Supplement to February 15 Posting February 20, 2012
Posted by forwardfinancialplanning1 in Annuities, Fixed Annuities, Retirement Savings, Retirement Spending.add a comment
How bad is the savings shortfall cited in the February 15 posting? According to the Employee Benefits Research Institute (EBRI), 56% of all workers have less than $25,000 in savings for retirement. And, 54% of retirees report that they have less than $25,000 saved. Finally, the EBRI found that 42% of retirees say their current level of debt is a problem.
Maybe the EBRI can call across town in DC and advise the Treasury and Department of Labor that their annuity proposal may not even qualify as “a drop in the bucket”.
Excuse me if I’m underwhelmed February 15, 2012
Posted by forwardfinancialplanning1 in 401k plans, Annuities, Fixed Annuities, Retirement Savings.add a comment
It must be an election year. The US Treasury has just proposed new rules regarding the use of annuities within employer sponsored retirement plans such as 401k’s. The purpose for the relaxed rules is that most employers have resisted adding an annuity as a distribution option from their defined contribution retirement plans. Because the plan sponsor is held to a fiduciary standard and must comply with a myriad of Department of Labor regulations, most have avoided offering annuities in the belief that either they were going to be too expensie, or more importantly, that they would be held liable for an imprudent selection of annuity providers.
The Treasury and the Department of Labor are trumpeting these rules as a wonderful solution to the impending retirement crunch for the Baby Boomers. Treasury Secretary Timothy Geithner hailed the plans as a solution whose time has arrived by stating, “When American workers take the responsible step of saving for retirement, we should do all we can to provide them with sensible, accessible choices for managing their hard-earned savings. Having the ability to choose from expanded options will help retirees and their families achieve both greater value and security.”
Sounds great, huh? Baby Boomers’ retirement problems solved!!! Somehow they forgot to mention that the average 401k balance for a mid-fifties employee is in the $50-75,000 range, depending on whose statistics you’re citing. Unfortunately, that’s going to provide an immediate annuity payout of a couple of hundred bucks a month. And, with interest rates sliding downward due to the hyperactive money creators at the Federal Reserve Bank, the lump sum will provide even less of an income stream as rates continue to fall. Somehow, these clarifying facts never make it into the press releases. The politicos can take all the victory laps they want in DC but the fact still remains that there’s a major societal problem looming and they are simply putting fingers into the leaking dam.
