Senate Opens Door to New Options in Your 401(k)

The authorities spending laws which passed from the Senate on Thursday tucks at a succession of changes which will affect individuals saving for retirement or people already withdrawing cash in their accounts.

The laws paves the way for companies to include annuities to their own menu of alternatives in their own 401(k) retirement programs, allows employees to donate to an individual retirement accounts after the era of 701/2, and might allow more part-time employees to participate in retirement programs.

“Together with Americans delaying retirement and more operating part time, these modifications will allow employees to continue to conserve,” said Senator Ron Wyden, Democrat of Oregon, the standing member of the fund committee. “While we have to do more to guarantee financial security for older Americans, passing of the bill is a significant step.”

The law, a portion of the $1.4 trillion spending bargain intended to avoid a government shutdown, could also increase the age in which individuals are needed to start taking withdrawals in their I.R.A.s into 72, from 701/2.

Possibly the most critical change was that the easing of rules concerning retirement plans and annuities, which, in their simplest form, empower workers to convert their savings into a guaranteed revenue stream.

Many companies have been unwilling to include annuities inside their offerings because they feared being sued if an insurer couldn’t create the guaranteed obligations — something which could occur decades after a worker has left a company. The new law removes a number of the accountability for companies.

But consumer advocates and other financial specialists said they were worried that undesirable annuities — frequently expensive and intricate ones — might wind up among spouses’ choices, especially at smaller companies who get less complex advice or do not look past a sales pitch.

“I am encouraged by the fact that programs could give folks the opportunity for guaranteed income over the duration of their life,” explained Jeffrey Levine, director of financial planning in BluePrint Wealth Alliance, a financial advisory company in Garden City, N.Y.”But I’m worried about the wrong kinds of annuities becoming there — there’s potential for misuse. It’s sort of a sword that is pleated ”

The bill would also permit modest businesses to band together to make retirement programs for their employees, and also the bill’s supporters say would provide them access to administrative and investments agencies at a lower price. Plus it would allow individuals who set aside money for instructional prices in a 529 college savings strategy to use around $10,000 in residual income in these accounts to repay student loans — and the debt of their inheritance’ siblings.

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