Our ability to save for retirement is already severely limited by Social Security – a system the government now intends to be a retirement program.
A high earning male from 1949 to 2014 would net a loss of $196,500. A man paying the maximum social security tax (which does yield higher benefits in retirement) during that period would’ve lost $378,171.
By contrast, what would’ve happened if the government still forced workers to save a certain percentage of income towards retirement, but allowed him to invest it on his own? The most passive approach he could take is to simply track the market, putting money in the Dow or S&P 500. This essentially tracks the economy as a whole, rather than one individual company in any specific sector.
The Dow increased from 1765.23 to 15,871.54 . The S&P500 increased from 15.36 to 1822.36. Clearly positive results would’ve been yielded.
That’s just one area of retirement: Social Security. The government already extensively regulates the markets, which many rely on to support themselves independently of social security.
As the Daily Caller is reporting, the Department of Labor (DOL) is working to change investment regulations to regulate that area of retirement even more.
“Federal labor officials may soon destroy free choice in the retirement system by overhauling investment regulations,” according to a report Wednesday.
The DOL has argued people are just not knowledgeable enough to plan for their own retirement. It has proposed a rule to categorize more people as fiduciaries in order to regulate them. The Competitive Enterprise Institute (CEI) warns the upcoming rule could undermine free choice and increase costs on retirees.
“Under the new rule, financial professionals who provide even one-time guidance or appraisal of investments could find themselves classified as ‘fiduciaries,’” the report detailed. “For centuries, the standard definition of fiduciary has been someone in a clear position of trust. In finance, this means someone whom the client has specifically entrusted to manage his or her assets and make investment decisions.”
Under current federal law the DOL can regulate anyone classified as fiduciary. If essentially everyone is classified as a fiduciary the department would then be able to regulate everyone. It would mean the department can limit what advise people can give or what choices people can make for their own retirement accounts. The rule has the potential to cause a significant rise in costs as well.
As a result, “Brokers would have to charge investors much more, because the DOL rule creates a presumption against brokers taking third-party commissions from mutual funds they sell to savers.”