President Barack Obamas administration recently asked the Department of Labor to establish a fiduciary standard for financial professionals advising people on their options for rolling over their 401(k) funds into IRAs. There is a broad belief by those who do not understand how to convert retirement assets into retirement income that 401(k) rollovers can be detrimental to the investor. This is partially due to the negative press surrounding the regulation. While there are certainly issues that ought to be addressed, by indiscriminately targeting 401(k) rollovers, regulators may be eliminating opportunities for investors to purchase products which could greatly improve the emotional and financial well-being of the client in their retirement.
Properly advising a client on their retirement income involves much more than assessing the literal financial return on assets. Planning for a retirement is as much an emotional issue as a financial one. Generally speaking, there is typically no investor that places a higher value on security and predictability than one on the verge of retirement. Unfortunately, defined benefit plans which are the tools consumers historically relied on to provide peace of mind, have all but disappeared. Instead, they are left with defined contribution plans like 401(k)s that without strategic planning, provide no more assurance than the average mutual fund.
