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Retirement Advocates Share Top Priorities With Congress

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The country has a new Republican-controlled congress, and with it, the opportunity to set new or shore up existing policies when it comes to retirement planning.

So what are the most pressing retirement issues this Congress should be acting on? Retirement Wire asked members of two leading organizations what message they would most like to deliver to Congress: Associate Professor Kristen MacKenzie is with the College of Financial Planning; and President Ed Gjertsen and Director of Advocacy Karen Nystrom are with the Financial Planning Association.

All agree that the government can play a large role in helping Americans better plan and save for retirement, but they have different views on what is the most important first thing Congress should do.

A Lack of Public Awareness

For the College of Financial Planning’s Kristen MacKenzie, the message to Congress is all about public awareness.  The government can do a lot more to help focus attention on retirement issues in general, MacKenzie believes.

“Over the long term [retirement planning] should be part of a national conversation –and the government needs to get involved,” MacKenzie said. “People are not saving enough, the vehicles to save are not available to everyone, and I think it needs to be put more to the forefront like healthcare was.”

As a result, there needs to be more of a public discussion about the importance of saving, MacKenzie said.

“I hear people say, ‘well I’ll just work until I’m ….’ Well, how do you know you going to be able to work that long? Also, there is a lot of concern about Social Security being around. I don’t get the feeling that people in my generation are really making it as important a priority as they should. I don’t understand why we can’t make choosing our retirement plan as important as choosing our health insurance, our disability insurance, and that type of thing,” she said.

The federal government could play a major role in encouraging retirement saving by requiring retirement plans from employers with a certain number of workers, much like the new program signed into law in Illinois last month (link). The biggest problem with retirement savings plans isn’t in how current plans are structured, but in the number of people that have access to them, MacKenzie said.

“I think the access to 401(k)s is a big factor [in retirement preparedness],” MacKenzie said. “People talk about wanting to increase IRA contribution limits, etc., but people aren’t funding the IRA maximum that they’re allowed currently, so I think that providing more access to workplace retirement plans is important.”

More can also be done to educate the public on Social Security benefits, MacKenzie believes.

“I’m a big proponent of looking into different strategies to maximize Social Security,” MacKenzie said. “I think people are really uneducated about their options, and when many people turn 62, they turn on a switch, and never look back. I think government and financial planning professionals should be doing more to educate people about delaying the receipt of their benefits.”

The good news is that the federal government is starting to make some progress on retirement issues, though again, public awareness is not keeping pace MacKenzie said.

For starters, “I’m really excited about the new My IRA,” MacKenzie said. “I wish that it was publicized more. I bet you that 9.9 people out of 10 out there haven’t heard of it. But I think that with some publicity and some promotion that will provide a lot of people – especially low income people – the means to start saving.”

Finally, MacKenzie cited the issue of retirement annuities and the need to better publicize them.

“I’m really interested in developments regarding longevity annuities,” MacKenzie said. “Just last year legislation was passed allowing people to put in up to $125,000 of their retirement savings into a qualifying longevity annuity. That money won’t be subject to minimum distribution requirements. It will allow people to purchase this long-term deferred annuity. Payments won’t begin until they’re 85 or so, but that is one of the biggest issues that people are not addressing – growing longevity, and this product is really designed to do that.”

Ensuring Retirement Advice is Credible

For Ed Gjertsen and Karen Nystrom of the Financial Planning Association, the most important retirement issue Congress could act on right now would be to better control who consumers get their retirement advice from. Specifically, is the advisor that a client meets with truly certified in the area of retirement planning?

“I think first and foremost the FPA is focused on how do we best protect the public in terms of how we’re handling their life savings and how we’re looking out for their financial health. That’s one of our top priorities in terms of having continual conversations with those in Washington,” said Gjertsen.

By financial health, Gjertsen is thinking long-term. His concern is not just with investment advice that a client might need at the moment, but what is the long-term strategy to help an individual best invest for long-term payoff and best retirement savings.

“I look at it this way,” Gjertsen said. “Most people know what they need to do to be in good physical health: eat less; exercise more. The same thing with finances for the most part. They know, ‘if I spend less and save more’ they might be in good financial health.”

Unfortunately, just like with diet and exercise, the spirit may be willing, but the flesh is often weak.

“We just fail to realize a lot of those endeavors for whatever reason,” Gjertsen said. “So I think part of the issue with the FPA and its members is to further educate the consumer in terms of long-term financial planning. The public is generally looking for good investment advice to help them keep up with their spending, rather than taking a holistic approach of saying ‘how do I make sure I’m looking at my best financial health in the best way possible.”

But how does the consumer know they are getting the best possible retirement advice? Often they may not, Gjertsen says.

“What often happens is that an individual is doing it on his own or her own; they think they’re on a good plan; and then all of a sudden something happens and they have a financial crisis,” Gjertsen said. “That is when they seek professional advice in regards to regaining their financial health.”

That is one of the most important issues that consumers are facing, Gjertsen said. Consumers may not really appreciate the qualifications of the advisor, “because, quite frankly, anyone can call themselves a financial planner.”

That is where the government can step into the picture, Nystrom said.

“I think that if we could deliver a message to Congress that would be heard it would be about a unified fiduciary standard for all who provide personalized investment advice, for all who provide advice to consumers,” Nystrom said. “We know, and everybody knows, in the last 20 years things have become much more complicated. It’s not going to get less complicated.”

“Consumers need a professional in their corner acting in a fiduciary role to help them,” Nystrom said. “Right now that doesn’t exist, because there are different standards depending on how you’re compensated. That is something the consumer is not going to understand, so Congress really does need to act on a fiduciary standard, so everybody gets the same level of care when they approach a financial professional.”