It’s natural to feel uneasy when the stock market gets choppy just when you’re approaching retirement. This volatility can leave you vulnerable to questionable sales practices, like those alleged in a recent lawsuit against Empower Retirement for exploiting participant data to market their own products.
When the Market Dips, Opportunistic Sales Pitches Rise
Many of you getting close to retirement may find yourselves invited by representatives from your 401(k) plan to meet to discuss your rollover and may even recommend you buy an annuity as a way to generate guaranteed income for life and avoid stock market turbulence. And the bright shiny pitch might sound right on time. But a recommendation to buy something as consequential as an insurance annuity is not financial ‘advice’. Real financial advice requires context, thoughtful analysis… and… transparency.
So far this month, the S&P 500 has declined about 9.3% from its February 19 all-time high. If you’re a pre-retiree, that might get your attention. But we know, that most financial decisions based on emotions in the moment tend not to be in our best interest.
The Rise of Cross-Selling Practices
Welcome to the ugly side of the retirement plan business. This practice is known as cross-selling and involves accessing your personal in-plan data and then using it to sell you their financial products – outside the boundaries of the plan. You inadvertently become a prime prospect for them just by being in the plan. Recently, Plansponsor highlighted a new lawsuit against Empower Retirement and its misuse of participant data for cross-selling products like Roth IRAs. The allegation suggests that Empower leveraged confidential information to market its own financial products, potentially prioritizing its profits over participants' best interests.
Why This Matters to You
When your personal 401(k) details are used for marketing products that may not truly fit your situation, it can lead to snap decisions that aren't in your best interest. For instance, in volatile markets, the appeal of "guaranteed" income from annuities might tempt retirees. But in full sunlight, you’ll see annuities can come with (extremely) high fees, complex terms, and restrictions that limit access to your money. Annuities are not a one-size-fits-all solution.
How to Protect Yourself From Making a Huge Financial Mistake
1. Stay Informed
Recognize that some of these emails and texts coming from your 401(k) provider might be sales-driven. Always question the intent behind unsolicited offers.
2. If You Do Want Unbiased Financial Advice
Before making rollover decisions, seek advice from a fiduciary advisor who is legally obligated to act in your best interest. They can provide unbiased guidance tailored to your financial goals. And yes, it’s why I created Wealthramp.
3. Protect Your Data
Understand how your 401(k) details are used by your plan provider. Don’t hesitate to ask about their data privacy policies and how they safeguard your information.
Remember, your retirement savings represent years of your hard work and dedication. Making informed, thoughtful decisions ensures these funds serve you best in the years to come. Stay vigilant, ask questions, and prioritize your financial well-being above all else.
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