There is no question that the economic struggles of recent years have been difficult on the finances of many families. With day-to-day costs being a challenge, saving for retirement often fell by the wayside. As the economy slowly recovers, however, a focus on retirement savings is coming back. New rules introduced by the federal government in early February are looking to build the demand for guaranteed income products that would make retirement savings easier for many.
The new rules deal with annuities, and encourage workers to use their 401(k) savings to purchase them. These annuities would provide monthly payments throughout retirement and could indeed provide greater security for retirees.
There are two main proposals included in the new rules, the first of which deals with partial annuities. This would make it easier for workers to purchase an annuity with some of their 401(k) savings and leave the rest. Reports have found that many families would come out ahead using some of their retirement savings to purchase an annuity.
For example, if a family has a certain amount in savings and uses half of that to purchase an annuity, that would pay their living expenses every month upon retirement. The rest of the money could be reserved for emergencies or be passed on.
The second main proposal concerns longevity annuities. These types of annuities are less complicated and much less expensive than immediate annuities because payments don’t start until later in life, around age 80-85. Often these annuities are purchased at or near retirement, and they are meant to provide a sense of security. If you live significantly longer than typical life expectancy you will still be covered.
As retirement savings becomes a priority for American workers, the government is taking steps to offer more options and make the process easier. With many of these added options providing additional security and protection for later in life, it’s increasingly important to be informed about what retirement options offer the best protection for each individual’s situation.