Government Stops Rule Protecting Retirement Nest Eggs

A nest with three golden eggs sitting on top of it and a laptop in the background

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Most retirement savers probably assume that the professionals advising them on their investments have their best interests at heart. But that’s not always the case.

AARP has long sought measures to protect owners of individual retirement accounts (IRAs) and 401(k)s more from bad advice, including the Retirement Security Rule, which the U.S. Department of Labor finalized last year.

The rule requires all financial advisers providing guidance on retirement investments to act as fiduciaries — meaning they put their clients’ best interests first, rather than steering them toward high-fee products that rake in higher commissions. This standard already applies to most financial professionals.

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Now, this rule is in jeopardy.

The Retirement Security Rule was supposed to take effect in September 2024 but was blocked by a lawsuit from insurance groups. In November, the Labor Department announced it would stop defending the rule in court.

“We are deeply disappointed by the Department of Labor’s decision to withdraw its defense of the fiduciary rule,” William Alvarado Rivera, senior vice president for litigation at the AARP Foundation, said in a statement. “Americans saving for retirement deserve financial advice that is in their best interest, not advice driven by conflicts of interest.”

The cost of poor advice

AARP and other consumer advocates pushed hard for the rule. In May 2024, AARP sent a letter to every member of Congress, urging them to protect the change .

“When your constituents are steered to products that are not appropriate, it can cost them up to 20 percent of their nest egg — that’s $15,000 for the typical retirement saver,” AARP Chief Advocacy and Engagement Officer Nancy LeaMond wrote.

A 2024 AARP survey found that 9 in 10 people believe a “best interest” standard should be required of their financial advisers. “In fact, most people are shocked to learn it isn’t already a requirement, demonstrating an even greater need for the rule,” LeaMond wrote.

Although the rule AARP fought for will no longer go into effect, “AARP will always fight for stronger protections for retirement savers,” says Clark Flynt-Barr, an AARP government affairs director focused on retirement security.

On December 2, Rivera testified at a hearing on employer-sponsored retirement plans before a House of Representatives subcommittee. He stressed the importance of letting retirement plan participants seek legal recourse when plan fiduciaries violate their obligations.

In April, AARP’s senior vice president of government affairs, Bill Sweeney, wrote to Sens. John Hickenlooper (D-Colo.) and Thom Tillis (R-N.C.) expressing support for their reintroduced Retirement Savings for Americans Act, which would create tax-advantaged retirement savings accounts for low- and middle-income Americans, with a match from the federal government.

AARP has also lobbied for auto IRAs, or state-run individual retirement accounts intended for employees who lack employer-sponsored retirement accounts. Such programs have launched in 14 states.