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Interesting form a Newsletter I just Received on legislation for the 109th Congress, according to equity analyst Andrew Kligerman of UBS
Following a recent "field trip" to the nation's capital that included discussions with representatives of the U.S. Department of the Treasury, Senate Finance Committee, House Financial Services Committee and key lobbying groups, Kligerman said he saw only "limited" support for recent congressional proposals for lifetime savings accounts, tax deductions for long-term-care insurance, permanent abolition of the estate tax, and permanent reductions of the dividends and capital gains taxes, and doesn't expect any of them to move in 2005.
"From where I sit, there seem to be mixed signals," Kligerman said. "President Bush is coming off some recent political successes, but the polls show he is having a hard time convincing the public on this issue, and just yesterday, Sen. (Lindsey) Graham of South Carolina said focusing on private investment accounts was a strategic mistake." Under the Bush proposal -- which has yet to be introduced in either chamber of Congress but is estimated to produce transition costs of more than $2 trillion over the next decade -- younger workers would, beginning in 2009, have the option of investing as much as 4% of their salary into personal retirement accounts using funds that otherwise would have gone toward Social Security payroll taxes. Participants could choose to invest those funds into a limited menu of diversified equity funds and fixed-income funds.
Though the Social Security Administration would continue to administer the accounts, private investment companies would manage the funds under a contract with the government, with annual fees estimated to be about 0.03%. At retirement, workers would be required -- either through the federal government or on their own -- to use a portion of their account's distribution to purchase lifetime annuities.
Though the unified Democratic opposition and only soft Republican support seen for the President's Social Security package would make passage seem unlikely, Jim Morrill, Lincoln National's director of federal relations, said that given the President's commitment to the issue -- most recently evidence in an ongoing "60 stops in 60 days" tour across the United States -- he wasn't willing to rule it out.
But even without passage, the Social Security debate itself has raised awareness of both asset-planning issues generally and annuities specifically, Morrill said. "The word annuity has become better understood in Washington, and the whole concept of a paycheck for life is attractive to a lot of people who are looking at these issues," he added.
"Reform of the estate tax is more likely than repeal, but if they define reform at a 15% rate, and an exclusion of up around $5 million for individual and $10 million for a couple, that's tantamount to repeal and would cost as much as repeal," Morrill said. "We have seen numbers that indicate that if they had a 45% rate, which they're set to get in 2010 before it fully repeals, with those exclusions, that program is going to cost $300 billion. It's unlikely that they're going to find money this year to deal with a full or permanent repeal, so they're kind of throwing everything in to 2010."
Fresh interesting info. Looks like you people will be getting into Immediate Annuities with lifetime income after all. If Social Security reform goes through.
Tony
