necessarily allow for that. Take it all in a lump sum the 401k is one of the only products that Americans buy but don't know the price. It is also one of the products that Americans buy and don't even know its quality. It is one of the products that Americans buy without knowing they are dangerous and it is because the mutual fund industry has been able to protect itself against regulations that would expose the danger and price of its products.

It used to be a lot easier in 1970, 42 percent of employees had a pension, a guarantee from their employer that they would receive a good percentage of their salary and benefits upon retirement, this is life, with my retirement plan and the few dollars I had saved, I had nothing to worry about. workers didn't have to figure out how to manage their own savings plan, it was done for them, it was very simple, the employee didn't really know any of the mechanisms behind it, they just knew that when they approached retirement they had been promised. a benefit for a secure income for their entire life, so they had this income until they died, so what was wrong with that system?

Nothing at all, to be honest, it was a great system. The problem was that during the last decade the rules of the game changed. What changed was that people began to live longer the new accounting rules global competition and market volatility 2 affected the cost of maintaining a pension plan the old system became expensive I think from the employer's point of view they have they have to know how to manage investment risk and they know how to have to know how to manage longevity risk and they have to spend a lot of money and they have to spend a lot of money and if the market doesn't do what they expect it to do, you know They may lose some of the cash that they've actually brought in from a funding status standpoint, so it's quite complex, one of our main concerns is protecting our accounts from fraud.

That's when corporations found a new loophole in the internal revenue code, what essentially happens is the 401k came out in the late '70s and early '80s, it starts out as a corporate tax dodge, basically, if you have a big income , you're going to save some of your money, no one ever thought this would apply to the rest of Us, I mean, it was never thought about, so a new retirement system wasn't quite designed. Large brokerage houses and banks saw an opportunity to expand their businesses and helped employers establish and manage their new plans. They touted the deal as a win for everyone, from an individual perspective, the 401k actually opened up the opportunity to save for retirement for many people who worked for companies that didn't have a pension and also allowed them to have a portable vested amount of money. that they could take with them as Americans began to change jobs more frequently.

It's so simple, isn't it, as companies decided to get out of the business of providing pensions and shift the burden to employees. I would phrase it more as a sharing of retirement responsibility between employers and employees. but while some employers contribute to employees' 401k plans, all the risk falls on individual 401k plans, they really put the burden on the individual participant to have an adequate retirement, and the vast majority of regular people don't know how to do it. , it's a very complex task, we wanted them to be able to calculate how much they needed to save for retirement, how to invest that money and then once they had a lump sum once they retired, how to withdraw the money so they didn't outlive their assets , so that's three different risks choosing the right investments requires very careful management enter the mutual fund industry people in the mutual fund industry realize that there was a huge opportunity here, I mean, not only could they sell your mutual funds that you know directly to the investors, but you could also make mutual funds the very basis of 401k plans in 1981 no one knew what a 401k was in 1989 it is in the lexicon that is written about and talked about He during the 90s now all the large employers actually have plans in place, people are participating, continue to grow from there, start saving 300 a month when you are 23 years old and can retire as a millionaire.

The boom occurred at the same time as the roaring bull market of the 1980s and 1990s. Mutual funds charged high management fees, but no one seemed to care. The returns are excellent, so no one thinks about how much this costs me when they earn 15 or 20 percent. Star mutual fund managers like Fidelity Magellan's Peter Lynch encouraged us all to get involved, don't be intimidated, everyone can do well. in the stock market you have the skills you have the intelligence it does not require any education all you have to have is patience do a little research you have it saving for retirement seemed as simple as betting on the market it was great time, the employees who participated in these plans and invested in the stock market, you know, they couldn't wait to open their monthly statements to see how much the value had increased, you know, so things seem to be working out very well, I invested in everything related to mutual stocks. funds, whatever we would get monthly reports things were growing everything was growing in the 90's you couldn't lose money in the market even if you were a dumb investor I mean it kept growing and growing and the growth of internet stocks fueled a powerful rise in Today on Wall Street, the economy was doing very well, I mean, there were all kinds of gains in the stock market, which was kind of the Internet of the dotcom era, which you didn't really have to pay attention to it, you know, you would get your statements at the end of every quarter and you were making money, it was exciting because gradually, over time, you got it, we would have a day where we would make seven thousand dollars or even thirty thousand dollars in a day while it was being built and even more by 1996 we had doubled our money we had like 400 almost 500 000. steve shulow and dan robertson believed thatThey were heading into early retirement on the day their portfolio surpassed a million dollars, it was November 11, 1999.

