The new rule was proposed back in 2012, and some employers liked it enough that they started offering this option back then. Many were hesitant to start offering this option without a final ruling from the IRS. Experts said that they expect to see most employers offering it before January of 2017 when the rule officially takes effect.
According to most research, the majority of people who are offered an annuity or a lump sum will choose the lump sum. One of the biggest concerns cited by the government was that more people could wind up outliving their savings when they accept a lump sum instead of setting up monthly payments. They said that the new offering of a split distribution may help prevent this problem from spiraling out of control. Also, they said that this offering would likely help more people gain an interest in learning about and using annuities.
Experts also thought that the new rule was beneficial because it does not put pressure on people to choose one extreme or the other. They can have a lump sum upfront to cover any immediate expenses or upgrade their home, and they have a guaranteed monthly income as well to supplement other retirement savings or income. However, experts also said that employers have the responsibility of educating their employees about how beneficial annuities can be. This is especially true because of the longer average lifespan today.
For questions or concerns about your preparedness for retirement, call your HALO insurance agent today, 314-351-HALO (4256).