AARP Helps Protect Rule to Save Retirement Nest Eggs

AARP has successfully fought back an effort to block a new rule requiring financial professionals to put retirement savers’ interests ahead of their own.

Known as the Retirement Security Rule, the federal regulation closes loopholes in 50-year-old regulations that have allowed some financial professionals to advise retirement savers to choose high-fee products that bring higher commissions — rather than what’s best for their client.

Legislation introduced in Congress earlier this year sought to repeal the rule under the Congressional Review Act, which provides oversight over rules issued by federal agencies.

A key deadline to act passed last week without a vote on the repeal measure, although the Retirement Security Rule faces an additional hurdle in court.

Under the rule, all financial advisers providing advice on retirement investments such as 401(k) plans and individual retirement accounts (IRAs) have a “fiduciary duty” to put retirement savers’ interests first, a standard that already applies to most financial professionals.

The U.S. Department of Labor finalized the rule in April. It was supposed to take effect Sept. 23 but has been temporarily blocked because of a court challenge from insurance groups.

AARP and other consumer advocates pushed hard for the rule. In May, we sent a letter to every member of Congress, urging them to protect the change.

“When your constituents are steered to products that are not appropriate, it can cost them up to 20 percent of their nest egg — that’s $15,000 for the typical retirement saver,” AARP Chief Advocacy and Engagement Officer Nancy LeaMond wrote.

A recent AARP survey found that 9 in 10 people believe a “best interest” standard should be required of their financial advisers. “In fact, most people are shocked to learn it isn’t already a requirement, demonstrating an even greater need for the rule,” LeaMond wrote.

Read more about how to build your nest egg, and keep up with AARP’s financial coverage.