Oh, that was very nice that day, wasn't that what happened on November 11? It was when our portfolio went over a million, so it was amazing, it was like, well, yeah, that's how investments work, you invest them and they grow, I mean, that's how I thought about it. It was a hectic Monday in the fall of financial market shares. The traders are there looking in amazement and I don't blame them, but in the spring of 2000 the market collapsed, many of their customers are scared, we didn't know this was our mistake. We didn't know it was a bubble, we just didn't know that our portfolio had dropped to where it was in 1996, from 1.5 million to 500,000,460.

I think all of that disappeared at the height of the Internet bubble. Americans had also invested 19 percent of their retirement money in company stock. We invested all of our 401k and Enron stocks. They disagree? For savers like Debbie Skedzinski, who worked for com disco, a computer leasing company, the decline would be precipitous. About half a million dollars I had in my 401k. With the company stock, you know, it was like, wow, look at all the money we have, look at what's happening, you know, I can probably retire when I'm 45. Dotcom failures continue to increase on the Internet.

Not only did Skozinski lose his savings, he lost his job today he filed for Chapter 11 bankruptcy protection, including 200 more job cuts or joined a who's who list of corporate bankruptcies the day I was laid off I lost it I thought, oh my god, I'm a single mother, I don't have a job, I have a house, I have a house payment, what do I do? Know? um and I was scared, really scared, I didn't have much retirement left, um, I couldn't even borrow and it was something I never anticipated. You know, never losing my job, the worst was yet to come, concerns about shaky home mortgages are sparking fears of a financial crisis, talk about the speed at which we are seeing eight years later, savers were hit again, The mortgage market is far from over, this is volatility we haven't seen of course since long before you and I had more trouble for the nation when the housing bubble turned into the 2008 crash put retirement even further out. out of our reach the economic turmoil of recent years is putting a comfortable retirement in The risk for many Americans was like holy smoke, how do you stop the bleeding?

The reality of what you have lost is enormous. I mean, not only have you lost half of your 401k, but your house is also worthless, so anything you can get. You thought you were going to have it there is gone and now half of your 401k is gone. Do you know if it took 13 years to accumulate 80,000 in one year to lose half of that and then try to get it back in another 13 years? and only being at the 80,000 you were 13 years ago, you know the math doesn't work, debbie skozinski was already in a hole with almost nothing to cushion the blow of a second shock and now her house was worth less than the loan she owed her to the bank, you know, there are some days where it's like you just want to go scream, you know, in the backyard and just scream because you have your choice, you pay this or you pay this, her bills were piling up, she did what a quarter of Americans have done it, she dipped into what was left of her 401k.

I was scared when I took the money out of my 401k, it was hard, I mean you know, never every day on the news would you hear it. I'd be like, "Oh God, it's really bad. Am I going to be able to keep my house up? You know? What if my car breaks down? I can't afford the car payment. It just can't be that hard to do it. I can't. You know ?" You listen to these big companies with these people taking these huge bonuses you're thinking well, what happened to the average citizen? They just don't care, they made their money and the outrage over those bonuses the year the markets crashed, Wall Street handed them out more and more. billion dollars in bonuses the latest bonus bomb is sending shockwaves through washington robert hilton smith entered the workforce in 2003 taught for a time worked in a coffee shop and then went to graduate school where he racked up forty thousand dollars in loans students, but on the bright side he had no savings to lose during the 2008 crisis, when he graduated with a master's degree in economics, was hired at a small think tank in New York, had a 401k plan, and started making regular contributions , but even in a relatively good market, I started to feel like something else was wrong.

I have a 401k. I save it on him. It doesn't seem to have gone up. It is awful. I continued checking the account statement. I was wondering: Why does this never go up? This is rare. I mean actions. I knew the market was going up and down, but I thought I should still see some returns. Hilton Smith decided to do a research project on the topic and began by analyzing the investment options within his 401k plan. 22 backgrounds in everything you know. I have all these names and the names don't tell you anything, it's a balanced fund, it's a growth fund, okay, you know, yeah, that's slang for a certain type of broad investment strategy, but really, what the heck do you invest in? ?

