Out of Step
Congress provided extraordinary leadership in recent years to address Americans’ anxieties about their retirement savings lasting.
Legislation in 2019 and 2022 made it easier for workers to access guaranteed lifetime income as part of retirement savings plans. And it was secured with overwhelming bipartisan support and signed into law by the previous and current President of the United States.
At the same time, public officials in 41 states – insurance commissioners, legislators, and governors – across the political spectrum took action to enhance consumer protections in annuity transactions. With traditional pensions unavailable to most workers, American savers are turning to annuities in record numbers.
Annuities deliver financial certainty like the pensions of old. They are unlike any other financial product. They are a legally enforceable promise made by an insurance company to provide monthly income throughout a worker’s retirement. With a mutual fund, the retiree assumes the risk. With an annuity, the risk shifts to the insurance company. Annuities let people “set it and forget it” and have certainty like retirees do with Social Security.
Today, the recent work to expand retirement security for Americans stands the risk of being undermined by a fiduciary-only regulatory proposal from the Department of Labor. The proposed package would make it harder for low- and middle-income Americans to obtain guaranteed lifetime income.
I explained how during my testimony this week at the DOL’s Employee Benefits Security Administration hearing. Fiduciaries usually require their clients to have a minimum of $100,000 to invest. This excludes most Americans as the median retirement savings in the United States in 2022 was $87,000. The median household income in the U.S. is $63,000 annually. The median household income among annuity owners is $76,000 a year.
With increasing longevity and today’s volatile and uncertain world, it’s not surprising that people want the certainty annuities provide. What is surprising is a DOL proposal that is so out of step with the reality faced by many working and middle-class Americans.
Rather than hurting Americans saving for retirement, the DOL should withdraw its latest proposal without delay.
