How to Not Outlive Your Retirement Savings [Real Clear Markets]

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.

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Gingrich’s Social Security plan:
Privatize gains, socialize losses
[Huffington 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).

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The failure of the Supercommittee: A recap and next steps

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.

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