Retirement Retirement Planning

The Missing Link That Could Make Your 401(k) Last a Lifetime

Saving is good, but this is more important.

By Catherine Collins , Edited by Laura Hohenstein

Updated May 4, 2026

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For many people, investing in a 401(k) is a straightforward part of working. Many employers now automatically enroll employees in 401(k) retirement plans, so many people invest without thinking about the strategy.

Having a strategy, especially understanding how to turn your 401(k) into reliable retirement income, is extremely important, though. Here's more information about why employees need to think carefully about their 401(k) income in retirement, as well as tips on how to get started.

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Why the shift away from pensions may negatively impact employees

In previous generations, it was far more common for workers to have a pension. A pension is a retirement plan that provides a guaranteed, reliable income for life. Many people in previous generations were able to retire knowing that their fixed income was guaranteed. However, today, many people focus on building a nest egg, but the missing link is a strategy for turning it into consistent retirement income that won't run out. According to the Congressional Research Service, only 14% of private sector workers had access to a pension plan as of 2025. For that reason, it's more important than ever for workers to think about how they'll make their retirement nest eggs last.

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The different types of guaranteed lifetime income

There are a few different types of guaranteed lifetime income. One of them is Social Security. Social Security provides a guaranteed income for people; however, for many, it is not enough to live on. Additionally, Social Security is projected to last at 100% until 2033, at which point the OASDI Trustees report shows that it can cover only 79% of benefits unless the government passes new legislation that addresses the gap. Another type of guaranteed lifetime income is annuities.

How annuities work and what employees need to know about them

Annuities are a type of guaranteed lifetime income where you pay an annuity company a lump sum in exchange for a guaranteed amount for life. The downside of annuities is that they can come with high fees, but they can benefit those who value the peace of mind and appreciate the certainty of a guaranteed income during retirement.

There is new, pending legislation proposing to allow annuities in 401(k) plans for employees aged 50 or older. It's called the Retirement Simplification and Clarity Act, and it's a bipartisan bill by Jimmy Panetta (D-CA) and Darin LaHood (R-IL). This legislation also addresses making it easier for employees to know their 401(k) options when leaving a job.

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Introducing annuities into 401(k) plans

Introducing annuities into 401(k) plans would work by allowing employees to convert a portion of their 401(k) into a pension-style paycheck. As mentioned, this would be offered to employees aged 50 or older. This would not benefit younger workers, who may need a longer time horizon for their investments to compound.

Why the timing matters for the first 401(k) generation

By 2030, baby boomers will be aged 65 or older. Generation X, the first generation to have access to a 401(k), will be reaching retirement age. Many of these workers have not saved enough to realistically maintain their lifestyle in retirement. For that reason, the availability of annuities within a 401(k) plan is becoming increasingly important. According to a survey from Allianz, 63% of Americans fear running out of money and retirement more than they fear actually dying.

The difference between annuities with institutional pricing and annuities through a broker

As mentioned, one of the downsides of annuities is that they do come with higher fees than other financial products. However, an annuity within a 401(k) typically benefits from institutional pricing. This pricing should be less than if someone were to purchase an annuity directly through a broker. However, it's important for employees to weigh their options, understand their fees, and speak with a financial advisor to decide whether or not this would be a good step for them.

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Make sure to take the time to make a retirement income plan

Ultimately, what's important is that workers take the next step beyond simply saving and investing in a 401(k) plan. That means that instead of setting up automatic retirement contributions and forgetting about it, employees start to think about how their income will look in retirement and the different ways that they can acquire guaranteed income and their golden years.

Taking this time to focus on retirement preparation (and not just an account balance) can help employees feel more secure about retiring on time.

Bottom line

In order to have a stress-free retirement one day, it's important to consider how much income you'll need in retirement and where that income will come from. For many people, having a guaranteed lifetime income, whether it is in the form of a pension, a Social Security check, or an annuity, can bring peace of mind. However, every financial product comes with benefits and drawbacks, and that's why it's important for workers to take the time to plan and ask a financial advisor if they have any questions.

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