Updated Friday, August 1, 2014 as of 1:53 AM ET
Practice - Retirement Planning
Retirement Account Cap With Obama Budget Buoys Insurance
by: Zachary Tracer
Monday, April 15, 2013
Partner Insights

(Bloomberg) -- A cap that President Obama has proposed on the size of tax-advantaged retirement accounts is seen as potentially pushing savers to another product that limits payments to the government: life insurance.

Obama’s 2014 budget plan, unveiled April 10, includes a proposal to cap at about $3.4 million tax-preferred retirement accounts such as IRAs and 401(k)s. That would encourage wealthy savers to put more cash into insurance -- whose death payouts are typically exempt from federal taxes -- and annuities, where taxes are deferred, said Walter White, chief executive officer of Allianz SE’s North America life business.

“In our industry, in many ways, that could be helpful, because then you’ll start to look for tax advantages in other ways, and some of our products are geared toward that,” White said in an interview in New York.

Wealthy investors have long included life insurance as part of a strategy to limit taxes and pass on wealth to their heirs. The cap proposed in Obama’s budget would push more assets into life insurance and annuities as investors seek to limit taxes, said Ron Rubin, the CEO of Union Square Financial Partners LLC, which advises wealthy clients on transferring their assets.

Annuities are another type of insurance product that can offer a stream of income in retirement.

“We’re going to see a massive swing over to the after-tax, tax-deferred asset classes like annuities and life insurance,” Rubin said in a phone interview.

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