Do you really have a good understanding of how far your retirement savings will go when you’re ready to call it a career?
Soon, you’re likely to.
It’s all thanks to a provision in the 2019 Secure Act, and now 401K plan sponsors are going to have to provide more details on both quarterly and annual statements regarding how far a contributor’s savings is likely to go later on in life if they were to receive it in an annuity. It could be a key planning tool for American workers and deliver better insight into whether or not they’re on the right retirement path.
Retirement Security is Still a Concern
We’ve covered retirement several times in this space in the past, and it’s perhaps more important than ever as we’re still smack-dab in a pandemic that is having a significant impact on finances. Depending on what story or survey you read, you’ll see various results. According to a June 2021 survey, more than 30 percent of Americans indicated that they now plan to retire later than they had initially thought because of the COVID-19 pandemic. A few months earlier, in March 2021, a Pew survey found that about half of non-retired adults are questioning whether or not they’ll not be able to reach their financial goals.
More recent retirement-specific data still paints a bleak picture of Americans and their retirement. Research from PWC states that about one-quarter of all American adults have no retirement savings and only about 35 percent of all American adults think that their retirement savings is on the right track.
But this provision that is soon to come to fruition will change how workers plan. Workers with retirement savings will be privy to a pair of illustrations: One on an annual basis that will show estimated monthly income from a single life annuity and another showing joint annuity with only benefits for a surviving spouse. By studying and learning from this information, workers can make adjustments as necessary to better zero in on their long-term financial goals. Obviously, the longer someone has to go until retirement, the more they’re able to plan for this long-term outcome based on the data they can learn.
Of course, it’s still important to abide by a few retirement tips, including:
- Begin saving for retirement as soon as you’re able to. This will put your money into the market and allow it to work harder for you for longer.
- If your company offers an employee match, make sure you’re at least saving the percentage that the company will match.
- Try to increase your 401K contributions on an annual basis. If this isn’t possible, try to increase it with every pay raise or promotion that you receive.
- If you’re able to put any bonus money you’re entitled to in your 401K, make sure to do so. (With some companies, you have to assign bonus money to your 401K separate from your conventional paycheck.)