How 401(k)s Are Becoming the New Pension: Understanding In-Plan Retirement Income Solutions in 2026
For decades, retirees relied on a three-legged stool of retirement security: Social Security, personal savings, and a pension. Today, most private-sector workers no longer have access to traditional pensions, leaving them largely dependent on 401(k) plans and individual retirement savings.
While 401(k) plans have been effective tools for accumulating retirement assets, they have traditionally lacked one key feature that pensions provided: guaranteed lifetime income.
That may be beginning to change.
New legislation, evolving retirement plan designs, and growing concerns about retirement income security are leading employers and plan providers to introduce innovative "in-plan income solutions" directly within workplace retirement plans. These options are designed to help workers transform their retirement savings into predictable retirement paychecks.
Some industry observers are even calling this movement the return of the pension—inside the 401(k).
But what exactly are these new options? How do they work? And should retirees embrace them?
Let's take a closer look.
Why Retirement Income Has Become Such a Major Concern
Most workers spend decades focused on one goal: accumulating assets.
They contribute to their 401(k), receive employer matching contributions, invest in mutual funds, and watch their balances grow over time.
However, retirement introduces an entirely different challenge.
The question changes from:
"How do I grow my money?"
to:
"How do I make this money last for the rest of my life?"
This transition from accumulation to income planning creates several significant concerns:
- Market volatility during retirement
- Sequence of returns risk
- Inflation reducing purchasing power
- The possibility of outliving savings
- Uncertainty about sustainable withdrawal rates
For many retirees, these risks create substantial stress.
Traditional pensions largely solved this problem by providing a monthly income stream for life. Once retirees started receiving pension payments, they generally didn't need to worry about stock market fluctuations affecting their monthly paycheck.
Unfortunately, most private employers have moved away from pension plans, replacing them with defined contribution plans such as 401(k)s.
The result is that retirees now bear much of the responsibility for creating their own retirement income strategy.
The Growing Demand for Pension-Like Income
Research consistently shows that retirees value predictable income.
Many people feel more comfortable receiving a monthly paycheck than managing a large investment account and deciding how much to withdraw each year.
This preference isn't surprising.
Throughout their working careers, most individuals budget around a predictable paycheck. Continuing that structure into retirement often provides confidence and peace of mind.
As retirees increasingly seek reliable income streams, retirement plan providers have begun exploring ways to incorporate pension-like features directly into workplace retirement plans.
How the SECURE Act Changed the Retirement Landscape
A major catalyst behind these developments is the SECURE Act and SECURE Act 2.0 legislation.
One of the barriers preventing employers from offering lifetime income products inside 401(k) plans was fiduciary liability.
Historically, employers worried about selecting income providers that could later face financial difficulties or generate participant complaints.
Since employers serve as fiduciaries for workplace retirement plans, many chose to avoid these products altogether.
The SECURE legislation created fiduciary safe harbor provisions that reduced employer liability when selecting qualified annuity providers and lifetime income solutions.
As a result, employers now have greater confidence incorporating retirement income options into their plans.
This legal and regulatory shift has opened the door to a new generation of retirement income products.
What Are In-Plan Retirement Income Solutions?
In-plan retirement income solutions are features built directly into a workplace retirement plan that help convert retirement savings into ongoing income.
Rather than rolling assets out of a 401(k) and finding outside income solutions after retirement, participants may be able to create income directly within the plan itself.
Several approaches are currently emerging.
Option #1: In-Plan Annuities
The most talked-about development is the introduction of annuities within 401(k) plans.
An annuity is an insurance-based product that can provide guaranteed lifetime income.
Historically, individuals who wanted this type of income typically had to:
- Leave their employer.
- Roll their 401(k) into an IRA.
- Work with an advisor or insurance professional.
- Select an annuity product separately.
Now, some plans allow participants to purchase annuity income directly within the 401(k).
This potentially simplifies the process and creates easier access to guaranteed income options.
For retirees who value predictable monthly cash flow, this may be an attractive alternative to managing withdrawals independently.
However, participants should understand that not all annuities are identical.
Important considerations include:
- Income guarantees
- Fees and expenses
- Liquidity restrictions
- Inflation protection features
- Insurance company financial strength
As with any retirement strategy, careful evaluation remains essential.
Option #2: Target Date Funds with Built-In Income
Another emerging innovation combines target date funds with lifetime income features.
