Don’t Restrict Options for Savers
[IMPACT+: This series features IMPACT articles that take a longer look at vital topics that affect Americans.]
Americans are increasingly worried about whether they will have enough money to live comfortably throughout their retirement, thanks to longevity and in the face of economic stresses. It makes sense that people are seeking guaranteed sources of income more than ever before.
And it makes sense for policymakers to pursue measures that would boost everyone’s confidence about their financial security.
Congress acted in 2019 and again in 2022 with bipartisan passage of SECURE and SECURE 2.0. These laws close savings gaps and expand retirement security.
It would be a mistake by Washington to turn back progress this year.
A fiduciary-only approach from the Labor Department would effectively eliminate commission-based arrangements. And fiduciary-only advisors generally require account holders to invest at least $100,000 up front, which is more than many working-class Americans have in retirement savings – thereby cutting off financial recommendations to millions of American retirement savers.
Americans overwhelmingly want to be able to choose who they work with about their financial options. A new Morning Consult survey finds that 91 percent of respondents prefer the option to work with any type of financial professional who is offering products and services that meet their needs. Public policy should be broadening opportunities for Americans, not limiting them.
But a fiduciary-only regulation would prevent many working Americans, including most Black and Hispanic Americans, from accessing information about retirement savings products. The median retirement savings for Black and Hispanic households is less than $30,000. A fiduciary-only policy would exacerbate the racial wealth gap.
The latest retirement survey by the Employee Benefits Research Institute reveals a marked decline in Americans’ confidence about their long-term financial prospects. A fiduciary-only regulation would only make it worse. It would also restrict access to an increasingly popular choice for financial consumers: the guaranteed income from annuities.
In the first quarter of 2023, annuity sales were nearly $93 billion, the highest quarterly sales ever. This comes after record annuity sales last year of nearly $313 billion.
Any proposal that would make it harder for Americans to access the guaranteed income and peace of mind from annuities is misguided. It’s also unneeded. Since a fiduciary-only regulation was first proposed in 2016, the Securities and Exchange Commission has introduced Regulation Best Interest to protect consumers. In addition, 36 states have adopted laws and regulations enhancing protections for savers.
A fiduciary-only regulation is not only unnecessary, it is detrimental to the financial security of savers – and the nation. Any proposal that would make it harder for working Americans to save and safeguard retirement savings will only add to the massive fiscal burden governments will be facing in the decades ahead.
A recent Pew study estimates that America’s retirement crisis could cost federal and state governments an estimated $1.3 trillion by 2040. Closing this retirement savings gap requires thoughtful public and private sector solutions.
Now is not the time for a regulation that will cause more harm than good. Life insurers stand ready to collaborate with policymakers to shape and support sensible public policy that will give Americans of all means the opportunity to achieve financial certainty throughout retirement.