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Rare Good News From the Treasury

News from the Treasury Department is rarely good these days. The latest news, however, should be welcomed by all: as the NYT reports, the department is rolling out a new set of rules that should make it easier for Americans to transfer money saved in 401k accounts to annuities that provide some insurance against running out of money in extreme old age.

The new rules make it cheaper and easier to buy annuities that kick in at a certain age — at 85, for example.  As the Times story puts it,

A white paper by the Council of Economic Advisors estimated, for example, that a 65-year-old would have to pay $277,500 for a $20,000-a-year annuity that started immediately, but only $35,200 for one that started at age 85.

Making it easier for retirees to take advantage of ideas like this will allow people to plan more efficiently for the ups and downs of retired life.  One of the biggest worries seniors have is the fear of outliving their money; cheap annuities that kick in late in life take the edge off this fear.

But don’t get too cocky.  Twenty years from now, $20,000 is likely to buy you half or less of what it can buy today.  Even with new help from the government, retirement planning remains a tough job.

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  • Anthony

    Money has a time value…present value and future value and all annuitants ought to be aware despite Treasury’s rolling out of new rules. That said, any economic policy facilitating retirement planning for the better warrants consideration.

  • Mrs. Davis

    In an Anglo-Saxon economy insurers wouldn’t need rules from the government to offer products like this.

    And something doesn’t feel right about having rules about end of life financial services made by the organization that will be determining whether and when I get end of life care.

  • Luke Lea

    You would still be gambling on inflation. 20 years is a long time.

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