Many workers are already familiar with target date funds.
These funds automatically adjust investment allocations as retirement approaches. Generally, they reduce stock exposure and increase bond exposure over time in an effort to lower portfolio risk.
New versions of these funds take the concept one step further.
As participants near retirement, portions of their assets may automatically be directed toward guaranteed income structures, such as fixed annuities.
The goal is to create a seamless transition from:
- Accumulation during working years
- Income generation during retirement
This approach appeals to individuals who prefer a "set it and forget it" strategy.
Rather than making complex decisions at retirement, the process becomes increasingly automated.
Although adoption remains relatively limited today, many industry experts expect these products to become more common over the next several years.
Option #3: Systematic Withdrawal Programs
Not all retirement income solutions involve guarantees.
Many 401(k) plans now offer systematic withdrawal programs.
Under these arrangements, participants can establish recurring monthly distributions directly from their retirement accounts.
For example, a retiree might request:
- $1,500 per month
- $2,000 per month
- Another customized amount
The plan administrator then distributes that amount automatically.
This creates the convenience of a paycheck without requiring an IRA rollover.
However, participants must remember that the underlying investments remain subject to market fluctuations.
Unlike guaranteed income solutions, systematic withdrawals do not eliminate longevity risk or sequence-of-returns risk.
If markets perform poorly and withdrawals continue, assets can be depleted more quickly than anticipated.
The Potential Advantages of In-Plan Income Solutions
These innovations may offer several meaningful benefits.
1. Simplicity
Many retirees prefer streamlined financial decisions.
Keeping assets within an existing retirement plan may reduce complexity and paperwork.
2. Income Predictability
Lifetime income options can help create a dependable retirement paycheck.
This predictability often improves confidence and reduces financial anxiety.
3. Reduced Behavioral Risk
Some retirees struggle with managing investments during market downturns.
Guaranteed income solutions may reduce emotional decision-making.
4. Easier Access to Pension-Like Benefits
Workers without traditional pensions may finally have access to retirement income structures that resemble pension payments.
The Potential Drawbacks to Consider
While these solutions may be appealing, they are not perfect.
Investors should carefully evaluate the tradeoffs.
Fees
Income guarantees are not free.
Products that provide lifetime income often involve additional costs beyond basic index funds.
Understanding the total cost structure is critical.
Reduced Flexibility
Some income products restrict access to principal or limit future changes.
Retirees should understand surrender provisions and withdrawal rules before committing.
Limited Provider Choices
When income solutions are offered inside a 401(k), participants may be limited to providers selected by the employer.
This could reduce comparison-shopping opportunities.
Product Complexity
Some retirement income products are sophisticated financial instruments.
Investors should fully understand how guarantees work, what risks remain, and how income is calculated.
A Practical Retirement Income Strategy
For many retirees, the most effective strategy may not involve choosing between guaranteed income and market investments.
Instead, a balanced approach can often provide the best of both worlds.
Many retirement professionals use the concept of an income floor.
This involves covering essential living expenses through predictable income sources such as:
- Social Security benefits
- Pension income
- Guaranteed annuity income
Once core expenses are covered, remaining assets can remain invested for growth, discretionary spending, legacy planning, and inflation protection.
This framework can provide both stability and flexibility.
Will 401(k)s Eventually Replace Traditional Pensions?
Probably not entirely.
Traditional pensions and modern 401(k) plans operate very differently.
However, retirement plans are clearly evolving.
The line between pension plans and defined contribution plans is becoming less distinct.
As employers adopt more income-oriented features, workers may gain access to retirement tools that previous generations associated exclusively with pensions.
Whether these new options ultimately become mainstream remains to be seen.
Adoption will likely depend on:
- Employer participation
- Product performance
- Cost competitiveness
- Employee demand
- Regulatory developments
What is clear is that retirement income planning is becoming a larger focus within workplace retirement plans.
Final Thoughts
The evolution of 401(k) plans represents one of the most significant retirement planning developments in years.
For workers approaching retirement, the ability to generate pension-like income directly within a workplace retirement plan could provide valuable flexibility and peace of mind.
However, every retirement income solution comes with tradeoffs.
Before selecting an in-plan annuity, hybrid target date fund, or systematic withdrawal strategy, it is important to understand the fees, guarantees, limitations, and alternatives available.
Retirement planning isn't simply about accumulating wealth. It's about converting that wealth into sustainable income that supports the lifestyle you want throughout retirement.
