Big change to 401 (k) statements will help you plan for retirement



When looking at your 401 (k) quarterly statement, you’re probably focusing on one number – hopefully a big one – and a few more. But that is about to change.

Sponsors of defined contribution pension plans, such as 401 (k) plans, will soon include an illustration on the returns that estimates the lifetime income that participants will earn from their nest egg.

The estimate will be expressed in the form of the income that you could potentially draw from your nest egg via an annuity each month, CNBC Reports.

The estimated amounts will be calculated on the current plan balance and will use the assumption that payments begin immediately. Life expectancy would be based on an IRS mortality table and interest rates would be based on the current yield on 10-year treasury bills.

Jason Berkowitz, director of legal and regulatory affairs at the Insured Retirement Institute, told CNBC the change – which stems from the federal decision SECURE Law of 2019 (Setting Every Community Up for Retirement Enhancement Act of 2019) – is intended to be an educational tool:

“The general intention here is to inform plan members of the true value of their account. [be] in monthly income. This will make participants wonder if they are on the right track.

The US Department of Labor is expected to issue a final rule soon that will dictate how information is presented in returns.

For the moment, a provisional rule, which would entered into force on September 18 if the Ministry of Labor does not publish a final rule before this date, imposes at least two illustrations per year. One illustration shows the income from a single life annuity, and the other shows the income from a joint life annuity with benefits for a surviving spouse.

Pension plan members should expect to see the new information on their 401 (k) statements between fall 2021 and fall 2022, reports CNBC.

Tips for building up your savings

Hopefully, you open up your new 401 (k) return and find that you are on your way to building a big nest egg. But if you are rather disappointed, don’t worry. Instead, sign up for Money Made Simple’s Money Talks News course.

This online course offers lessons on 13 key financial topics spread across videos, as well as jargon-free articles and worksheets. The chapters cover everything you need to know about:

  • Set and Achieve Goals
  • Organize your finances
  • Budgeting
  • Live more while spending less
  • Banking
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  • Income taxes
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  • Estate planning

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