You know, so I went through each one of these. the really fun prospectuses, um, which took me an exorbitant amount of time because each of these things, you know, was 50 pages long and they still didn't tell you what they were doing. As he dug deeper, he discovered a fund invested in mortgage-backed securities. type of security that caused the housing market to collapse, but that's not what he was worried about. He was looking into all the different aspects of it and I kept coming back to fees, so here's the first mention of fees, this x ratio here, why would you think? that x ratio means fees hilton smith found more than a dozen different types of fees, including asset management fees, trading fees, marketing fees, record-keeping fees, and administrative fees used when you withdraw money, the fees when you take out loans, the fees when you actually withdraw the money when you're retired, which I actually didn't even know about I spent a month lily saying oh oh, actually this fee is a subtype of this v and o that covers that or not , that's another name for it, was very opaque, the actively managed mutual average fund carries an annual expense of one point three percent.

Some funds charge a fee of two percent and even as high as five percent. That may not seem very correct. You know you have fifty thousand dollars or one hundred thousand dollars. you lose five hundred dollars, so you lose a thousand dollars a year, that's what you would pay a financial advisor, but if you add that up over 20, 30, 40, 50 years in a 401k plan, suddenly you're in the six figures at as your balance grows and that's the difference between running out of money before you die or having a little money to pass on to your heirs many 401k programs are lousy the fun options suck the fees are outrageously high and in many cases, you can take two neighbors you know who live on Maple Street in any US city and one person is paying 10 times more to invest in a 401k than the other person to understand this fee business.

I went to talk to someone who has thought. Jack Bogle, the founder of Vanguard, a company that offers some of the lowest-fee products on the market, says that if you want to improve your retirement outcomes, be sure to minimize Wall Street costs—they're a crucial part of the equation. . It doesn't take a genius to know that the higher the profit of the management company, the lower the profit that investors obtain. Money managers always want more and that is quite natural in most companies, but it is not suitable for this business. Bogle gave me an example. Let's say you're invested in a fund that earns a gross annual return of seven percent, you're charged a two percent annual fee for 50 years, the difference between your net five percent, the red line, and what you would have earned without rates, the green one. the line is amazing bogel says you've lost almost two-thirds of what you would have had what happens in the funny business it's the magic of compounding returns it's overwhelmed by the tyranny of compounding costs it's a mathematical fact there's no way around it the While we don't see it as bad for us, what I'm having a hard time understanding is that the two percent fee I might pay into an actively managed mutual fund will actually have a big impact on my future retirement savings. you have to trust someone to get a compound interest table and look at the impact over the life of the investment.

Do you really want to invest in a system in which you put 100% of the capital? You are the shareholder of the mutual fund, you take 100 of the risk and you get 30 of the return. He wanted to know how others would react to Bogle's claims. Jpmorgan Chase offers more than 100 mutual funds that charge from less than half of one percent to more than two and a half percent annually. I want to get your reaction to an example that Jack Bogle gave us and that is that if you invest over a 50-year lifespan in a mutual fund, you earn seven percent annually on average, but you're paying a two percent fee for that, that two.

The percentage will erode something like two-thirds of your profits, so lower fees relative to any given investment will always result in a bigger accrual, but is your example correct? I mean, it's shocking that you're giving up two-thirds of so I don't know the math behind the example, but does it sound right? exciting it sounds um it sounds loud it had also sounded loud to me so I followed bogle's advice I found an online capitalization calculator and I used a simple example in order to isolate the effect of fees, take an account with a balance of one hundred thousand dollars and reduce it by two percent annually at the end of fifty years, that two percent annual charge would subtract sixty-three thousand dollars from your account, a loss of sixty-three percent, leaving you with just over thirty-six thousand dollars, most investors are unaware of all the types of fees they are paying, so as soon as everyone is seated, we will go over what is happening.

Crystal Mendes started saving for retirement when she was in her early 20s. but she rarely looked at her account and just assumed that she was doing well today. One day, my fiancé was thinking about her retirement and was basically bragging about how well she was doing, so I pulled out my annual report and I and I compared notes. realized that he was doing much better than me he basically said honey I think you are getting scammed we should look into this after looking at the fine print Mendez found out that not only was he paying high fees but he was also invested in an annuity. with a high surrender fee, a penalty for any early withdrawal, I think it was ten percent, it was the surrender fee, so I thought, you know, fighting with myself?

Do I really want to give these people my money or leave it there and then I won't? I have a surrender fee, but I think in the end I said, forget it, they can collect the fee and I'll move on with the rest of my money. All this talk about fees made me curious about my own 401k. I run a small business with a handful of employees making documentaries for the front line, but we're too busy to look at the fine print of our retirement plan, but while putting together this report, I went online to see what my plan offered and the funds it offered.

