A quiet, influential congressional research arm — the Congressional Research Service (CRS) — recently gave members of Congress, and the members’ aides, a quick guide to saving for retirement.
One short section in that short guide is “Converting Savings Into Retirement Income.”
- A copy of the CRS saving for retirement report is available here.
- An earlier article about annuities and behavioral finance is available here.
Given that many congressional aides are about 31, and that typical members of Congress have to think about everything from COVID-19, to military budgets, to running for reelection, the CRS income planning guide may account for a large share of what some people on Capitol Hill will hear about income planning this year.
Cheryl Cooper, a CRS analyst in financial economics, and Zhe Li, a CRS analyst in social policy, are listed as the report authors.
Here’s a look at five things Cooper and Li said about annuities in their report.
1. Annuities may be good alternative to asset-withdrawal-based retirement income strategies.
“Withdrawals mostly are taken in the form of lump-sum distributions or periodic withdrawals,” the analysts write. “Households may face the risk of either outliving their resources by withdrawing too much during earlier years or consuming too little by spending too conservatively. People may also have to make investment decisions on the remaining assets in their retirement accounts.”
2. Annuities take different forms.
“A life annuity — also called an immediate annuity — is an insurance contract that provides guaranteed income payments for life in return for an initial lump-sum premium,” the analysts write. “A life annuity pays income to the purchaser for as long as he or she lives and,in the case of a joint and survivor annuity, for as long as the surviving spouse lives. Another annuity product, the Advanced Life Deferred Annuity, can be purchased at retirement with a smaller share of accumulated assets and payments beginning at a later age,such as 85.”