Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
New 401k/403b Statements – Lifetime Income Illustrations
The Secure Act 2019 requires 401k/403b plans to provide lifetime retirement income illustrations in statements. The first efforts will meet the letter but not the spirit of the law. It seems that most plans will just provide how much lifetime income annuity the current balance could buy if the participant was of retirement age TODAY. This may not be meaningful at all as it ignores potential future contributions, higher accumulations due to interest credits alone, changes in rate environments, etc. Of course, any assumptions made on those may also be controversial. One way could be to use estimates similar to the ones used for deferred-income annuity (bought earlier for income to start later). At least some accepted methodologies exist for those. Another way could be similar to how the insurance industry handles cash value illustrations. So, multiple assumed rates (2+) could be used and contributions may be assumed at the current level and with some assumed escalation. That may lead to 4+ possible retirement income streams that may be more helpful. Whatever is done would involve some controversy. https://money.yahoo.com/401-k-statements-retirement-savings-181646060.html https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/SECURE Act section by section.pdf https://ybbpersonalfinance.proboards.com/thread/342/401k-statements-lifetime-income-illustrations
It is a good start for many. It helps to visualize how much one gets monthly if their 401(k) are annuitizes. Same goes for one’s social security (depends on when the withdrawal dates). If one fortunate to have a pension plan from their employers, one can get an estimate on that too. The sum of these three sources of income after retirement give a decent estimate on the potential monthly income.
Fidelity has a decent retirement calculator to estimate your income and your expect withdrawal amount. Still there are other parts including insurance and other expense not included.
Comments
Fidelity has a decent retirement calculator to estimate your income and your expect withdrawal amount. Still there are other parts including insurance and other expense not included.