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Retirement Planning > Saving for Retirement

Annuity Bill Gets Companion

By Arthur D. Postal

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WASHINGTON BUREAU – A new Senate bill could provide a 50% tax exclusion on up to $40,000 in annual income from a non-qualified lifetime annuity.

The Retirement Security for Life Act, S. 1297, was introduced by Sens. Kent Conrad, D-N.D., and Pat Roberts, R-Kan., members of the Senate Finance Committee. If S. 1297 passes, a taxpayer could receive up to $40,000 per year in lifetime annuity income and keep half of that total out of taxable income.

A typical U.S. retiree in the 25% tax bracket who used a lifetime annuity could save up to $5,000 in taxes annually, according to officials at Americans for Secure Retirement, Washington.

S. 1297 is similar to H.R. 2748, a bill recently introduced in the House by Reps. Early Pomeroy, D-N.D. and Ginny Brown-Waite, R-Fla.

Last year, a similar bill received broad support in both chambers of Congress, with 79 co-sponsors in the House and 12 in the Senate.

“This legislation is a critical component of retirement policy, and we are pleased that Congress is making helping Americans secure a financially sound retirement a priority,” ASR Chairman Bill Waldie says in a statement.

S. 1297 would be especially helpful to taxpayers who are not covered by employer-sponsored retirement plans and who build retirement savings by using a life insurance policy, or by selling a home or business, according to the American Council of Life Insurers, Washington.

“Instead of relying on defined benefit plans to provide retirement income, Americans must now manage their own savings for a comfortable and secure retirement,” ACLI President Frank Keating says in a statement. “The challenge that millions of retirees now face is how to make those savings last throughout retirement. The Retirement Security for Life Act will help retirees meet this challenge by encouraging them to convert some of their savings into a lifetime income stream through an annuity.”

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CORRECTION: An earlier version of this article described the size of the tax exclusion incorrectly. The bill would apply a 50% tax exclusion to $40,000 in lifetime annuity income, or $20,000 in lifetime annuity income.

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