Annuity IQ

There is legislation that is being introduced called The Retirement Security for Life Act of 2007. Basically, the proposal would allow for a portion of income, up to $20,000 a year derived from an annuity that offers a lifetime income guarantee, to be excluded from taxation. This could give the average person in a 25% tax bracket annual tax savings of up to $5,000 on that income generated from an Annuity.

It is no secret that Baby Boomers and Americans in general need more incentive to save for retirement. We all know the numbers behind Social Security, and they are not pretty. We need to do something and I see this legislation as an excellent step to get people to save more money for retirement.

For two decades we have seen politicians posturing and talking about fixing Social Security, but no action has been taken. It is time for our politicians to come up with a plan that will actually help the looming crisis. Certainly there is a lot that can be done to increase personal savings and this legislation is a great step in providing an incentive for people to save.

This legislation will not fix Social Security though, but it will help build piece of mind for millions of Americans. Do not misunderstand me here, we need to fix Social Security and we need to fix it soon. I do not have the solution to the Social Security problem, but I do know that personal savings accounts probably will not work.

Unfortunately, I think the only real solution to fix Social Security and Medicare is to raise payroll taxes, not a very popular solution I know, but a realistic one. I am only talking about a 1% raise split between your employer and you. Then again, what do I know?

That is my two cents on politics, but what would this new legislation mean to investors and the annuity market? It would be huge, an unprecedented opportunity for the middle class to find a way to save more money than ever before. This proposal would be a boom for insurance carriers and agents unlike anything we have ever seen in the past.

It is unclear if variable annuities that provide living benefits would be included, but it would make sense that they would be. These contracts loosely fit the description laid out by the legislation, but it does look like much of the proposal is geared towards income annuities. If it does include Variable annuities that would be a boom for investors who could reap the rewards of guarantees and stock market growth, which could lead to higher income in the future.

I see this as an opportunity for insurers and agents, but it will help millions of people at the same time. It is a total win-win situation for everyone involved, I cannot think of a better situation. This proposal should be examined closely, passed and signed into law!