New Bill Proposes Annuities for 401(k) Funds, Sparking Advisor Concerns

Legislation reintroduced in the House could allow workers aged 50+ to convert portions of their 401(k) savings into annuities. The Retirement Simplification and Clarity Act aims to streamline retirement planning but faces skepticism from financial professionals who warn about annuity complexity and illiquidity risks.

Current rules permit in-service rollovers of 401(k) funds to other retirement accounts tax-free. The bill seeks to expand these options while improving disclosure requirements for departing employees about their distribution choices—a known pain point in retirement planning.

"This isn't about forcing annuities on anyone," said bill co-sponsor Rep. James Panetta (D-CA). "It's about giving savers more tools and clearer information when making irreversible decisions about their life savings."

Financial advisors caution that while annuities provide guaranteed income, their high fees and surrender charges often outweigh benefits for mobile workers. The legislation remains in committee with uncertain prospects.