Nov. 07, 2005
Recently, a group of bipartisan Congressional leaders introduced The Retirement Security for Life Act, which is designed to help Americans maintain their standard of living and empower them to receive a steady "paycheck" for life. The legislation provides a tax incentive — that would be available to any retiree — to encourage investment of some of their individual after–tax savings in retirement vehicles like annuities that provide a guaranteed lifetime income.
"Retirement security is about more than savings accumulation. Retirement savings must be managed to last a lifetime, no matter how long that might be," said John Meyer, senior vice president, New York Life. "This bill would enable more retirees to purchase lifetime annuities, a key New York Life product, and a vital piece of any secure retirement portfolio."
Last year, sales of New York Life's LifeStages®/MainStay Lifetime Income Annuity increased a dramatic 154 percent compared to a modest industry–wide increase of only about three percent for lifetime income annuities over the same period. Sales rose to $292 million in 2004, up from $115 million in 2003.
The tremendous growth of New York Life's lifetime income product has been driven, in part, by unique withdrawal features and legacy benefits.
"At a time when Americans are living longer, Social Security's future is uncertain, and defined benefit pension plans are dwindling, lifetime annuities provide retirees with two rare commodities: a guaranteed retirement paycheck for life and peace of mind in knowing they will never outlive their assets. I commend these Congressional leaders for proposing this legislation," said John Meyer.
Under the proposal, individuals would not pay federal taxes on one–half of the income (up to a maximum of $20,000 annually) generated by annuities that make lifetime payments. For a typical American in the 25% tax bracket, this would provide an annual tax savings of up to $5,000.
According to the bill's sponsors, including Senators Gordon Smith (R–OR), Kent Conrad (D–ND), Olympia Snowe (R–ME), Hillary Rodham Clinton (D–NY) and Representatives Nancy Johnson (R–CT), John Tanner (D–TN), Phil English (R–PA) and Stephanie Tubbs Jones (D–OH), this is expected to be one of the truly bipartisan solutions that Congress will be considering as they look for common ground on retirement security issues.
Several significant economic and demographic shifts are putting the retirement security of many Americans at risk. These shifts include:
- Americans are living longer. About half of all retirees will live beyond average life expectancy and one of three 65–year–old women today is expected to live into her 90s.
- The coming retirement of the nation's 77 million baby boomers will double the number of retirees in the Social Security program.
- Fewer retirees in the future will enjoy the security and regularity of monthly pension checks that many employers once paid.
Groups that traditionally have not had access to adequate pension coverage are especially at risk. They include women, farmers, the self–employed, part–time workers, employees of small firms, and minorities, many of whom are middle–income. For example, according to Census Bureau data, about 60 percent of workers with household incomes of less than $50,000 lack pension coverage.
For more information on this legislation, visit www.paycheckforlife.org.
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To learn more about guaranteed lifetime income using the MainStay Lifetime Income Annuity, please call 1-866-695-3287, and we will be happy to assist you.
|Legislation Would Encourage Lifetime Annuities for Retirees|