If you took all of your retirement savings and bought an annuity, what would your monthly retirement paychecks look like? Legislation introduced this week in both houses of Congress is intended to help retirement savers paint that picture.
Industry groups are applauding the introduction of the Lifetime Income Disclosure Act (H.R. 2317), bipartisan legislation that was introduced in the House Thursday and in the Senate Wednesday (S. 1317), requiring employer-sponsored retirement plans to provide participants with a estimate of how much monthly income they can generate from their savings.
“American workers today are faced with the increasingly difficult task of making a lifetime of savings last throughout all their retirement years,” said Cathy Weatherford, president and CEO of the Insured Retirement Institute, an annuity lobby group, in a statement. “Showing workers how much monthly income their savings may generate in retirement will provide workers with a better understanding of their savings options and help them to plan for their future financial security.”
Both bills require participants in workplace retirement plans to receive an annual statement of how their lump-sum savings translate into a guaranteed lifetime stream of monthly income from an annuity. “This vital information would make it easier for workers to understand how their savings will address their month-to-month living expenses,” the American Council of Life Insurers said in a statement.
IRI performed a study in September of 1,500 respondents between the ages of 21 and 65 who currently have a 401(k) balance and found that nine in 10 workers want a monthly income estimate on their benefit statements, as such information would help in planning for their future financial security.
Also, more than 75% of plan participants in the study, called Consumer Preferences for Lifetime Income Estimates on 401(k) Statements, said they would increase their plan contributions by four percentage points or more after seeing lifetime income estimates.
— Check out Senate Introduces Lifetime Income Disclosure Act on ThinkAdvisor.