As new 401(k) income options continue to emerge, retirees may have more choices than ever before to build a reliable and confident retirement future.
Frequently Asked Questions About 401(k) Income Solutions
Can a 401(k) provide lifetime income?
Yes. Some modern 401(k) plans now offer annuity-based income solutions that can provide guaranteed lifetime income directly within the retirement plan.
What is an in-plan annuity?
An in-plan annuity is an annuity product offered inside a workplace retirement plan that allows participants to convert a portion of their retirement savings into guaranteed income.
Are 401(k) income solutions guaranteed?
Some are. Annuity-based solutions may provide guarantees backed by an insurance company, while systematic withdrawal programs do not provide guarantees and remain subject to market risk.
What is a target date fund with built-in income?
It is a retirement investment option that automatically adjusts risk over time and may incorporate guaranteed income features as retirement approaches.
Should I use an income solution inside my 401(k)?
The answer depends on your goals, risk tolerance, retirement income needs, fees, and available alternatives. A comprehensive retirement income analysis can help determine the best approach.
Do I still need financial advice if my 401(k) offers retirement income options?
In many cases, yes. Understanding fees, guarantees, tax implications, withdrawal strategies, and overall retirement planning remains important even when income solutions are available within the plan.
Daniel Wendol
Item #1
00:00:01
Imagine a world where you’re working and you’re earning and you’re saving in your 401k and then it magically turns into a pension like your grandparents had or even your parents. And it takes all the stress of retiring out of the picture because you have now have a lifetime income from a pension. All through your 401k. That’s what we’re going to talk about today, the rise of in-plan income solutions from your 401k. It’s going to be magical. Speaking of being magical, let me bring in my
00:00:37
co-host, Tony Shore, the magician. Thanks for joining me, Tony. We’re talking about 401ks becoming the personal pension starting in 2026 because they’re offering in-plan solutions now to turn your savings into paychecks that you can outlive. What do you think? Well, I think it’s going to be it is going to be magical. >> [music] >> Ah, yes, magical. Well, I think it’s an interesting um theory and I think people, since the pension has gone away, unless you’re a government employee, uh
00:01:16
pensions are pretty much gone and I would rather have a pension, but then uh the company funded the pensions. Uh it’s still employee funded. So, I I’d still prefer a pension because uh I think the company contributed more, but if you get a good match, you’re at a good company and they can turn it into an income stream. Aren’t people going to be going, “Dan Wendel, who? Dolphin, what? Why would I >> Yes, there may be resistance from people in my industry that are retired. Sure, there will be uh
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because that’s the crux of the biscuit, as uh Frank Zappa would say. That’s the crux of the biscuit. Uh is income planning. People are retiring with a lump sum. How do they know it’s enough to last? How do they know when it’s enough to last? How do they know how much they can pull out each month? How does that work? So, they the paranoia is running out of income in retirement, but I have a lot of questions about this. I mean, is this like an income rider on an insurance policy? So, your 401k has an income
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rider that you can choose or not choose? How does that work? Slow down Slow your roll, Tony. I’ll answer them all. I want to talk about what the in-plan solutions are. And why they’re new now. Why is it now that I’m bringing this up? What’s changed? But you know, what happens is people do save in their 401k, they get their match and then they go from accumulation to decumulation or income. And they’re hoping that’ll last and there’s a few problems with that, Tony, as we’ve talked about on countless
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shows. You have to worry about market volatility. Are you going to get hit with sequence of returns risk? Oh, I just retired and as soon as I retire, the market crashes and now I’m pulling out of my 401k as it’s going down, double whammy. Or inflation. Uh I’m going to not have enough. I’m pulling you know, 2,000 a month from my 401k but that’s not going to be worth that much 10 years from now, 20 years from now. And then there’s always this fear of outliving your money.
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And so there’s those things have not gone away but the 401k has created some new features in it or not new. They’re offering some things that they didn’t in the past and I want to talk about what those are. But the thing is, Tony, what I first want to do is explain >> are new. I mean, aren’t they new really because they haven’t offered these before, have they? Ah, are they new? Well, why would they even bother with this, by the way? And I want to start with uh with this.
