The Obama Administration claims its new rule will transform the way the financial industry gives you advice. The IRA Leadership Program’s Ed Slott explained the impact of the new rules and offered tips for planning for retirement Thursday on the FOX Business Network’s Mornings With Maria.
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“It’s just about putting customers first, which they [financial advisors] should have always been doing; I don’t even understand the point of it. So now you’ll have a contract. But if any of you have ever worked with a financial advisor that you trust, sign here, sign here, initial here and now that five-page contract, sign that too. You don’t know what you’re signing,” Slott told FBN’s Maria Bartiromo.
Slott also explained how the new rules will give savers more clarity about the fees advisors charge.
“The fees are still there, except you sign a contract acknowledging that he told you about it. And they are supposed to send you to let’s say a website that gives you the fees so you know what you are paying,” said Slott.
Slott then elaborated on why those saving for retirement should be more concerned with taxes than the fees charged by advisors.
“But long term, remember why are you putting money in retirement; so in retirement you can take it out. It’s not even the fees, it’s the taxes in retirement and what retirement advisors should really be doing is getting educated on the taxes. That’s where people lose their money, on all those taxes on the way out.”
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Slott discussed his three top tips for retirement planning. His first is to start early.
“The greatest single money-making investment anybody can own is time, so obviously the earlier you start,” Slott said.
Slott’s second retirement savings tip is to “pay yourself first.”
“Take it off the top, what they say, ‘pay yourself first.’ You don’t see the money so you can’t spend it, that’s the best way – put it on automatic pilot,” says Slott.
Slott’s last tip is to go Roth, because of the tax benefits for retirement savers.
“In retirement you want to keep every cent you have. Years ago when I started there weren’t Roths – you had tax deffered like people have now, 401(K)s, IRAs and the taxing comes later. You’d be better positioned if you could have something tax free later when you need it most,” says Slott.