Advice abounds when you are putting money into a 401(k). Your employer urges you to save, and may even automatically enroll you in a plan or match your contributions.
But when you prepare to retire, or take another job, that changes. You have the option to roll your 401(k) into an IRA, and not every financial professional offering advice about that is required to act entirely in your best interest. Investment advisors are required to follow that principle, known as the fiduciary standard. But brokers are only required to recommend "suitable" investments.
The difference between "fiduciary standard" and "suitable" seems arcane. But it means a broker can advise you to put money in a high-cost or low-performing fund or account, even when a better option is available, as long the recommendation is suitable. The recommendation does not have to be in your absolute best interest. According to a leaked White House memo, first obtained by The Hill in January, studies showed that difference wound up costing investors between $8 billion and $17 billion annually in high fees or sub-optimal investment performance.
"When you get bad advice, you are paying for it," said Cristina Martin Firvida, director of financial security at AARP.