Saturday, February 27, 2010

OMG … Obama’s Sounding Like a Republican!

Immediate annuities were once part of the foundation for many Americans heading into retirement. Safety was their biggest concern. And with an annuity all they had to do was pay in a lump sum to get a guaranteed, fixed income that they could not outlive.
But then the stock market started going up … up … and up. And annuity owners watched in envy, settling for lowly returns, while stock market investors stuffed their pockets with double-digit payoffs. The pendulum then swung the other way … and new retirees ignored the safety of annuities in search of stock market gains.
We all know what happened next … the market tumbled. Now the boring, oft-ignored annuity is getting a closed look by wary Boomers, including President Obama.
Last month, President Obama’s Middle Class Task Force concluded annuities can help Americans secure a better retirement. Imagine, a politician advocating, in a round-about way, that Americans should start assuming more responsibility for their future rather than relying on the government to bail them out!
Obama must have taken a look at the report by the trustees of Social Security and seen that the system will start running a deficit in 2016 and be flat broke by 2037. You can click here to read the report for yourself.
For decades, financial advisors and insurance agents have been suggesting annuities to keep clients from running out of money during retirement. And finally the government is onboard with the idea.
Immediate annuities can replace the pension plan your employer discontinued, or perhaps never offered. Plus they can supplement your Social Security income. There are some tax benefits, too. Income from an annuity is only partially taxable since some of it is a return of principal. This could help reduce the taxability of your Social Security benefits. You might even consider using an annuity to cover your fixed expenses each month (mortgage, car payment, etc.).
Check with your financial advisor or insurance agent to get an idea of how much income an annuity could pay you. There are online sources too, such as In its most basic form, an immediate annuity is a contract issued by an insurance company in which you hand over a chunk of money in return for a guaranteed lifetime income. But there are a lot of bells and whistles available, such as joint payout and inflation protection. So a financial advisor or an agent could be the better source to explain all of these and help suggest the best option for you.
Will President Obama or anyone in his administration run out and buy an annuity? It would be interesting to track. But I doubt it. Most of those guys are loaded. And just like Congress, they have a sweet setup … they’re covered under the Federal Employees’ Retirement System. Nonetheless, I’ll give Obama credit for stepping over the line and suggesting that individuals and private industry can come up with a better way to secure our retirement.
Best wishes,

1 comment:

  1. Interesting blog, George, but it’s missing an important part of the equation: Generation Jones (between the Boomers and Generation X). As many experts, and Obama himself have said, our President is a GenJoneser, not a Boomer.

    Google Generation Jones, and you’ll see it’s gotten lots of media attention, and many top commentators from many top publications and networks (Washington Post, Time magazine, NBC, Newsweek, ABC, etc.) now specifically use this term. In fact, the Associated Press' annual Trend Report chose the Rise of Generation Jones as the #1 trend of 2009. Here's a page with a good overview of recent media interest in GenJones:

    It is important to distinguish between the post-WWII demographic boom in births vs. the cultural generations born during that era. Generations are a function of the common formative experiences of its members, not the fertility rates of its parents. And most analysts now see generations as getting shorter (usually 10-15 years now), partly because of the acceleration of culture. Many experts now believe it breaks down more or less this way:

    DEMOGRAPHIC boom in babies: 1946-1964
    Baby Boom GENERATION: 1942-1953
    Generation Jones: 1954-1965
    Generation X: 1966-1978
    Generation Y/Millennials: 1979-1993