Bill Overview
Title: Financial Freedom Act of 2022
Description: This bill prohibits the Department of Labor from limiting the type or range of investments that fiduciaries may offer participants and beneficiaries in certain employer-sponsored retirement plans. The bill applies to certain defined contribution plans that permit participants or beneficiaries to exercise control over the assets in the account, such as a 401(k) plan that allows participants or beneficiaries to select additional investment options through a self-directed brokerage window.
Sponsors: Rep. Donalds, Byron [R-FL-19]
Target Audience
Population: Individuals participating in defined contribution retirement plans globally
Estimated Size: 60000000
- The bill impacts those who have employer-sponsored retirement plans, specifically defined contribution plans like 401(k) plans.
- Defined contribution plans are popular in the United States, with millions enrolled in such plans to manage retirement savings.
- As of 2021, approximately 59% of U.S. workers reported having access to a defined contribution plan at their workplace.
- Globally, variations of defined contribution plans exist, and many individuals have similar retirement savings plans where fiduciaries control investment options.
- Individuals who participate in self-directed brokerage windows will be directly impacted by the new freedoms in investment choices.
Reasoning
- The target population for this policy includes individuals with employer-sponsored defined contribution plans like 401(k)s, particularly those utilizing self-directed brokerage windows.
- Participants who actively manage their retirement portfolios may experience varying degrees of impact depending on their investment strategies and risk tolerance.
- Those not inclined to adjust their investments outside traditional plan options will likely see little immediate impact, whereas those seeking diverse opportunities may benefit more under the new policy.
Simulated Interviews
Software Engineer (San Francisco, CA)
Age: 35 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 14/20
Statement of Opinion:
- I think this policy will give me more flexibility in choosing the types of investments I can include in my retirement portfolio.
- I'm excited about the potential to diversify beyond what's usually allowed.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Marketing Specialist (Austin, TX)
Age: 28 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 16/20
Statement of Opinion:
- I'm not entirely sure how this will affect me since I'm just beginning to save for retirement.
- It sounds like it might give me more options, which is good, but I need more guidance.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 6 |
Electrical Engineer (Chicago, IL)
Age: 50 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- While the policy allows more freedom, it also means more responsibility for mistakes.
- With volatile markets, I worry this will lead people to make riskier choices.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 4 | 4 |
Retired (Miami, FL)
Age: 62 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 8/20
Statement of Opinion:
- This policy doesn't affect me much as I rely on stable investments.
- I'm more focused on withdrawing my savings safely.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Banker (New York, NY)
Age: 45 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 20.0 years
Commonness: 12/20
Statement of Opinion:
- I welcome any policy that gives me more control over my financial future.
- Potentially better returns with diversified investments are a plus.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Graphic Designer (Portland, OR)
Age: 30 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- I hadn't considered managing my investments before, so this will be a learning curve.
- I hope this opens up opportunities for better returns.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Professor (Dallas, TX)
Age: 55 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 0.0 years
Commonness: 10/20
Statement of Opinion:
- I tend to prefer the traditional investment paths for my 401(k).
- This policy might be advantageous, but I prefer not to take much risk.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Healthcare Professional (Atlanta, GA)
Age: 42 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 15.0 years
Commonness: 13/20
Statement of Opinion:
- This policy will allow me more room to explore innovative investments.
- I'll likely use this to shift towards a more growth-focused portfolio.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Data Scientist (Seattle, WA)
Age: 38 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 20.0 years
Commonness: 11/20
Statement of Opinion:
- More flexibility is great, especially for investing in high-growth tech companies.
- I plan to adjust my portfolio as new options become available.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 8 | 7 |
Management Consultant (Boston, MA)
Age: 41 | Gender: male
Wellbeing Before Policy: 9
Duration of Impact: 10.0 years
Commonness: 9/20
Statement of Opinion:
- I think this policy further empowers individuals to take charge of their financial well-being.
- It's an excellent opportunity to align retirement with personal growth goals.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 9 | 9 |
| Year 5 | 9 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 9 | 8 |
Cost Estimates
Year 1: $5000000 (Low: $3000000, High: $7000000)
Year 2: $5000000 (Low: $3000000, High: $7000000)
Year 3: $5000000 (Low: $3000000, High: $7000000)
Year 5: $5000000 (Low: $3000000, High: $7000000)
Year 10: $5000000 (Low: $3000000, High: $7000000)
Year 100: $5000000 (Low: $3000000, High: $7000000)
Key Considerations
- The impact on the Department of Labor's regulatory enforcement and compliance monitoring.
- Potential changes in the financial behavior of participants enrolled in defined contribution plans, particularly 401(k) plans.
- Long-term macroeconomic effects resulting from enhanced investment options and possible returns.
- The complexity and appropriateness of investment options available through self-directed brokerage windows.