Does Wall Street Bleed Your Retirement Savings?

Eduardo Porter: “Here is something every non-rich American family should know: The odds are that you will run out of money in retirement.”

“The Center for Retirement Research at Boston College estimates that more than half of all American households will not have enough retirement income to maintain the living standards they were accustomed to before retirement, even if the members of the household work until 65, two years longer than the average retirement age today.”

“The standard prescription is that Americans should put more money aside in investments. The recommendation, however, glosses over a critical driver of unpreparedness: Wall Street is bleeding savers dry.”

“If there is an industry rived with conflicts of interest, it is the financial conglomerates that advise Americans on investing these savings. Yet nobody was paying attention to the safeguards that might be needed when corporate retirement funds managed by sophisticated professionals were replaced by individual 401(k)s and Individual Retirement Accounts.”

“Imposing tighter standards on I.R.A.s will not end suspect advice … But the new rule could move American retirement saving one step closer to the goal: getting almost everybody to stop trying to beat the market, put their money in low-cost index funds and leave it there. Then Americans might reach retirement better prepared.”

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