As the initial wave of 76 million Baby Boomers reaches its official retirement age of 66 next year, how many will be prepared to start converting a nest egg into a steady stream of income for life?

According to a recent survey by Principal Financial Group Inc., only 14 percent of respondents said they’ve developed such a plan.

That generation – born between 1945 and 1964 – can expect to live much longer in retirement than their parents did, but have fewer employer pensions available to them and are increasingly responsible for planning for their own financial security in retirement.

“Of all the challenges facing this generation and the next, few are as daunting as the risk of outliving their savings,” said Greg Burrows, senior vice president of retirement and investor services with Principal, based in Des Moines.

However, concerns about fiduciary liability based on information provided to workers has caused many plan sponsors to shy away from educating employees about their options.

The U.S. Department of Labor and Department of the Treasury are gathering information that is expected to lead to regulatory changes aimed at improving access to retirement benefit options for workers. Burrows provided testimony last week in Washington, D.C., during a two-day hearing conducted by the Labor Department’s Employee Benefits Security Administration (EBSA).

“I think the general goal as they look at the retirement savings system for individuals is to focus on how to make savings last in retirement, and the role that income annuities in particular could play in helping people sustain income levels on a consistent basis during retirement,” Burrows said.

Principal advises defined contribution plan sponsors across the country, and currently holds about $8 billion in income annuity assets on behalf of group benefit plans. Income annuities are contracts in which an insurance company agrees to make regular payments to an individual in exchange for a lump-sum payment.

Speaking on behalf of the Financial Services Roundtable, which represents 100 of the largest financial services companies, Burrows said last week that EBSA needs to remove some hurdles that have kept retirement plan sponsors from providing more education to employees about lifetime income options.

“The way the regulations are drafted today, the plan sponsors bear the responsibility to evaluate the insurance company’s ability to actually provide the income stream into the future, in perpetuity,” he said. “That’s a very onerous responsibility.”

Plan sponsors should have responsibility for evaluating the soundness of the insurer and the product at the point when they make them available, Burrows said, However, they should not be held liable for individual participants’ choices and the outcomes of those choices years down the road, he said.

The percentage of employers offering income annuities as a distribution option has declined significantly. According to a 2009 survey by the Profit Sharing/401K Council of America (PCSA), 19 percent of plans offered an annuity distribution option last year, compared with 34 percent in 2000.

“In general, because participant interest is so low, defined contribution plan sponsors increasingly see no reason to accept the additional fiduciary exposure that comes with an in-plan annuity option,” the PCSA said in testimony to the committee.

Burrows said that despite those figures, as many as 75 percent of Principal’s retirement plan sponsors offer an income annuity option.

“We believe, and many in the industry believe, that there is a very important role for income annuities for people to have as part of a product portfolio, once they understand their particular needs at the point of retirement,” he said. “I think there’s a definite awareness of the role income annuities can play, and there is a need for us as an industry to make those more consistently available.”