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Let’s hear today’s secret to retirement success. The secret The secret is having an income stream makes life so much easier and less stressful in retirement. Yes. But a 401k doesn’t offer that. Until now. Guaranteed income is what everybody wants. But they don’t want to do it and the 401k doesn’t offer that. If you want to do it in the past, you’d have to take your money out of a 401k, move it into an IRA and then figure out how to create your own income stream. But now they’re
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offering new and I don’t say I’ll say new. The 401ks are offering some different things here and I want to go through these with you, kind of explain them. But before I do, I want to explain why. Why is this happening now? And it all has to do with the Secure Act. Oh, really? >> Yes. Secure Act, you know that one. 2.0. >> on that. We just did a show on the last show on how you could take uh withdrawals from a 401k without penalty before 59 and a half to buy long-term care. You remember that show? I’ll put
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it up here if you didn’t if you missed it. And then you attacked the HR department for saying that [laughter] they typically don’t know what’s going on and they were going to mess it up. They absolutely do not. Yeah. And one of the reasons why these plan options weren’t available in a 401k in the past is because they were just weren’t available because people didn’t want to be bothered with the liability. And what the Secure Act does, because a 401k is a is a safe harbor plan, meaning
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>> Sure. there are rules and regulations on there. So, when you add an option to a 401k plan, the employer is at risk. The employer itself that says, “Hey, this is an option in the 401k.” If the employees get beat up by that option or something goes wrong, the employer is on the hook cuz they’re the one choosing what is available in the 401k. So, what they’ve done is avoided it. They’ve said, “I’m not entering adding a lifetime income situation in there.
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Those are complex and what if it goes wrong? We’re going to get sued by our employees.” So, they just said, “You know what? Forget it.” Secure Act reduced the liability. They said, “You know what? The fiduciaries uh which are the employer in this case of 401k we’re going to allow some more flexibility, less liability on you if you start offering these plans.” Interesting. >> So, that’s why we’re seeing it now. It was all about legal. Really. And um there’s going to be resistance
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from retirement plan and planners and there’s going to be major competition for uh insurance companies saying, “Ah, we have the solution. Put ours in your 401k.” But competition’s good cuz it helps the end user. So, anyway, here are the options that are going to you’re going to be seeing more and more of. You’re going to see in-plan annuities cuz that’s what annuities are, Tony, lifetime income streams. You’re buying an annuity and so right now, if you want to get an annuity or in
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the past, you had to take your money out of the IRA 401k, put it in an IRA and then find an annuity company. And there are hundreds of insurance agents that have the best solution for you. They’re going to be [clears throat] the ones out there offering this. >> and financial advisors. That’s a big part of what they do is uh sell or offer people annuities as one of the tools. They have an investment side, they have an insurance side and they do both. Uh and even the companies who say, “We
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would never sell you an annuity.” Uh that’s their they advertise like that, but that’s their investment side. That they have two separate entities. And sure, their investment side can say we never, but oh, all of a sudden over here, Smith uh insurance company, not Smith investments, but Smith insurance company does. So, Right. And I’m up front about that. We did a show where I think it was called I sold my mother-in-law an annuity. Right. >> And I didn’t go to hell, right? Um so,
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Because you believed it was the best thing for her in her situation based on her situation. Sometimes and I I would rather work with somebody who looks at all the tools in the toolbox rather than just one. I think that’s the mistake. Too many people do things siloed. I it’s a little off track, but it really relates to this because right now, you hear an investment person uh or a broker will tell you got to put everything in the market and then you’ll be fine in retirement if you just
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withdraw 4% a year. Uh an insurance only person is going to try to sell you something insurance related. So, he’s going to try to sell you an annuity, he or she. They will try to sell you an annuity. Um and one the investment broker says, “Well, I only take a fee. I only do well if you do well, but over here, those guys take commissions.” And so, uh they try to paint each other as bad, uh but they’re both equally necessary. We need insurance. You can’t drive a car without insurance. You should. Uh
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and you should ensure You have to ensure your home and I want to ensure my retirement income. So, um there are certain instances where it’s the best case scenario, but that’s why I’d rather work with an overall financial services professional who has everything. Uh they work with tax professionals. They may have tax professionals in their office. They work with estate planning attorneys. They work with insurance. They work with uh investment firms, right? Right. And in in the past, you had to go
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find that person such as myself and you kind of map it out. Yeah. is happening now is the 401k companies are adding this to it, so it’s an option. And I don’t know if it’s going to be the best option. I don’t know which companies and are you going to be able to shop? Probably not. You’re going to say, “Here’s the annuity option in your 401k. Take it or leave it.” But that’s better than to not having it as an option. In the past, like you said, it’s all got to be in the market. Bond
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market, stock market. There was no There was no pension option for a lot of comp- for a lot of these. >> Right. So, in-plan annuities are finding some traction in there. Not a lot. Not many. What is happening though is a lot of people, I’m going to skip to that third one, systematic withdrawal plans do exist. I think it’s about half of 401ks offer this. And what that is, Tony, it’s just like your 401k. You have your money in there and it’s in the market going up and down.
