The legislation provides a tax incentive to encourage retirees to invest some of their individual after-tax savings in retirement vehicles, such as annuities that provide a guaranteed lifetime income.
Under the proposal, individuals would not pay federal taxes on one-half of the income (up to a maximum of $20,000 annually) generated by annuities that make lifetime payments. For a typical American in the 25 percent tax bracket, that would provide an annual tax savings of up to $5,000.
The bill's sponsors include Senators Gordon Smith, R-Ore.; Kent Conrad, D-N.D.; Olympia Snowe, R-Maine; Hillary Rodham Clinton, D-N.Y.; and Representatives Nancy Johnson, R-Conn.; John Tanner, D-Tenn.; Phil English, R-Pa.; and Stephanie Tubbs Jones, D-Ohio.
"How people are going to manage their savings so they last is increasingly concerning for a vast number of Americans, especially women because they live longer and have less access to traditional pensions," said Elisabeth Gehl, director of public policy for Business and Professional Women/USA, and a member of the Americans for Secure Retirement coalition.
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