In his State of the Union Address, President Obama
proposed a blueprint for an American economy built to last, and yesterday the
Treasury and Labor Departments announced two executive actions designed to help
enhance security for millions of Americans saving for retirement. By broadening
the availability of retirement plan options and expanding transparency in the
401(k) plan marketplace, these actions will help American retirees manage their
hard-earned savings and retire with dignity.
Treasury’s proposal will reduce regulatory burdens and
make it easier for retirees to choose to receive their benefits as a stream of
income in regular payments for as long as they live. These flexible “lifetime
income” options can provide greater certainty in retirement and minimize the
risk of retirees outliving or underutilizing their retirement savings.
You can read more about the announcement here
and here,
but don’t take our word for it:
“The proposal will also allow individuals more
flexibility to purchase products that protect them from outliving their
savings,” said
Wisconsin Senator Herb Kohl. “We must continue to work to find ways that
make it easier for Americans to make their retirement savings last a lifetime.”
According
to MarketWatch, “some say these products are ideal for people who want to
maintain control over the bulk of their money, investing it as they see fit,
but at the same time would like to insure against the risk of running out of
money in the event of a long life.”
“It is one of the biggest conundrums of an aging society:
Americans have salted away $11 trillion in retirement plans, yet millions still
risk running out of money in old age” wrote
the New York Times. “On Thursday the government said it had some new tools
to deal with the problem. The Treasury issued several new regulations intended
to make it easier, and maybe cheaper, for middle-class people in retirement to
transfer the money they accumulated in their 401(k)s into an annuity that would
guarantee monthly payments until they die.”
“Treasury’s proposed regulations,” wrote
the AP, “would make it easier for people with 401(k) plans to receive part
of their funds as an annuity, a plan that pays out regularly over a lifetime.
Such plans can be useful options because people are living longer and some may
end up outliving their savings or, fearful of such an outcome, hold back on
spending more than necessary.”
Erika Gudmundson is New Media Specialist at the Treasury Department.