Retirement Retirement Planning

Workers Over 50 Could Soon Turn Part of Their 401(k) Into a Lifetime Paycheck Without Quitting Their Job

A proposed bill could give workers more flexibility to buy annuities.

By Josh Koebert , Edited by Laura Hohenstein

Updated Sept. 4, 2026

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A proposed bipartisan bill in Congress might give workers more flexibility to buy annuities while they're still working, helping to keep them on track for retirement. If passed, the Retirement Simplification and Clarity Act would allow workers age 50 and older to roll over part or all of their 401(k) assets into a qualified annuity, even while they're still employed, giving them more options to turn their savings into retirement income.

The bill might be good news for workers who are nearing retirement age but who want to continue building wealth while remaining employed. Here's how it might work and what makes it possible.

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Why you may want to roll over 401(k) money into an annuity

When a worker rolls funds from a 401(k) or IRA into an annuity, they're creating a contract with an insurance company, and that company guarantees the worker a monthly payment for life. It's an option that helps eliminate the risk that comes with market volatility, providing a guaranteed stream of income. Additionally, annuity payments may be structured so that they last for a worker's entire lifetime, so there's no risk of outliving your money.

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Current 401(k)-to-annuity rollover rules

Though an annuity might seem like an ideal option, some workers might face limitations to this option. Most people aren't permitted to roll over funds to an annuity while they're still enrolled in an employer's retirement plan. Some plan sponsors may let workers roll over money beginning at age 59 ½, but the option usually isn't available for younger employees.

As a result, many employees have limited options if they want to turn their retirement savings into income.

How the Retirement Simplification and Clarity Act could change 401(k) rules

The Retirement Simplification and Clarity Act would let workers aged 50 and over roll over part or all of their employer-sponsored 401(k) accounts into annuities even while they're still working.

The bill, which was reintroduced by Representative Jimmy Panetta and Representative Darin LaHood, would also require the IRS to update the document that individuals receive when they leave an employer and request a 401(k) plan distribution. The IRS would be required to redesign the notice with "clear, straightforward language."

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How the SECURE Act expanded annuity options in 401(k) plans

The SECURE Act of 2019 changed the retirement system and helped to make this bill possible. The SECURE Act included a provision that helps eliminate an employer's fiduciary responsibility if the annuity provider they choose fails.

Some 401(k) plans are offering a standalone annuity option for employees, and other plan sponsors are taking a different approach by adopting annuity-enhanced target-date funds. If a worker chooses the target-date funds, some of their money is allocated to the future purchase of an annuity.

When the employer is far away from retirement, the funds are invested more aggressively. As the worker ages and gets closer to retirement, the funds shift to less risky investments.

Pros and cons of rolling a 401(k) into an annuity

Taking money out of a 401(k), where it could grow, and putting it into an annuity may not be a beneficial move for workers who are earlier in their career. Giving up that growth could potentially cost workers long-term, but workers who have low risk preferences might prefer the reassurance of a guaranteed payment that an annuity offers.

Annuities offer less liquidity than retirement plans; their monthly distributions are fixed. In contrast, an individual could make withdrawals from a 401(k) or IRA at any time once they've reached retirement age, giving them more flexibility in how they access their money. Since annuity payments are fixed, it's possible that the payments don't keep up with inflation, and those distributions don't have the same purchasing power as the years pass.

Annuities are complex and may be difficult to initially understand. They also come with high fees that may vary according to the type of annuity, and those fees could quickly eat into the money that a worker has saved. It's essential for an individual to fully understand the annuity and any associated fees to verify that it's the right financial choice for them.

Bottom line

The bill has been referred to the House Committee on Ways and Means, and it has not been enacted into law. For the time being, workers may face limited opportunities to roll over funds into annuities until the workers are nearing retirement age.

Annuities offer numerous benefits, but they should be used cautiously. Consider the "income floor" retirement strategy; cover your essential expenses with Social Security payments, plus a portion of your guaranteed income, such as income from annuities.

You may also want to consider converting part, not all, of your 401(k), which would allow a portion of your savings to continue growing while leaving the funds more easily accessible to help free up your retirement budget as needed.

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