Tags: Hanson | Obama | retirement | reform

Financial Planner Hanson: Obama Seeks Wrong Type of Retirement Reform

By    |   Tuesday, 17 March 2015 08:20 AM

Instead of focusing on the role of financial advisers in the country's retirement mess, President Obama should seek a different kind of reform, says Scott Hanson, senior partner of financial planning firm Hanson McClain.
 
"Rather than merely tinkering with our current system, I think it's time for drastic measures," he writes in a commentary for CNBC. "I believe the time is right to decouple retirement savings from our employers."
 
The problem is that the 401(k) plans offered by our companies give us limited investment choices and no access to financial advisers, Hanson explains.
 
"Employers throw together a limited menu of investment options, and the employee is left with very little choice. There's no option to choose a favorite investment company or a trusted relative or friend, nor is there the option of hiring an advisor," he notes.
 
"A better approach to the 401(k) would be to loosen the government's grip and to give employees the option of directing their savings to an investment firm of their choosing," Hanson suggests.
 
"The employer could and should simply act as a conduit and transmit the employee's deductions to whatever firm the employee selects." And the employee could receive professional advice from the investment firm.
 
"It is time we allow the people who are actually saving for their own retirement to decide what is best for themselves. It's time to limit the power and influence of the employer, the Department of Labor and our elected officials. It's time to place the control of our futures, and of our retirements, back in the quite capable hands of the American people."
 
Meanwhile, much has been made of the fact that for many of us, our wealth isn't enough to maintain our current lifestyle in retirement.
 
The general prescription for this problem is to increase our savings. But that's not the biggest issue, says John Bogle, the esteemed founder of Vanguard Group.
 
"Everybody's big focus is that we have to save more," he tells The New York Times. "A greater part of the problem is the failure of investors to earn their fair share of market returns."
 
The fees we pay for our retirement investments eat heavily into our returns. Bogle has repeatedly harped on the high expense of actively managed mutual funds, which account for most of the choices in 401(k) plans, compared with index funds.
 
David Swensen, the legendary manager of Yale University's endowment, puts the issue bluntly. "Wall Street makes no money on low-cost index funds," he tells The Times. "That is the problem."
 
To be sure, all this doesn't mean that we should neglect the issue of savings. Surveys show that about one-third of unretired Americans have no retirement savings, including about 20 percent of households aged 55 to 64.

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Instead of focusing on the role of financial advisers in the country's retirement mess, President Obama should seek a different kind of reform, says Scott Hanson, senior partner of financial planning firm Hanson McClain.
Hanson, Obama, retirement, reform
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2015-20-17
Tuesday, 17 March 2015 08:20 AM
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