While most people rely on the total 401k balance on their statements to plan their retirement, it is more important to know how that money will last by getting an annuity equivalent number. The Lifetime Income Disclosure Act that Congress is researching would require the annuity equivalent number to be listed on 401k statements, according to Tim Grant of the Pittsburgh Post-Gazette. His article, “Bill would require annuity data on 401(k) statements,” says that this annuity information actually gives the clearest picture on where you stand in your retirement planning. The annuity equivalent is the amount of guaranteed lifetime income that retirees would receive at age 65 if they purchased an annuity with their entire 401k balance.
A New Mexico Senator said in the article that half of Americans will not have enough monthly retirement income to allow them to maintain their standard of living, and many Americans are not even aware of that fact. He argues that this bill will let Americans know if they are saving enough to retire and maintain their lifestyle. While the fixed annuity rates at the time the annuity is purchased will determine the exact monthly payout for each individual, the annuity equivalent number will give a good picture of the approximate monthly income retirees would receive if they purchased a fixed annuity with their 401k balance. While the bill is still in the early stages, there are many bipartisan supporters as well as support from community organizations. If the bill does pass, the Department of Labor will be in charge of issuing regulations to 401k providers.