We all know that it is important to save for retirement. Knowing how much to save and how to spread that money out over time is challenging, but good information can help. That is why the U.S. Labor Department is looking for the best ideas on how to improve existing periodic benefit statements to show workers who participate in employer-sponsored retirement plans what their savings could look like stretched out over the course of retirement.
Right now, 401(k) and other retirement account statements include the savings balance in an individual’s account. What many do not show is what this balance would look like if it were spread out on a month-to-month basis over the course of an individual’s retirement, or how this amount may grow over time with additional contributions and investment returns. Without information on what a retirement account balance looks like as a lifetime stream of income, it can be difficult for workers to know whether they are saving enough.
Lifetime income illustrations are good for workers at all stages of their careers. Young workers can figure out early on how much to save. Retirees can determine how to make that 401(k) nest egg last. And mid-career workers, who may be struggling to save, can get a realistic view of how their current accounts will look in 10 or 20 years and what steps can be taken to shore up their savings.
While we believe that lifetime income illustrations are an effective way to help workers save, we need input from you, the public, to figure out the best way to present this information. The Advance Notice of Proposed Rulemaking that will be published in the Federal Register on May 8 is your opportunity to help us get it right.
Saving a little bit out of each paycheck for retirement is a challenge for most. For many, it takes foresight to know that the money will be needed in the future – not tomorrow, or even in 10 years, but much later down the road. Knowing how much to save and how to stretch it out over a long retirement can be tough, even discouraging at times. And it takes discipline to leave the money alone until that retirement date comes. But with your input, we can help workers save more for later.
I hope that you will take this opportunity to share your thoughts with us. We look forward to hearing from you.
Phyllis Borzi is the assistant secretary of labor for employee benefits security.