Proposed Legislation Could Allow Older Workers to Buy Annuities With 401(k) Funds. But Should They?

Group 1 - Proposed legislation, the Retirement Simplification and Clarity Act, aims to allow workers aged 50 and older to roll over some or all of their 401(k) savings into an annuity, providing more investment options for older workers [1] - The bill seeks to simplify the rollover information provided to workers leaving a job, addressing the complexity and confusion surrounding distribution options [1] - Financial advisors caution that while annuities can provide guaranteed income, they are often complex, costly, and illiquid, making them potentially unsuitable for younger individuals or those needing quick access to funds [1] Group 2 - The bill would enable retirement plan sponsors to offer the option for older workers to convert part of their 401(k) savings into an individual retirement annuity, enhancing retirement security [1] - A Government Accountability Office report indicated that 80% of eligible 401(k) participants were unaware of their distribution options, highlighting the need for clearer communication regarding rollover choices [1] - Experts suggest that while annuities can create a reliable income stream, they should only constitute a portion of an individual's portfolio, with recommendations of around one-third allocated to annuities [1]