A new bipartisan bill in Congress, known as the Retirement Simplification and Clarity Act (H.R. 6324), aims to provide 401(k) investors with more access to guaranteed income in retirement. The proposed legislation would allow employees aged 50 or older to roll over part or all of their 401(k) assets into a qualified annuity while still working.

Key Provisions of the Bill

The bill would enable workers to purchase annuities outside of their 401(k) plan, giving them more flexibility in managing their retirement savings. Currently, most people cannot move money from their 401(k) into an annuity while still enrolled in the plan, which limits their options for generating income in retirement. David Chavern, president and CEO of the American Council of Life Insurers, supports the bill, stating that it would provide workers with more choices for turning their accumulated savings into needed income.

Financial advisors, however, caution that rolling over 401(k) assets into an annuity may not be the best decision for all workers. Leaving money in a 401(k) plan can allow it to continue growing, potentially providing a larger nest egg for retirement. Certified financial planner Patrick Huey notes that converting part of a 401(k) into a predictable monthly paycheck via an income annuity can be valuable for someone without a pension who is anxious about running out of money, but it may not be the best time to do so in one’s 50s.

Guaranteed Income in Retirement

The fear of not having enough income in retirement is a prevalent concern among savers, with 66% worrying they’ll run out of money, according to BlackRock’s 2025 Read on Retirement survey. The majority (93%) of respondents said they want a guaranteed income in their golden years. Annuities can provide a way to address these concerns, as they offer a contract that promises regular payments to the holder over many years or decades in exchange for a lump sum.

Some 401(k) plans are already incorporating annuities into their lineups to help workers secure guaranteed income in retirement. The Secure Act of 2019 included a provision intended to eliminate employers’ fear of legal liability if their chosen annuity provider fails or otherwise doesn’t deliver on its promises. BlackRock is the largest provider of annuity-enhanced target-date funds, and Vanguard recently unveiled its own version.

Considering the Options

Roughly $29 billion is invested in annuity funds as of early December, which is a tiny fraction of the more than $4 trillion invested in target-date strategies, according to Morningstar. Most retirement savers who end up putting money into an annuity are still doing so after they leave their employer, not while they are employed. Huey advises that most people are better off leaving their money in a 401(k) for accumulation, but there are times when locking in a guaranteed future income might be warranted, especially for those with very low risk preferences.

Smart Tip for Readers

When considering rolling over 401(k) assets into an annuity, it’s essential to carefully evaluate your individual financial situation and goals to determine the best course of action for your retirement savings. You can find more information about the proposed bill and its potential impact on 401(k) investors Here