The U.S. Treasury recently amended its rules to encourage workers with retirement plans to purchase life annuities within these plans. Life annuities generally make fixed monthly payments from the date of retirement until the death of the purchaser.
For years, many economists have recommended that workers use all their retirement savings to buy life annuities in order to avoid outliving their savings. Nevertheless, few workers want to put their whole retirement nest egg into a life annuity.
Why? In one word, optionality. Retired workers want to have substantial resources available to deal with medical emergencies or unexpected disasters during their retirement years. Alternatively, retired workers want to bequeath any remaining savings at death to their families, friends and favorite charities. However, if workers buy a life annuity, all payments typically end at death — even if it occurs shortly after retirement.
To achieve their multiple retirement goals, workers should use PART of their assets within their retirement plans to buy a deferred life annuity that starts paying out at age 75,80 or 85. Then they would have the rest of their retirement assets available to deal with medical emergencies or to make bequests at their death.
Read the rest at realclearmarkets.com…
As I wrote last week, provisions built into current law threaten to take $500 billion out of the U.S. economy in 2013. While Congress cannot allow this “fiscal cliff” to occur as scheduled, it should use this “crisis” as an opportunity to pass a smarter package of spending cuts and revenue increases that will gradually put us on the road to fiscal discipline.
The Social Security Trustees released their latest report yesterday, which showed that the finances of the system are deteriorating. In particular, The Trustees moved up the date when Social Security will become insolvent by three years, from 2036 to 2033. In 2033, absent any reform, the Social Security benefits of all recipients will be reduced across the board by 25%.
With Newt Gingrich vying for front-runner status in the Republican presidential primaries, his positions on important public policies such as Social Security and income taxes deserve scrutiny. In both cases, Gingrich adopts familiar Republican concepts — but then undermines their key objectives.
Read the rest at the Washington Post
Last week, former House Speaker Newt Gingrich unveiled details of his plan to partially privatize Social Security. His plan would allow younger workers to contribute a portion of their payroll tax obligation to a private investment account. Roughly speaking, Gingrich is signing on to the legislation from 2004 sponsored by Representative Paul Ryan (R-WI) and former Senator John Sununu (R-NH).
Read the rest at the Huffington Post
In not unsurprising news, the Supercommittee will shortly announce that they have failed to reach an agreement to cut $1.2 trillion from the deficit over ten years. The New York Times reports on why the twelve-member group became deadlocked:
In the end the two sides could not agree on a mix of tax increases and spending cuts and — perhaps above all — on the fate of the tax cuts originally signed by President George W. Bush, which are now scheduled to expire at the end of 2012.