I was assigned. If you look, I found what Hilton Smith found with confusing tables of all kinds of products with different types of rates, but it doesn't have any type of symbol, but those are mutual property rights that they have 434, but axa because they are an insurer. I even found this offering the American Century Livestrong Fund, a co-branded mutual fund with the Lance Armstrong Cancer Foundation, how did this get here? How do funds like these get into my plan? First of all, when searching for an answer, I came across another family of rates. It works like this so your offers are placed on the employer's 401k menus.

Mutual funds depend on brokers and scheme administrators. In exchange, brokers request a payment or revenue share. It's a kind of pay-for-play deal or, as some say, a kickback that adds another. cost layer for retirement plans many people use a term like bribery because in some ways it is a legal bribe, there is nothing against the law, but it is a kind of agreement like you scratch my back and I will scratch your neck yours. If you sell our funds, you will get a share of the income we make from selling them through you. This is kind of the underdog part of this industry and there isn't a lot of information about it, but the fact is as far as I know.

Know that those types of payments to brokers for distributing their shares have simply become part of the system. You know thatrunners are getting a little religious. Here they say: why should I distribute your funds unless I am paid to receive these large management fees? I want some. You are receiving a lot. Give me a little. The problem is that these fees are not paid by the fund company. We pass the bill to you and me. It's buried deep in my 401k plan documents. It took me about an hour. to find the reference, do you think the industry could do a better job of making people aware of the effective rates on their savings?

I think we could make people aware of the effect of every pressure they have on their accounts, what gets in the way of doing that best work. What I would say is that sometimes it is very difficult to get people to focus on something. which seems complicated, boring and boring, so could we do a better job helping consumers understand all the things that are related to what they do? I just bought, whether it's financial services or the lawnmower, yeah, it's too complicated, uh, retirement, sit back, relax, get out the newspaper and what an article that says a typical family pays 155,000 in Wall Street fees for their 401k, seriously, seriously, you don't believe a certain average American household will pay almost 155,000 over a lifetime and just fees, according to a new study here to break it all down robert hilton smith in the spring of 2012 robert hilton smith published his study on the impact of retirement savings fees when we looked at it, we really found that all the costs over time are really passed on to people here.

I was surprised, I mean, everyone covered it, all the major outlets and all the financial industry outlets, as well as every single one of them. We had really been sold these 401ks and iras as safe products over the years, the point is that this system is not designed for individuals at all, it is certainly not designed for your benefit, a revealing new report released this morning, they are Taking a large part of our retirement, the industry disagreed with some of Hilton Smith's figures, but he made it clear that these financial firms are charging us a lot for not doing much, in many cases we need something different.

We need something simpler, something safer, you know, honestly, something where people can invest their money and get good returns, without having to worry about losing all their savings and then trust that they will actually be able to retire sometime. day if they know how to do the right thing and save enough, etc. There is someone who has been promoting something simpler. Many years ago I was criticized, someone said the only thing that What the poor guy is looking for is the uncanny ability to recognize the obvious over the last four decades. Jack Bogle has been preaching the gospel of long-term, low-cost investing through index funds.

Take Wall Street out of the equation. Take trading out of the equation. Management fees are out of the equation You own an American business and you keep it forever, that's what indexing means. The entire non-trading US stock market has a cost of ownership of one percent a year and that's the only way to do it. then you were the creature of the market and not of the casino. Index funds buy and hold a broadly diversified basket of stocks that match the holdings of a market index, the S P 500, the Wilshire 5000, or perhaps a bond or commodity index that they do not eliminate. market risk, they go up and down the market, but they are much cheaper because there is no active manager who can guarantee the shareholder that they will capture their fair share of the stock market return, for better or worse, if they want to bet with their money retirement, all I can say is be my guest, but keep in mind the mathematical reality that you may have a chance to beat the market over time.

It has been proven correct year after year because it cannot be proven wrong. mathematical certainty a tautology, if you will, Jack Bogle would say: stop fooling yourself, it is better to invest in a broadly diversified index fund than actively managed mutual funds, what do you say to that? I think it's a uh, I'm not going to second it. -guess, I'm going to say that I think there is a role for actively managed product in the market, I think, but that's questioning what you're saying, so I'm doubting the jackpot, respectfully, I disagree. I think active management plays a role in portfolios.

