Protecting Our Aging Retirees: Converting 401(K) Accounts into Federally Guaranteed Lifetime Annuities

55 Pages Posted: 19 Nov 2009 Last revised: 26 Jan 2011

See all articles by Lawrence A. Frolik

Lawrence A. Frolik

University of Pittsburgh - School of Law (Emeritus)

Date Written: November 14, 2009


America’s retirees are faced with a potential financial disaster. Economic security in retirement has long depended on Social Security, private savings and employer provided retirement plans. While much attention has been paid to the financial problems of Social Security and the lack of private saving for retirement, little attention has been paid to an alarming development in employer provided retirement plans: the likely inability of retirees during the long years of their retirement to successfully manage their retirement funds accumulated in 401(k) and similar accounts. We as a society have set up a funding system for retirement that assumes retirees will be able to successfully manage their IRAs for the 20 or 30 years of retirement. We know, however, that most will not. Some will lack the basic intelligence or knowledge of finance take on the risk, oversight and planning. Some will be fine managing an IRA at age 65, but lose the ability due to physical decline. Finally, millions of aging IRA owners will lose the ability to manage their finances because of the lost of mental capacity, primarily because of dementia. Asking individuals to husband a lump-sum payout from a 401(k) retirement account for the 20 to 30 years of retirement as they physically and mentally decline is a recipe for disaster. Unless we provide a more secure way to stretch retirement dollars into the twilight of retiree lives, we can expect to see more and more elderly retirees slide into poverty. The solution is to create federally guaranteed life-time annuities that retirees can purchase with the funds accumulated in their 401(k) retirement accounts.

Keywords: retirees, retirement plans, pension plans, economic security, 401(K), lifetime annuities, federally guaranteed lifetime annuities, estates, IRA, Individual Retirement Account, ERISA

Suggested Citation

Frolik, Lawrence A., Protecting Our Aging Retirees: Converting 401(K) Accounts into Federally Guaranteed Lifetime Annuities (November 14, 2009). San Diego Law Review, Vol. 47, p. 277, 2010, U. of Pittsburgh Legal Studies Research Paper No. 2009-34, Available at SSRN:

Lawrence A. Frolik (Contact Author)

University of Pittsburgh - School of Law (Emeritus) ( email )

3900 Forbes Ave.
Pittsburgh, PA 15260
United States
412-648-1363 (Phone)


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