Few workers would be surprised to find out how much their current savings in a 401(k) plan would provide them in monthly income, and few are likely to save more or worker longer based on that income projection, according to a new analysis by the Employee Benefit Research Institute in Washington.
Last May, the Department of Labor issued a proposal to require retirement plan statements to show how a worker’s current account balance would translate into an estimated lifetime income stream of payments. DOL plans to issue a lifetime income rule proposal in August.
Based on an analysis of the results of the just-released 2014 Retirement Confidence Survey (RCS), EBRI found that while the vast majority of respondents (only workers who were currently contributing to an employer plan) found the information useful, they weren’t surprised about the income projection.
More than one in three (36%) of the respondents thought that it was very useful to hear an estimate of the monthly retirement income they might expect from their plan, and another 49% thought it was somewhat useful, EBRI found.
However, EBRI found that the information didn’t seem to come as a surprise to many. More than half (58%) thought the estimated monthly income was in line with their expectations.
Perhaps because of that, relatively few (only 17% of the respondents) said they would increase their retirement savings contributions as a result of hearing the monthly income estimate, while 81% of the respondents indicated that they would continue to contribute at their current rates after hearing the projected monthly income amount.
However, of those responding that their illustrated value was much less or somewhat less than expected, more than a third (35%) indicated they would increase their contributions.
“It is possible that these respondents’ current participation in employment-based plans has already provided them with a sense for what their retirement savings balances would provide,” noted Jack VanDerhei, EBRI research director and author of the report.