The Obama administration will promote use of annuities to generate retirement income when it releases proposals for helping stressed middle-income families.
The administration's plans include a proposal to encourage the use of annuities and similar products to transform savings into guaranteed future income, thereby reducing the chance of retirees' outliving their savings or seeing nest eggs worn down by inflation or investment losses.
The proposals were outlined in a fact sheet released by the White House in advance of President Obama's State of the Union address. Obama is set to give the address Wednesday.
The American Council of Life Insurers, Washington, has released a statement praising the administration's plans and saying it is looking forward to working with President Obama and his administration on advancing the retirement security proposals.
"President Obama's initiative recognizes a key challenge to Americans' retirement security--how to manage savings to last a lifetime," ACLI President Frank Keating says in the statement. "The decline of defined benefit plans and emergence of defined contribution plans, such as 401(k)s, has shifted responsibility for managing savings from the employer to the individual."
Other initiatives outlined by the White House document include:
- Increasing the clarity of 401(k) plan fees.
- Encouraging retirement plan sponsors to give workers access to impartial retirement advice.
- Requiring clearer disclosures of the risks of target-date funds offered as retirement plan investment choices.
- Establishing a requirement for employers above a certain size that are without a retirement plan to enroll employees in individual retirement accounts with automatic payroll deductions, unless the employees opt out.
- Expanding the saver's credit to match the first $1,000 of retirement plan contributions by 2-income households earning up to $65,000, from the current $55,500, and allowing a partial credit for families earning up to $85,500.
- Increasing by 200,000 the number of family caregivers entitled to federal assistance with tending to elderly relatives.
- Expanding child care funding for working parents to serve an additional 235,000 children.
- Placing a cap on student loan payments. The cap would be tied to an individual's income.
UPDATE, Jan. 28, 2010: President Obama delivered the State of the Union address last night, and he ended up discussing retirement savings only in passing. Coverage of what Obama actually said is available here.