One more Giant Step Towards the forced Ownership of Treasuries in your Retirement Plan
The Treasury is set to issue its Lifetime Income Guidance and the Department of Labor will follow shortly. It is no secret most investors chose a lump sum option when the separate service or retire from a company taking their retirement plan as an IRA Rollover or as a distribution.
Can you blame them? For the first time they have the ability to get away from a company sponsored plan with exorbitant fees, bad investments and artificial restrictions. They finally get to self-direct their own account and who can blame them.
But that is all about to change if the government has its way. J. Mark Iwry, senior advisor to the secretary and deputy assistant secretary for retirement and health policy at Treasury, announced new guidance is coming from the Treasury and the DOL on "Lifetime Income Options". (Also known as lifetime annuitization)
I wrote about the new focus on lifetime income previously but here is a short recap. You are going to be encouraged, (at least initially), to not take your money out of the company retirement plan. Instead they want you to convert the balance into a stream of income that will be paid to you over your remaining lifespan. An easy rule of thumb is a male age 65 has a 20 year life expectancy meaning the balance of the account will be paid in equal installments over 20 years.
The proposals I have seen indicate this income stream would be funded with government bonds. 100% of your retirement plan balance would be invested in government bonds with 100% exposure to the dollar.
This is a fantastic plan for the government for a number of reasons. It gives them control of your assets, helps fund the deficit and gives them a controllable revenue stream through the taxes on your annuitized distributions.
The guidance is expected shortly, which will begin as an effort to get more retirees to chose this option. My belief and the belief of others is, if given their way the government will eventually require this option and no longer allow you to convert your plan into a self-directed account. It has already been stated publicly "they" believe "they" know what is best for you and believe this option should be mandatory.
