How to Convert Your Retirement into a Personal Pension Plan

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

How to Convert Your Retirement into a Personal Pension Plan

Converting your retirement savings into a personal pension plan is a strategy aimed at securing a steady income stream during your retirement years. This can be achieved by rolling over your retirement plan into an annuity’s guaranteed lifetime withdrawal benefit (GLWB). Below is a step-by-step guide on how to accomplish this, including the types of retirement plans suitable for conversion and the tax implications.

Step 1: Understand the Types of Retirement Plans Eligible for Rollover

  • 401(k) Plans: Employer-sponsored retirement plans allow employees to save a portion of their paycheck before taxes are taken out.
  • 403(b) Plans: Similar to 401(k) plans but for employees of public schools and certain tax-exempt organizations.
  • 457 Plans: Deferred compensation plans available to state and local public employees, as well as employees of some tax-exempt organizations.
  • Traditional IRAs: Individual retirement accounts where contributions may be tax-deductible and earnings grow tax-deferred until withdrawals begin.
  • Roth IRAs: Contributions are made with after-tax dollars, but withdrawals are tax-free in retirement under certain conditions.
  • SIMPLE IRAs: Savings Incentive Match Plan for Employees, allowing both employer and employee contributions.
  • SEP IRAs: Simplified Employee Pension plans that allow employers to contribute to traditional IRAs set up for employees.
  • Profit-Sharing Plans: Retirement plans that give employees a share in the profits of the company.
  • Keogh Plans (HR-10): Retirement plans for self-employed individuals and their employees.
  • 401(a) Plans: Qualified retirement plans offered by employers to employees, including government institutions.
  • Spousal IRAs: Allows a working spouse to contribute to an IRA in the name of a non-working spouse.
  • Stretch IRAs: A strategy extending the tax-deferral benefits over multiple generations.
  • Thrift Savings Plan (TSP): A federal government-sponsored retirement savings and investment plan.
  • Pension Plans: These are traditionally defined benefit plans that provide a fixed payout at retirement based on salary and years of service.
  • Inherited IRAs: Accounts opened when an individual inherits IRA or employer-sponsored retirement plan assets. This is subject to certain conditions determined by the IRS, but we can help guide you through it.

Step 2: Choose an Annuity with a Guaranteed Lifetime Withdrawal Benefit (GLWB)

An annuity is an insurance product that can provide a steady income stream for life. The GLWB feature guarantees that you can withdraw a certain percentage of your annuity’s value each year for the rest of your life, even if the account balance falls to zero. When selecting an annuity, consider factors such as:

  • Withdrawal Rates: The percentage of your annuity’s value you can withdraw each year.
  • Fees: The costs associated with maintaining the annuity can impact your returns.
  • Insurance Company: Choose a reputable company with strong financial stability. We recommend only choosing companies with an A- rating or better.

Step 3: Execute a Direct Rollover to Avoid Tax Consequences

Rolling over your retirement plan into an annuity should be done as a direct rollover. This means the funds move from your retirement account directly to the insurance company without you taking possession. By doing this:

  • Avoid Taxes: A direct rollover ensures the transfer is not considered a distribution, avoiding immediate taxation.
  • Maintain Tax Advantages: Your retirement savings continue to grow tax-deferred within the annuity until you start making withdrawals.
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Converting your retirement plan into a personal pension plan by rolling over into an annuity with a GLWB can offer peace of mind by providing a guaranteed income stream for life. It’s important to carefully select the right annuity product and execute a direct rollover to avoid any tax implications. This strategy can be a valuable part of your retirement planning, ensuring you have a reliable source of income in your later years. Contact us for a free quote.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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