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Treasury Notes

 Helping American Workers Achieve Security in Retirement

By: Erika Gudmundson
2/3/2012

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.
Posted in:  Tax Policy
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