Lawmakers push bill that will give retirees consistent income for life
By Julie Jason, Staff Writer, Hartford Courant  

August 1, 2004

U.S. Rep. Nancy Johnson, R-New Britain, would like to see more middle-income retirees receive a "guaranteed paycheck for life."

Johnson introduced legislation last week, called the "Retirement Security for Life Act of 2004," to address growing concerns over future retirees, including 77 million baby boomers, not having enough money to live on.

The bi-partisan bill, co-sponsored by U.S. Reps. John Tanner, D-Tenn., Phil English, R-Pa., and Stephanie Tubbs Jones, D-Ohio, is not a total solution, but it is a move in the right direction. By lowering taxes on annuity income, the bill encourages people to purchase immediate annuities to create retirement income that they cannot outlive.

Why does the bill focus on annuities?

"Annuities are complicated, there is no question," said Kevin Bruns , spokesman for Americans for a Secure Retirement. "But they are the only retirement vehicle that will give you income for life, no matter how long you live."

Americans for a Secure Retirement, a newly formed coalition dedicated to achieving retirement security for all Americans, is encouraging people to write to their representatives to support the bill's passage. Coalition members include The Latino Coalition, American Agri-Women, Soybean Producers of America, the American Agriculture Movement of Arkansas, the Women's Institute for a Secure Retirement and the Committee of Annuity Insurers.

"As a society, we're facing two retirement crises," Bruns said. "While we're working, we don't save enough for retirement. After we retire, we don't create enough income to live on comfortably."

The bill addresses financial needs after retirement by dramatically cutting taxes on annuity income. It targets middle-income Americans who have saved their entire lives and now wonder how to make those dollars last, so they can maintain their pre-retirement standard of living.

Under the bill, an individual would not pay federal income tax on one-half of the income payments from the annuity, up to a maximum of $20,000 annually, according to Johnson.

Since the bill caps the eligible income at $20,000 a year, it is intended for middle-income taxpayers, not millionaires.

Because of work-force trends, groups of people are not covered by adequate pension and retirement programs, Bruns said. They tend to be women, farmers, minorities, self-employed, part-time workers and people who work for small businesses who do not have access to an employer plan and need to rely on their own savings for retirement.

Social Security will be helpful in providing part of their income needs, but not all. These are the people who will be helped by the new proposed legislation, Bruns said.

About 50 percent of the work force has pension coverage through a traditional defined benefit program, a 401(k) or other defined contribution plan, Bruns said. Forty percent of workers who earn $50,000 or less are covered by a retirement program at work.

When they retire, they may have equity in their homes, farms or businesses, and they may have mutual funds and IRAs, or an insurance check when a spouse dies, Bruns said. "We want these people to be able to manage their savings, because many will live into their 90s."

"People need to be able to translate a lifetime of savings into a guaranteed lifetime income," Johnson said.

-- For more information, go to the newly launched Americans for a Secure Retirement Web site at www.paycheckforlife.org.