John Oliver took on finances again on “Last Week Tonight,” and this time he talked about the biggie: retirement savings.
In this week’s main segment, Oliver tackles the way financial services companies work — a subject that, he admits, “sounds boring.”
But that knowledge has a huge impact on your retirement savings, as he goes on to illustrate through the surprising and somehow hilarious exposé that includes the “Last Week Tonight” staff’s own workplace retirement plan.
To simplify things, LWT skipped the so-called experts and brought in actor and comedian Billy Eichner to tell you five basic things that will help you save for retirement.
You can watch the full video below. Here are your five key takeaways:
1. Start Saving Now
“In fact, start saving 10 years ago!” urges Eichner.
“Now” is the key to saving for retirement, because your investments require time to grow through the “magic” (that’s what we writers call math) of compound interest.
As Oliver points out, “now” may not be a reality for you. “Now” should really mean ASAP. As soon as you have space in your budget, start directing some funds to a retirement account.
It doesn’t have to be a lot.
Save a little at a time, and let compound interest do the heavy lifting. Look how you could save more than $683,000 by retirement if you put away just $25 per week starting at age 21.
And if you’re as lost about budgeting as I was, here are the 10 steps I took to get my act together and manage my money in just 15 minutes a month.
2. Invest in Low-Cost Index Funds
Much of the segment warns against “active management.” Managed funds, Oliver explains, stand to cost and possibly lose you a lot of money.
“Average people like you — and let’s face it, you’re very, very average — should probably just invest in low-cost index funds and leave it alone,” Eichner points out.
That sounds exhaustively boring and more complicated than it is. Don’t worry. Low-cost index funds should be an option — maybe even the default — for your 401(k).
If that delightful “meet your 401(k)” conference call the company invites you to doesn’t explain any of this in terms you understand, don’t be afraid to consult your HR rep so you know what’s happening with the money they’re shaving off your paychecks.
3. Make Sure Your “Financial Advisor” is Actually a Fiduciary
Your financial advisor may certainly have your best interests in mind — we’re not knocking them, necessarily. But if they’re not a fiduciary, their legal and ethical obligation is not guaranteed, according to Oliver.
Because of recent regulatory changes, the person managing your retirement accounts will soon have to be a fiduciary. No more questionable, unregulated advisors, wealth managers, consultants or analysts will be in charge of your financial future.
But that’s not in effect until next year. So check now: Is the person offering advice about your retirement investments a “fiduciary”?
If you’re not sure, the best way to find out is to ask them.
Can’t tell whether you’re getting bad financial advice? Here are three signs.
4. Gradually Shift Investments from Stocks to Bonds
As you get older, start moving your money out of those index funds and into bonds.
We’re not financial advisors of any sort, so we recommend you consult your scrupulous fiduciary if you’re not sure how or when to do this.
5. Try to Keep Your Fees Under 1%
Keep an eye on the fees your financial services provider charges on your investments.
“Just like interest compounds, so do fees,” Eichner warns. As your investments grow, so will your fees, and that could mean a lot of lost money over time.
For example, a fee of just 2% over 50 years could cut your earnings by 63%, Oliver notes, citing a report by PBS.
“Think of fees like termites,” he suggests. “They’re tiny, they’re barely noticeable and they can eat away your … future.”
One of the most notable places you’ll accrue fees is through active management of your funds — which, as we note above, you probably don’t need.
Your Turn: What questions do you still have about saving for retirement?
Dana Sitar (@danasitar) is a staff writer at The Penny Hoarder. She’s written for Huffington Post, Entrepreneur.com, Writer’s Digest and more, attempting humor wherever it’s allowed (and sometimes where it’s not).