About the Guaranteed Retirement Accounts Proposal
By Robert Giese
bob.giese@chsfl.org
Recent hearings in the House and Senate have focused on the need for 401(k) and IRA accounts to provide better retirement income. Vice President Joe Biden referred to these discussions in the White House Task Force on the Middle Class. He suggested creating “Guaranteed Retirement Accounts [GRAs].”
The guaranteed retirement accounts may replace conventional 401(k)s and could eventually provide annuity income to individuals.
Response to GAO Report
In response to a White House request, the General Accounting Office (GAO) released a report on April 28, 2010 that discussed some of these retirement issues. The GAO noted that a couple age 62 has at least a 47% probability that one of the two spouses will live to age 90. While life expectancy is in the mid-to-late 70s when one is born, the age at maturity increases as we grow older. Therefore, the average retirement age couple in America has a reasonable prospect that the survivor will live to be age 90.
GAO reports that Social Security is the primary support for lower income retired Americans. For the median retired person, Social Security is expected to provide approximately 47% of retirement income. The balance will come from savings or investments, a qualified plan such as a 401(k) or IRA and retirement earnings from employment.
Better than Conservative Investments?
The GAO report notes that an annuity may provide more income than a conservative investment, such as a bond or CD.
Assessment
Republican lawmakers this week wrote a letter to Treasury Secretary Timothy Geithner and expressed concern about the guaranteed retirement accounts. They noted that a number of the witnesses before the various committees would “dismantle the present private-sector 401(k) system” and replace it with the GRA.
Their letter expressed concern and opposition to any effort to “nationalize” the 401(k) system. The Republican lawmakers continued by noting that over 90% of households have a favorable opinion of 401(k) or IRA accounts.
Conclusion
And so, your thoughts and comments on this ME-P are appreciated. Is this new vehicle really better than a bond or CD? Is it the correct vehicle for a long-term retirement strategy? Is it even appropriate for physicians and medical professionals?
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Filed under: Breaking News, Insurance Matters, Investing, Op-Editorials, Portfolio Management, Retirement and Benefits | Tagged: 401-k, 403-b, annuities, GAO, Guaranteed Retirement Accounts, IRA, Joe Biden, Robert Giese, social security, Timothy Geithner, White House Task Force on the Middle Class | 3 Comments »
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