That's what I believe, but what is that role? How well do they perform? They come with names intended to reassure all investors. Growth funds. Value funds. Balanced funds. They are run by experienced professionals who are paid handsomely to manage them the question is why do you get superior performance? and the unequivocal answer for the industry as a whole is no, there is no scientific evidence that mutual funds outperform a simple market index holding strategy, the verdict. has been in this state for at least a quarter of a century, all things being equal, you should buy the cheapest fund and one of the fund industry's dirtiest secrets is that many people who run other fund companies own index funds in their own accounts and don't talk about it unless I get them a couple of beers the evidence is overwhelming year after year actively managed mutual funds have failed to outperform index funds studies have confirmed this repeatedly over various periods of time in markets bullish and bearish.

I asked the head of retirement at Prudential, which markets dozens of actively managed funds, what she thought about this. Yes, I haven't seen any research to corroborate what I mean. I don't know if it's true or not. Honestly, I haven't seen any research. That corroborates it, so all the research that's been done at the vanguard that makes that argument, you've seen that no, no, no, no, I haven't read everything, but it depends so much on you know what I need. different than what you need and there is no one asset allocation or fund strategy that is right for everyone.

I spoke to a woman at Prudential who is head of retirement and asked her if she was aware of studies showing that index funds outperformed actively managed funds over time and she says no. That is incredible. It actually seems incredible to me. These people who are in the business know that index funds do better. They convince themselves that's not true when I talk to these people, but wait a minute. Look at all the studies, how can they convince themselves that that's not true because they are convinced that they are recommending the fund that will have the best results?

This is not a time when you want to buy indices and of course there are hot funds, this is not the time. betting is investing the financial media loves the best performing stock mutual fund this year and we are often susceptible to temptation, the problem is that the fine print says that past performance does not guarantee future results if only it were the pass for the Foreword. It's a big thing that returns don't persist. There are some funds that are outperforming the broader market. Good markets turn to bad markets. Bad markets turn to good ones. Therefore, the system is almost rigged against human psychology that says if something worked well in the past. will do well in the future that is not true and is categorically false, the high probability is that when you reach someone at his peak, he is about to descend into the select valley of ten here today, the last will be the first and the first It will be the last.

Last year's dogs might actually be this year's winners, so why don't we invest more of ourselves in a diversified portfolio of low-cost index funds? Critics say it's because the fund industry spends millions hoping workers will follow its financial advice. the worried worker will actually trust an advisor. You have the audacity to believe that your financial advisor should focus on your long-term goals, not the short-term. In its marketing, the industry implies that retirement advisors are on our side, but when it comes to employee retirement plans. there are no clear standards for who can give advice financial advisors lead from a new position of strength the department of labor is responsible for regulating employee retirement plans today we have a system where anyone can present themselves as an expert they call themselves retirement financial planners, advisors, etc., we do not have a standard way for the consumer to determine who has the experience to provide advice.

What is a financial advisor? It is a term that means almost nothing. It's someone who could be a financial planner or could be a. broker who is really a salesman there when you need it there are registered investment advisors or fiduciaries who are required by law to act in the best interest of their clients let's talk about the typical retirement advice you receive somewhere the vast majority of so-called Los About 85 percent advisors are not fiduciaries, they are simply brokers or salespeople. A fiduciary is a professional who, according to the law, must put his or her interests before his or her own.

Stockbrokers have no such obligation. They have to meet a suitability standard, which means I can't put you in something that is totally inappropriate for you. This doesn't have to be the best thing you can choose for them. It's just kind of appropriate. Alright. I can't believe someone would want to get involved in something. business and then staying in the business of just being adequate, basically your guy is looking to maximize his sales and the way he does that is to be loyal to the mutual fund and they try to sell him the most profitable products. Steve Shulo learned this lesson the hard way when he encountered someone selling financial advice in his school cafeteria.

I met my saleswoman in the teachers' cafeteria. She showed us the different products. You know, she didn't know much about investing, but in the back of my mind back then. How is this person compensated? It was always a question because I had worked in the private sector before I started teaching and I knew there were no free lunches. Nothing is free. The commission-based salesperson offered Shulo an annuity and retirement insurance product. what he thought was a guaranteed return of 12 percent a year, so I signed up for 200 a month and for about five years the interest rate went down to three percent and I was wondering what the hell is going on here, why has gone down. at three percent, I didn't understand that the insurance company has the right each year to reset that rate as it sees fit, so how can you tell when a financial advisor is really a salesman if you're working with someone who is trying to sell you financial advice, you tell them: are you acting in my best interest here?

