Retirement Funds

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Some might feel that the practice of continuing to feed tax-deferred retirement funds such as 401(k) plans in an economy where taxes are expected to rise is a bit like buying tickets on a ship that has already sailed and then hoping they can pay extra to rent a paddle boat to try to catch up. We should take note of recent government action that is designed to charm the masses of people who are concerned about dwindling balances in retirement funds and worried about the likelihood of having enough money available to make retirement possible.

Allowing annuities as a choice in retirement fund options is not new, but recent regulations make the process of aligning annuities as a portion of the retirement investment package a more transparent option, giving investors the ability to keep their money in the tax-deferred funds while segregating a portion of the investment into a fixed income annuity. The process is not cut-and-dry, as there are complicated rules determining at what age an annuity payment would begin, what portion of the fund could be allocated in this direction, how the provider can insure against a poor economy, and what would be the appropriate cost for this option. I believe anything that encourages saving is a positive move. Whether this is a viable alternative remains to be seen, but choice is good and annuities provide a security blanket that few other investments can offer.


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