Treasury Retirement Proposal Touts “Lifetime Income” Benefits

A proposal made this month by the U.S. Treasury aims to help retirees achieve financial security without outliving their means. By outlining changes to 401(k) annuities programs and disclosures, the treasury aims to make it easier for retirees to take advantage of annuities and use them in retirement planning. Lifetime income achieved through these annuities looks a lot like the lifetime income achieved by some kinds of reverse mortgages.

The Treasury Department’s proposal will “reduce regulatory burdens and make it easier for retirees to choose to receive their benefits as a stream of income in regular payments for as long as they live.

“These flexible ‘lifetime income’ options can provide greater certainty in retirement and minimize the risk of retirees outliving or underutilizing their retirement savings,” the Treasury stated.


The proposal encourages partial annuity options, acknowledging that today some retirees do not know what options are available to them. It also removes what it calls a “key obstacle” to longevity annuities by by removing a regulatory impediment to purchasing a deferred “longevity” annuity. Finally, it clarifies rules for plan rollovers to purchase annuities and spousal protection rules for 401(k) deferred annuities.

“When American workers take the responsible step of saving for retirement, we should do all we can to provide them with sensible, accessible choices for managing their hard-earned savings,” said Treasury Secretary Tim Geithner. “Having the ability to choose from expanded options will help retirees and their families achieve both greater value and security.”

View more on the proposals.

Written by Elizabeth Ecker

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  • Annuities of this kind have been around a lot longer than tenure payouts.  Rather than annuities being a lot like tenure payouts, tenure payouts are a somewhat inferior annuity.  Where they lack most significantly is portability.

  • True in some cases Mr. Veale, and I like annuities as a retirement tool, but the downside to commercial annuities is that once the retiree chooses the ‘life only’ option, they’re gambling on their longevity.  Either they win or the insurance company wins.  Not so with a reverse.  Big difference if they were to die unexpectedly in six months.

    • beaches21,

      Most annuities have riders available which can greatly reduce that risk such as payouts for minimum terms certain.

      HECMs also have their risk.  What happens if the senior must move and there is little or no value remaining in the equity?

      HECMs are a great product especially with their tenure payout but HECMs cannot possibly be the best answer in all situations.  Portability issues are a chief example.

  • You have a choice with immediate annuities (IA), and most people select a guaranteed minimum, usually ten years, payout.  However, I’ve had clients with no heirs go for the maximum life only-payout, usually against my advice.  When used to fund the premiums on a LTCI premium, you can use the life -only payout IA, too, with tax advantages..
    One should also compare the payout of an IA against tenure, since rates change and one might be better, but always bear in mind the IA payments continue whether you are in your home, or not. (Am I correct that tenure payments stop if you don’t reside in the home after a year.)
    Also important in a comparison is the availability of a higher IA payout for a client with a higher  mortality situation (a rated annuity).

  • dduck12,

    Tenure payouts cease just as soon as the HECM matures.  They are also suspended when bankruptcy proceedings are instituted and generally are reinstated at the time such proceedings have been completely terminated.  IA payouts do not cease in either of those cases. 

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