Would you be willing to sign a commitment that says you will act as my fiduciary at all times with all products because if you are not then I am leaving and it is really as simple as another broker sold an annuity to Featherston after the crisis of 2008. At the time it seemed right, this was a product that we had discussed with him and we thought this would insulate some of our money from what we had just gone through what most people had just gone through, you know, We trust him, yes we trust him, yes we trust him, but problems arose after Mark was fired and the couple had to break out. your account, I mean we're talking seven thousand dollars, the fees have been over 600 just to get the money out, I can agree to pay the 10 fine, you know Uncle Sam, but you know these companies need to realize that they are winning. money at the expense of people who have worked hard for their money makes you angry but you know what you're going to do you're powerless paid for advice that was not to try and hold the industry accountable the department of labor proposed a new fiduciary rule in the fall of 2010.

When retirement savings are at stake, advisors should put their clients' interests first The critical question is what constitutes paid investment advice The proposal we are discussing today will amend a 35-year-old regulatory interpretation that the rule requires everyone to financial advisors who put their clients' interests before their own when dealing with retirement accounts. Today there are trillions of dollars in each of these markets. The variety and complexity of financial products has increased and fee arrangements are much less transparent. The financial services industry lobbied hard. Contrary to the new rule, it just seems like the financial services industry is really concerned because they caught the attention of Congress.

Our job here in Congress is not to preserve the business model that has existed for 35 years, but we are going to disrupt that business. model, we better know why and where we don't need aalternative, we just don't need to do this, the labor department withdrew their proposal, the people in the eligibility business have very good lobbyists and have done a very effective job. The task of creating doubt in Washington and concern about how something like this would be administered, about how the fiduciary standard would be enforced, about the costs of making any transition that would be needed to achieve the full political power of financial institutions and the banking industry mutual funds. completely committed to making sure that rule never saw the light of day, they were saying the rule is too strict, they were saying they don't want any rules, they don't want a fiduciary applied to them, they don't want to do it because they're not really giving advice financial, they are only providing information and educational services yadda yadda yadda give me a break, they are directing you to the funds controlled by their company; otherwise you could go somewhere else.

I asked the head of retirement at Jpmorgan Asset Management why anyone would want to take advice from someone who is not bound by a fiduciary promise. Shouldn't you only want to work with someone who has a fiduciary obligation? Not necessarily no, no, isn't it better that I can? It's different It's not better It may cost more You may not get any different advice or results and it may cost you more True, but make this simple for the investor I sit down with someone and they give me some advice You say I should ask a lot of questions I want to know if one of those questions shouldn't be do they have a fiduciary answer yes I think that's a very good question and if they don't ask them what that means and see what you think in the world keep it simple you should prefer someone with a fiduciary responsibility, so that's a question that can only be answered personally based on what your level of need is, what your risk appetite is, and what part of the investment decision you take.

I want to delegate, this is not doing it so, well, I wish it were simpler. Over the last two decades, we've given over $10 trillion of our retirement money to the financial services industry, they've built a pretty good business. But how well it is working for you and me so far. Most efforts to reform the industry have recently failed. The government has imposed some new rules on fee disclosure and the Department of Labor says it will try to reintroduce a new fiduciary. govern soon unless there is a change in the game unless a law is passed or laws are passed or the system is eliminated and start again as I defend many times nothing will change because there are no incentives for the market to simply change people Keep saving This is the only option they have and companies will continue to make profits, so saving for retirement remains a perplexing and terrifying challenge for millions of Americans.

For the people we met when creating this program, the results are mixed. Some are confident that I definitely couldn't retire right now. but the fact that I'm planning ahead and you know to invest wisely is that I hope you know it's going to help me and I don't think I'm going to run out of money. I'm worried about running out of money, but I'm a survivor and If I have to downsize to a tent, I'll do something special. Retirement dream. I mean, we, we're living it right now, this is, this is, you know, it's life. It gives you these opportunities.

We never planned to learn about investing until it hits us in the gut then, oh, we better start paying attention. here others are worried I'm wary I'm very wary I don't know what I'm going to do I feel like I'll be working for the rest of my life absolutely for the rest of my life it's hard to imagine even at this point in my life being retired yeah, just I don't see it, I just don't see it either. I don't see it, my retirement plan is to cross my fingers and pray, basically, yeah, win the lottery.

I hope my dad has more money than him and the truth is I just have to find a way to save a lot more than I should in the meantime. What's up with the Hilton Smith investigation? She is now finishing her doctoral dissertation on the retirement crisis in America, but the grant money she needs to support her continued work has run out. In my case, over the last few months I have spent a lot of time playing with different sites online. retirement calculators some were optimistic others very discouraging I will continue to work for more information on this and other