Ray Lucia: As the national debt continues to climb and reductions in social security and Medicare benefits to baby boomers seem all but inevitable, the government announced new proposal designed to make it easier for retirees to generate regular monthly income streams.
The IRS and the Treasury Department Proposal would reduce some of the current restrictions for baby boomers to take retirement benefits as annuities i.
e. fixed amounts of income as monthly or annual payments.
If enacted, one proposal would allow an option for an employee for a partial annuity rather than cashing out an accumulated pension entirely at retirement, part of that account could be annuitized to provide guaranteed regular payments rather than wanting the risk of totally depleting the lump sum.
Although annuities have come under some scrutiny lately and can be very complex contracts, the consensus among finance professor is that pensionizing at least a portion of your retirement savings can be greatly beneficial.
According to the research firm Ibbotson Associates, taking 50% of your retirement savings and allocating it to a life annuity can greatly enhance your degree of certainty for providing at lest 30 years of inflation adjusted retirement income.
So here is the bottom line, as government entitlements are very likely to be slashed as baby boomers get older, the burden of finding regular retirement income streams will shift the individual, creating a greater degree of self sufficiency.
By annuitizing at least some of your retirement savings with a less restrictive annuity policy, could protect millions of baby boomers in the future.