The US Treasury, Your 401 (k) and Longevity Income
Uncle Sam wants you and your annuity.
The Treasury Department announced a plan to help 401 (k) and IRA owners add annuities to their investment options in February. The announcement by the Treasury received a lot of attention and helped push annuities to the forefront of available options. The fact that “longevity” options can increase income for a lifetime makes excellent sense. Knowing an income can pay for anytime period allows for a lifetime of security for the plan participants.
The proposal would give these annuities “special relief” from Internal Revenue Service rules that require retirement plans to start taking taxable withdrawals at age 70½. Treasury officials have not yet provided final rules and regulations, but the apparent need for annuities in planned as an alternative to guaranteed income needs.
A recent discussion with Treasury officials did reveal an outline of their plans, income withdrawals would need to start by age 85, and there would be a limit percentage of the 401(k) that can be placed in the annuity.
Many details still need to be considered, such as how the annuity would be managed within the 401(k) plan administrator. How best to select the correct insurance company and keep compliant with existing Employee Retirement Income Security Act (ERISA) rules are vital concerns.
Insurance companies can reduce the risk of an individual making an incorrect decision with their vital assets. The Treasury has reiterated the need for “longevity income” for plan participants, and outsourcing the responsibility to insurance companies seems a good fit. Many companies build their portfolio around the necessity of their customer’s income needs lasting an extended period.
A recent official stated that outsourcing the responsibility for providing income for plan participants is solid. Place the trust in the hands of experts in the field.
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