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And they say the administrator on these 401ks will say “We’re going to How much money do you need?” “I want 2,000 a month.” Okay, “We’re going to send you a check from your 401k for 2,000 a month.” >> [snorts] >> And you say, “Oh, well, that’s easy.” And you just live off of that. The problem with that is that your assets are still in the in the funds that you choose going up and down. So, there’s no guarantee. But it just makes it easy for
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you to get a income stream from a 401k without having to move it into an IRA. Cuz a lot of times 401k administrators be like, “No, we’re not doing systematic withdrawals here. It’s all or nothing, right?” And so, they’re allowing you to do that now. But there’s still some risk on the back end that you’ll run out. So, it’s not it’s not like a guaranteed lifetime income rider, right? But it allows you to have income stream. So, you This is a case where you could say,
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“Give me the 4% rule. I’m going to calculate it and say, all right, I’m going to take, you know, 2 grand a month because that represents 4 grand uh 4% of my overall portfolio. I should be fine. I should be fine.” And then maybe you will be. And I think you probably will. But it also depends on what you’re invested in. But now But there’s still risk. >> on the annuity side. So, if the 401k is saying, “Well, you could do that or you could buy an annuity and you have a
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guaranteed Now, you’re not going to get 2,000 a month, but you’ll get 1,500, but it’s guaranteed with this insurance company. Now, people will say, “Oh, well, let me think about that.” On top of that, Tony, is the second one I want to talk about, which is the hybrid target date funds with built-in income. You’ve heard of target date funds, right? >> [snorts] >> And we’ve done shows on target date funds. We have. We have. And I thought when you said, “Tony, we’re going to do
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a show on target dates,” uh I thought you were talking about taking a date, asking someone out, and then the whole date was just going to Target and shopping or walking around. But I turns out I was way off on that. There’s actually >> Yeah, a financial term, target date funds. And I think, you know, my wife and I initially, when we worked with a financial advisor, that’s what that’s what they did for us because we are ways out. Uh they said, “Let’s start this way.” So, target date funds mean
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uh we’re going to move less out of risk when you hit a certain date based on your age. Is that right? Right. So, you might say, “Uh I’m going to retire at 60. And I’m going to That’s going to be in the year 2045, as an example. So, you buy the 204- 2045 target date fund. And what that does is it automatically, without you having to think about it, moves your assets from stocks to bonds as you get closer to that target date when you’re supposed to retire, thereby reducing risk,
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you know, ostensibly reducing risk by buying bonds versus stocks. Yeah. What they’re offering now is target date funds that not only do that, but as you retire, the money stays in the 401k and you start getting a lifetime income built into it through the purchase of a fixed annuity. Hm. So, your target date fund, you set it and forget it. It reduces risk as you get older and then it starts taking money out, automatically putting into an fixed annuity that spits out a lifetime income stream for you without you having
00:14:05
to do anything. It’s all built into the product. So, it kind of automates this whole switch from growth to pension Yeah. within But is it really lifetime? It’s not a guaranteed lifetime if it’s part of through this 401k, right? Well, it is. And that’s the thing. Part of it’s going to be lifetime because it’s built on an annuity chassis. You’re actually owning an annuity, which gives you the guaranteed rate, >> Sure. right? So, it’ll be a fixed annuity and say, “Well, well, maybe it’s
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5% as an example.” And then so, but it’s not taking all your income and buying it. It’s taking a portion of it. And so, there’s not many out there on this. You you’ll see Nuveen, you’ll see TIAA. Those are the big ones that are propping up. I think we’re probably at 10, 20% of Uh I think I think I read somewhere that about a thousand employers are offering this now, which was far This was not an option ever. But the Out of the tens of thousands of possible employers.
