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: Sen. Tuberville, Tommy [R-AL]
Target Audience
Population: People participating in defined contribution retirement plans in countries with systems like those of the United States
Estimated Size: 60000000
- The bill affects participants and beneficiaries of employer-sponsored retirement plans, specifically those with defined contribution plans like 401(k)s.
- Income and employment statistics suggest a large proportion of the working-age population in many countries has access to such plans.
- People who have 401(k) plans are primarily located in countries with defined contribution retirement systems, particularly in the United States.
- In the US, a high percentage of the working population may have access to 401(k) plans.
- Globally, the adoption of 401(k)-like plans varies, but significant participation is noted in countries with similar retirement systems.
Reasoning
- The policy directly affects individuals with employer-sponsored defined contribution retirement plans, such as 401(k)s.
- The impact will likely vary depending on the individual's current engagement with and understanding of their retirement investments.
- Some individuals may appreciate having more investment choices, while others may feel overwhelmed by the increased responsibility.
- The policy does not involve direct financial transfers, hence there is no direct cost associated with it for individuals or the government budget.
- Given that 60 million participants in the US have access to 401(k) plans, a substantial portion of these individuals may be impacted, but primarily those actively managing their investments.
- Most individuals might experience 'low' to 'medium' impact in terms of decision making, with potential long-term effects on their retirement savings and wellbeing.
- Since the policy allows greater freedom in investment choices, it could lead to both better or worse outcomes based on individual decisions.
- It is crucial to note that not everyone with a retirement plan will be impacted equally, as only those making investment choices will directly experience changes.
- While there's no direct cost, individuals may incur indirect costs in the form of higher fees or losses depending on their investment decisions.
- The expected wellbeing scores should reflect these nuanced experiences, including variations for those who will remain unaffected.
Simulated Interviews
Financial Analyst (New York)
Age: 45 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 20.0 years
Commonness: 4/20
Statement of Opinion:
- I welcome the policy as it gives more freedom in choosing investment options.
- I am confident in my ability to manage my investments.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 9 | 8 |
Software Engineer (California)
Age: 30 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 5/20
Statement of Opinion:
- I think more options could be overwhelming for people with little investment knowledge.
- I'm not sure if I will benefit from having more choices.
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 | 7 | 6 |
Teacher (Illinois)
Age: 55 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 3/20
Statement of Opinion:
- I have always relied on safe investment options and this policy doesn’t change much for me.
- More choices could mean riskier investments for some.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Entrepreneur (Texas)
Age: 40 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 20.0 years
Commonness: 2/20
Statement of Opinion:
- The policy is a positive change that supports those who want to diversify their portfolio.
- There's a risk, but investment is about taking calculated risks.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 10 | 8 |
Retail Worker (Florida)
Age: 28 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 7/20
Statement of Opinion:
- Having more options might be beneficial but I'm unsure how to use them.
- I might need guidance to understand new investment 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 | 7 | 5 |
| Year 20 | 7 | 6 |
Nurse (Ohio)
Age: 60 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 4/20
Statement of Opinion:
- The policy doesn’t affect me significantly as I'm approaching retirement.
- I've made my investment decisions already and plan to stay the course.
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 |
Customer Service Representative (Arizona)
Age: 32 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 6/20
Statement of Opinion:
- I feel that having more options can be beneficial over the long term.
- I may need to invest more time understanding new options.
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 | 8 | 7 |
| Year 20 | 8 | 7 |
Construction Manager (Georgia)
Age: 47 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 5/20
Statement of Opinion:
- I'm concerned that more choices may lead me to make risky decisions.
- I'd prefer simple, straightforward investment options.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 6 | 6 |
Graphic Designer (Colorado)
Age: 25 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 15.0 years
Commonness: 8/20
Statement of Opinion:
- I might benefit from extra options if I learn quickly about investing.
- Excited but also wary about potential risks.
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 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 9 | 8 |
Lawyer (Washington)
Age: 50 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 20.0 years
Commonness: 3/20
Statement of Opinion:
- This policy allows me to explore more diverse investments and strategies.
- I see potential gains but also acknowledge the associated risks.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Cost Estimates
Year 1: $0 (Low: $0, High: $0)
Year 2: $0 (Low: $0, High: $0)
Year 3: $0 (Low: $0, High: $0)
Year 5: $0 (Low: $0, High: $0)
Year 10: $0 (Low: $0, High: $0)
Year 100: $0 (Low: $0, High: $0)
Key Considerations
- The bill's impact largely depends on the investment choices individuals make once restrictions are lifted.
- Potential shifts in investment strategies could alter asset distributions across different market sectors.
- While the bill allows broader investment options, it doesn't guarantee improved financial returns or outcomes for participants.