A new bill proposed in the House would exempt up to $20,000 in annuity income from federal taxation. The Retirement Security for Life Act of 2004 proposes that 50% of annuity income, up to $20,000 annually, be free of taxes, amounting to savings up to $5,000 for someone in the 25% tax bracket.
The bill is supported by both republicans and democrats and is backed the Americans for Secure Retirement, a coalition that includes insurance company groups, the National Association for Variable Annuities, womens groups and various agri-business groups.
The issue of retirement income is more keenly felt by women, who face greater longevity than their male peers.
"Women live longer and they often don't realize, until it's too late, that their resources won't let them maintain their standard of living for the 25 or 30 years they may be retired," said Karen Kerrigan, president and CEO of the Small Business Survival Committee, which is part of the coalition. "Women who are self-employed or consider the sweat equity in their businesses 'their retirement' are especially at risk."
While Americans have heard the mantra that they must save enough for a comfortable retirement, how those assets are allocated can be equally important, especially as medical advances and better understanding of health increase longevity. "We must encourage people to choose retirement vehicles that pay a guaranteed paycheck for life," said Frank Keating, president and CEO of the American Council of Life Insurers, also part of the coalition.