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>> Right. Right. But this is But again, this is all new because of the Secure Act, people are dipping in. So, hopefully it’ll >> Act or the second? So, I think it’s a 2.0. I think it is 2.0, yeah. Yeah, but it’s still early in this phase. So, this isn’t available to many people, but I think it’s going to be. Hm. And then uh as you start seeing more and more people jump into this, you’ll see more other companies saying, “Oh, I want a piece of that. Let me offer my
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hybrid target date fund with built-in income.” And so, more and more companies will start adding more and more options. >> Just like the Roth 401k option. Just like because used to be 401ks were uh tax-deferred accounts. There was no other option. Then they changed the laws and it hasn’t been that many years ago where you could offer a 401k. Well, or a Roth 401k. Well, not every company did that. There are still companies that aren’t offering Roth, but most of them now do because it’s a popular
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uh Right. And with that with that, they changed the law where any excess contribution above the limit has to go into a Roth. So, now companies have to have a Roth 401k option Yes. >> in order to compensate the employees. So, this is brand new, not brand new. This is very new though. And it’s starting out. There’s a couple of companies offering it. I haven’t analyzed them yet. I want to see what they offer Sure. >> cuz none of my employees have uh that are None of my clients that are still
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working have been approached with this option yet. >> But it’ll happen. You’re going to You’re going to get clients and people you work with that have this option and you’ll be able to look at, “Okay, what can this do?” Uh and really be able to study it once you’re able to study the contracts, the what they offer, uh things like that because it is relatively new. I mean, people say, “Well, new, the 2.0.” Well, a lot of it’s just taking effect. Companies are
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just adopting. Really 2026, I’m hearing more about Secure Act 2.0 this year than I did the year it came out, which has been a couple years. So, Yeah. Yeah, because it’s taking a while to adopt the new I mean, cuz think about it. If you’re a 401k administrator, you’re a company, you know you’re going to be on the hook if something happens that bad. So, you’re going to really do your due diligence on who is allowed into the plan. And you might drag your feet. You might drag your feet on change. Uh most
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like, you know, I’ll throw HR departments under the bus again is uh they’re not eager to adapt change cuz it’s a lot of work for them. I mean, anytime you change your benefit structure or anything like that, uh it’s a lot of work. There’s probably a lot of paperwork. It’s going to take time. And we all know big companies and the government, they don’t turn on a dime. You know what I mean? It takes a while. It’s like turning one of those gigantic freighters. Uh they’re not going to be able to turn
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on a dime. So, what happens is uh I think it’s going to And what we always see, what I’ve noticed about some of the other Secure Act um and One Big Beautiful Bill things, they clarify. They clarify, but really they’re changing. They realize, “Oh, this law or this change was written this way, but that’s not working. We need to make a change.” Like you said, like the Roth thing. They changed They changed things to make it more adaptable or they changed the law that made it necessary.
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So, now all of a sudden And I think we’ll see the same thing happen with this, right? Yeah. And you’ll see the big companies, the big names start using it. Other people will be like, “Well, you know, I haven’t done the due diligence, but if company XYZ is doing it, you know, maybe it’s safe for me to offer it to my employees.” And then you’ll it’ll take a little bit of a snowball effect to get it out there. But eventually it will You have to watch out though. There’re going
00:19:01
to be higher fees than the just a plain index fund. The target date funds have higher fees because it’s doing some changing. It’s active. It’s moving. And I bet you there’s going to be an additional fee because of the you’re adding this annuity portion to it. And once you start that income, I’m sure there’s going to be a lot less flexibility. You’re not going to be like, “Oh, never mind. I’m going to pull out.” Cuz the annuity companies are
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going to be like, “Well, we have a guarantee here. We need to get compensated for being on the hook to pay these people out.” Um so, there’s going to be some tricky parts to this. So, it’s not like, “Yeah, it’s going to work for everyone.” So, you got to do the You got to do your homework again. I think the sweet spot though, Tony, is if you can get 20 to 40% of your 401k in an income situation that creates a floor, you add your social security on top of that, you have
