The government has recently been taking steps to alleviate the heartache accompanying retirement plans. Their goal has been to put retirees' best interests at the heart of the matter, and figure out what the best plan might be to ensure a secure retirement.
Their decision has been to focus on annuities and change up some of the rules as a way to strengthen retirement plans. To keep you abreast of what's been going on, we have compiled some important information concerning annuities and these new rules.
Annuities: The Definition
An annuity is a financial product that provides you with an income throughout your retirement. You make payments into the account, and once you've reached a certain age, you begin receiving checks. The frequency of these checks depends on how you would like to receive them. You can choose a lump sum in the beginning, a monthly payment, or an annual payment.
Partial Annuities: The Definition
As illustrated above, once you retire, you are entitled to receiving your money in a lump sum, monthly payment, or annual payment. With a partial annuity, you can split this up. You can take part of the accumulated funds in a lump, and then take the rest either monthly or annually.
Partial Annuities: The Proposal
When given a choice, many retirees have decided to take the lump sum. The main issue they have with this choice, however, is that they often run out of money
To help put a stop to this problem, the current administration has proposed that partial annuities get pushed harder as an option for retirees. This would provide a great option for retirees, as they would receive both a nice amount of cash soon after retirement, but would also receive a monthly or annual payment.
Also, employers often either don't offer partial annuities or do not inform employees when they do offer them. Another part of the government's proposal would fix this as well by simplifying the calculations involved with partial annuities. With simplified calculations, employers would have an easier time realizing the benefits of these annuities, and would pass this information on to their employees.
Longevity Annuities: The Definition
A longevity annuity is one that pays quite a bit of time after retirement has happened. The rules of this type of annuity declare that payouts begin to accrue once a retiree is 70 years old. However, they are not given access to the funds until they're around 85 or so. If the longevity annuity is offered through a 401k or IRA, a portion is funded by the employee's retirement funds.
Longevity Annuities: The Proposal
Due to the late payout, not too many retirees utilize longevity annuities. To make them more attractive, the government has proposed that they be simplified by lessening the age at which a retiree would have access to his or her money. In addition, the value of such an annuity would not be included in any calculations.
401k Fees: The Proposal
Employers often provide a variety of options when it comes to retirement plans. To assist them with choosing the best plan, the government has created a set of rules wherein each 401k provider must list all plan administration and money management fees. All plan providers must begin doing this no later than July 1st, 2012.
In addition, the administration is proposing that each 401k provider design an easy-to-understand disclosure of fees. This requirement was meant to start right away, but it has been delayed for an unspecified amount of time.
Source: http://firstsecurityfinancialshow.com/blog/bid/132199/Obama-s-Retirement-Rescue
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