How To Convert 401(k) Plans Into An Income Stream

Updated on

Many retirement security experts agree that a big drawback of 401(k)s is that they do not help participants turn their assets into a predictable income stream intended to last an entire lifetime. I have Pamela Yellen, financial security expert and New York Times best-selling author, to discuss a better way to save for retirement and:

Get The Full Warren Buffett Series in PDF

Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q1 2021 hedge fund letters, conferences and more

How to Convert 401(k) Plans Into an Income Stream You Can't Outlive

The growth in 401(k) plans is unpredictable, and creating a bullet-proof retirement fund distribution plan is not as simple as following some arbitrary withdrawal rate rule. Other drawbacks of 401(k) plans include:

  • Most 401(k) plans have very low limits on how much money people can borrow from them and very strict limits on when and how it must be repaid without triggering penalties and taxes.
  • The employee match is not guaranteed – almost 46,000 businesses halted contributions to their employees’ plans last year.
  • Most employers now automatically put their employees’ 401(k) investments into Target Date Funds, many of which charge high administrative fees.
  • There’s no way to ensure a major market crash doesn’t cut the value of your 401(k) in half when you don’t have time to recover from it.

Pamela shares how people can ensure a guaranteed lifetime income by doing a tax-free rollover of funds from a 401(k) into an IRA Annuity, and redirect future 401(k) contributions to enjoy multiple benefits and tax advantages.

“Since none of us knows when we’ll die, this little-known, powerful retirement planning solution lets you live out the rest of your life without the stress or worry that you’ll run out of money before you run out of life,” she says.

About the Author:

Pamela Yellen is founder of Bank On Yourself, a financial investigator and the author of two New York Times best-selling books. Readers can get a free copy of her latest book, "Rescue Your Retirement: Five Wealth-Killing Traps of 401(k)s, IRAs and Roth Plans — and How to Avoid Them" here for a limited time.