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your lifetime income floor, a good base. Yeah. And then you might have a little bit more flexibility on the rest of your money to invest it and kind of do some things with it. So I’m thinking that this might be a good option, especially for people that don’t have a financial person there that hey, this 401k is offering this. I feel a lot better. I wish I had a pension like my dad did. I don’t work for the government. So maybe I should take this pension like 401k option, but just be careful with it. You know,
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you don’t want to put all your eggs in one basket. Yeah. >> So we’ll see. We’ll see where this goes. I expect a lot of people are going to see this as an option. You know, a lot of people like the idea of income. They like the idea of a pension, but then when you say, well, it involves an annuity, then they run. They run away and they’re like, yeah, never mind. Never mind. Run away. Suze Orman told me to Suze Orman told me to run away. Right. And so maybe by a 401k calling it
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a hybrid target date fund with built-in income, Yeah. They don’t hear the word annuity. They might be like, oh, that sounds great. I love it. >> What’s funny is those pension plans are annuities. I mean, most pension plans Well, social security is correct. Well, You’re paying in and you’re getting a monthly payment back. That’s the very definition of annuity. And we’ve done shows on annuities, but the reason you hear Suze Orman or other people I won’t name names
00:21:22
poopoo annuities and the reason that bad taste I think is because of things like variable annuities where there’s still risk, you’re still there’s still risk and the and the fees are really high. Well, my question is, can I check that box on my 401k annuity or 401k pension payment plan and is there an additional fee to have that? What are the fees and where do they come in? Because there’s always fees whether they’re hidden or baked in. People don’t realize. Oh, you know,
00:21:54
people say you can go to a person some people who call themselves financial planners and say, I got this. We got a fixed index annuity here. There’s zero fees. Well, somebody’s paying something somewhere. >> [snorts] >> They’re baked in or I’m not making a you know, there’s no commission. It’s all baked in to what you’re paying. I mean, there’s a price for an annuity and there’s going to be a price for the ones that are in the 401k. You’re
00:22:19
just not going to really know it. And so what you got to do, the question is do you go into this? Do you go with a systematic withdrawal plan at the 401k? Do you buy an annuity within your 401k? Do you buy this new target date fund with a hybrid? You got to do the math. You So you still need to talk to someone, but if you talk to someone they say, oh, no, don’t do it. Terrible, terrible. And or you’ll I have a feeling there’ll be people out there that are saying these are the worst things ever to come out.
00:22:46
But if you come to me, I’ll give you a better one. Maybe. But maybe the one in the 401k is a better option. Sure. Don’t throw it out. So I think there’ll be a lot of resistance from people that are losing business or they think they’re losing business because they’re product pusher as opposed to solving a problem. If I can solve my client’s problem using a tool within their 401k, shouldn’t I be doing that? Isn’t it Isn’t that my fiduciary responsibility to say, yeah, you should keep it there.
00:23:17
The fees are lower and there’s less drama. At the same time I should be able to say, well, maybe you should consider doing this cuz it’s better or different. I shouldn’t just say throw this out with the baby with the bathwater. I think what a lot of people will do. I think a lot of people are going to throw this out. The financial people are going to say this is terrible. I got a feeling. But we don’t know. We’ll see cuz maybe it will be terrible. I haven’t seen these products in go through. This is
00:23:43
the first iteration. So we’ll see. So real question is whether to do it, depends. I don’t know the answer yet, but if you have the option within your 401k, bring it to your financial advisor. You could send it call me or email me and I’ll take a look at it for you and say, here’s how it works. Can you replicate it outside on your own? Is it better to do that? Maybe. I don’t know. But don’t feel like this is terrible and you have to throw it out and don’t think I should jump in headfirst.
00:24:11
Do the due diligence on it. You know, so that’s the message, Tony. Yeah. I think it’s a good message. It’s important to understand these things. That’s why you’re here and you’re going to pay attention to this. I know this is going to come up in future shows once this thing starts to play out, but I’m glad you made us aware of it. To be honest, I wasn’t that familiar with it. I did just see something recently that talked about 401k monthly payment plans or something like
00:24:42
that. That’s how it was worded. So we’ll see. I mean, if it’s you know, the word guarantee is used loosely, but you know, the sleep well at night, it’s great, but if it’s like you’ll get this but if the market goes down, you could run out of money halfway through retirement, that’s trouble. That is trouble. Yeah. And it’s trouble. So we’ll see. We’ll see if the insurance companies can get some a foot in the door here with the 401k plans and start beefing up the income
00:25:14
and who knows, maybe we’ll go back to where everyone gets a pension, right? Maybe that Maybe we’ll go back there. And I’ll tell you what, those that are on pensions will tell you, they kind of like it. So we’ll see. Thanks for another great show, Tony. We’ll catch everyone next week.