Will there soon be a law mandating how a retiree must take money from their IRAs? Perhaps. Since 2006 some congressional members and government agencies have discussed the idea of encouraging personal 401 (k) and IRA funds be converted into lifetime annuities.
In June 2015 Dr. Mark Warshawsky, visiting scholar at Mercatus Center of George Mason published a study designed to influence government policy on individual retirement accounts (IRA). The title is Government Policy on Distribution Methods for Assets in Individual Accounts for Retirees.
“I judge the life annuity an effective instrument to produce lifetime retirement income–generally somewhat better than the commonly used withdrawal rules”
Proposes government policy be used to:
- Mandate minimum level in dollars or percentage of all qualified plans be automatically converted to life annuity payments for all qualified plans.
- Make lifetime annuity payments the default option for defined contribution plans. (401 k and IRAs)
- Mandate that retirement plan sponsors offer a life annuity option.
- Encourage retirees to take a lifetime annuity option through favorable tax treatment. For example, a portion of the annuity income payment would be free from taxation.
- Create a government-sponsored source of life annuities provided by private insurers. Similar to Healthcare.gov.