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Put Your Retirement Security First

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In the past, we've talked about looming concerns over retirement security. It's no small matter for the American public. According to the Investment Company Institute, at year-end 2014 the United States retirement market had $24 trillion in assets.

Here's what the asset breakdown looked like:

• $7.4 trillion in Individual Retirement Accounts (IRAs)
• $6.8 trillion in defined-benefits plans
• $3.8 trillion in state/local governmental defined-benefit plans
• $3.2 trillion in private sector defined-benefit plans
• $2 trillion in annuities
• $1.4 trillion in federal defined-benefit plans

One pressing concern within the financial services industry is charges of self-enrichment. Insurance products, as well as other financial products like mutual funds, are often paid on a commissioned basis. A commission structure differs from other forms of compensation within financial services -- such as a fee based on the value of assets under management. Because of this, government regulators have argued commission payments could pose a conflict of interest in recommendations for such products.

Impact on the Annuities Industry
As insurance products, annuity contracts typically are paid on commissions. This has caught the attention of federal regulators, who argue that having commission payments may lead financial professionals to recommend annuities that are not in consumer best interests. Someone may be motivated by a higher commission rate instead of the product being the best fit for that investor's profile, they say.

But this doesn't change the behavior of financial professionals who are already looking out for their clients' best interest. And because they provide guarantees and protections over a lifetime, annuities are products offering mortality benefits. When commissions are examined over the length of a person's life expectancy, or even the length of the contract "surrender period," commission payments are well within the marketplace range for compensation. Let's get into the conversations that Washington is having about this, now.

Washington's Response
One solution that's being proposed is to introduce new regulations on these financial professionals. The regulations would require these individuals to act in their clients' best interest. Or in other words, it would compel them to give recommendations suited to personalized investor needs.

Proponents of the fiduciary proposal say it would bring greater accountability within the retirement market. Opponents say it could open up many new legal liabilities for financial professionals – including those who are committed to client service.

Another point of contention is the rule would affect investors and financial firms alike. Both investors and firms would be hit with an avalanche of new paperwork for regulatory compliance. Plus the proposed rule could actually hurt investor choice, as well.

The Grim Reality & Solution
At the end of the day, investors must realize they're in the driver's seat. After all, Washington's record on retirement isn't a positive one. This isn't likely to change anytime soon, either.

Ultimately, you're the one who decides on your investments. There's simply no alternative to putting your retirement security into your own hands. And to make sound decisions, people need to be well-educated on the many financial options at their disposal.

• Be wary of anything which sounds too good to be true. It probably is.
• Understand the different means for retirement income – Social Security, pensions or other retirement vehicles, investment portfolios or personal savings – and where they fit into your financial picture.
• Make sure to be educated on the tax liabilities and opportunities for tax deferral with different investment options.
• Some investments also come with penalties for early withdrawals, such as “surrender charges” for annuity products. It's advisable to be up-to-date about these details.

Via SafeMoney.com, there are articles on annuities, life insurance, IRAs, Social Security benefits, long-term care insurance, retirement income planning, and many other areas of interest. We invite you to use these resources and become well-educated to make confident decisions for your future retirement lifestyle.

If you're ready for personal guidance from a financial professional, SafeMoney.com can help you. Use our Find a Licensed Advisor section to connect directly with an independent financial professional, and to request a personal strategy session to discuss your needs and goals. And should you have any questions or concerns, call 877.476.9723.

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