A new rule of the Biden administration will force companies when considering which 401(k) plan to use, to focus on diversity issues, climate change and even political donations!
The new Labor Department rule would make things such as donating to Black Lives Matter or building wind turbines carry as much weight as profitability. And unfortunately, workers could be completely held in the dark as to where their money is being invested!
This new rule, which will force retirement plan administrators and asset managers to consider environmental, social and corporate governance factors (ESG) when selecting investments, is still in the process of being approved, but once approved it will affect nearly 150 million employees and over $10 trillion of assets which are now covered under ERISA (Employee Retirement Income Security Act of 1974).
As there is no economic value in many of these ESG schemes, the damage 401(k) owners face is tremendous. Already, Americans are outliving their retirement savings by up to 10 years. But this woke rule will certainly exacerbate this tragedy.
Financial sustainability requires wise planning. It necessitates making decisions based on the financial interests of the participants not some ESG project(s). This rule however will allow the special interest groups and their political allies on Wall Street and corporate America to rip off the middle class once again and destroy the wealth hard working Americans are trying to build to sustain them in retirement.
Asset managers charge higher fees for ESG funds according to Morningstar Inc., and higher fees will reduce an individual’s retirement savings by tens of thousands of dollars over a few decades. Furthermore, the Edhec Business School out of France, concluded this past summer that the ESG market has peaked and will soon peter out. Companies attempting to improve their environmental social scores will show lower profits and therefore compromise future returns.
Obviously, large investment companies are cheering this new ruling, and why shouldn’t they? They will be able to collect more in fees while the public 401(k) accounts will earn less and less.
What a bunch of phooey.
It’s time for Americans to get smart and stop supporting government qualified plans and begin to wisely take care of their own money. But only if they intend to have any money in retirement.
Participating whole life insurance has been, and continues to be, the place where like-minded people mutually join together financially, so that wise and principled management of their money can be leveraged to guarantee profits and growth using actuarial science. Taking better than average care of policyholder’s money, participating whole life insurance is a viable option to the government’s plan for your retirement. Call our office to become your own money manager today and avoid the 401(k) debacle that is headed this way under this new rule.
Dr. Tomas P. McFie
Most Americans depend on Social Security for retirement income. Even when people think they’re saving money, taxes, fees, investment losses and market volatility take most of their money away. Tom McFie is the founder of Life Benefits which helps people keep more of the money they make, so they can have financial peace of mind. His latest book, How to Build Sustainable Wealth, can be purchased here.