We believe that part of this concern stems from the fact that the traditional “three-legged stool” of retirement income – Social Security, employer-sponsored plans and personal savings – is weakening. Less than half of working Americans have any type of employer-sponsored retirement plan, on average Social Security replaces just 38 percent of pre-retirement earnings, and America’s personal savings rate is negative. In addition, Americans are living longer and spending more years in retirement, meaning they need their retirement income to last longer than ever before.

Significantly more baby boomers will be managing their own retirement savings as traditional "defined benefit" pension plans have given way to "defined contribution" plans, such as 401(k) plans, or no plans at all. As a result, fewer retirees will receive the regular monthly retirement check that many employers once paid. They'll bear the individual responsibility for managing their savings throughout retirement and ensuring that they provide themselves an adequate and steady stream of income for as long as they live. Even careful savers and planners often misjudge their own life expectancy, as well as the effects of inflation, rising healthcare costs, the adequacy of Social Security payments, and other factors relevant to a secure retirement. A recent poll by Public Opinion Strategies and the Mellman Group found that a majority of working Americans age 50-70 are more concerned with "making their savings last a lifetime" (50%) than with "saving a significant amount of money before retirement" (38%). Congress has a tradition of encouraging workers to adequately save and plan for retirement. The less Americans are prepared for retirement, the more they will need to rely on government programs in their retirement years. The poll described above also found that 59 percent of older Americans said Congress should create an incentive for people to invest their retirement.

An annuity is a flexible financial product that allows individuals to receive distributions of their retirement savings in a stream of periodic payments. A life annuity provides a steady stream of retirement income that is guaranteed to continue for the retiree’s entire life, or the joint lives of the retiree and another person, such as a spouse. This is different than periodic payments based on life expectancy, which can deteriorate over time. Only a life annuity can guarantee steady payments for as long as an individual lives. Life annuities are typically purchased with a “refund” feature of some type. For example, payments can be guaranteed to last for as long as an individual lives or at least until a minimum number of payments have been made or a minimum dollar amount has been received. In either case, the owner's beneficiaries receive any remaining value upon his or her death. "Non-qualified" life annuities can be purchased by anyone with after-tax money, i.e., they are available outside of an employer-sponsored plan or IRA. Two-thirds of nonqualified annuity owners have total household incomes of less than $75,000 per year.

Incentives are needed to ensure that all Americans have adequate savings to enjoy their golden years. Life annuities are the only investment vehicles, apart from pensions and Social Security, that provide a "paycheck for life" – a guaranteed stream of income a retiree cannot outlive. Non-qualified life annuities are retirement vehicles to which every American has access, whether they run their own small business or farm, are unemployed, or work for a Fortune 500 company.