Maybe it’s because I have miles to go until I can actually collect Social Security – not to mention the fact that I’m not wholly convinced it will be available to me even when I’m eligible – but I tend to gloss over the annual SSA statements that tell me how much of a benefit I could collect once my working days are at last behind me.
That said, perhaps such statements are a more used and useful tool for other Americans. Thus, Sens. Jeff Bingaman (D-N.M.), Johnny Isakson (R-Ga.) and Herb Kohl (D-Wis.) were inspired to craft legislation that would require 401(k) sponsors to provide participants with SSA-esque statements projecting how much investors would have each month in retirement based on how much they have saved.
“It is estimated that half of American households will lack sufficient retirement income to maintain their pre-retirement standard of living,” Bingaman said, Money Management Executive reports. “Yet, many Americas are unaware of their financial vulnerability. Our bill is a common-sense approach to empowering Americans, and helping them determine whether they are on a path to a secure retirement.”
Isakson added, “Defined contribution plans such as 401(k)s are the retirement plans of the present and future. This bill will enable participants to receive additional, helpful information so they can better plan for their retirement.”
The bill, called Lifetime Income Disclosure Act, already has the thumbs-up from AARP, the Retirement Security Project and the Women’s Institute for Secure Retirement.
While that definitely increases the measure’s street cred in my eyes, I’m still not sold. Not only do I think that not many Americans actually read their SSA statements, I know for a fact that since the bottom dropped out of the economy, there’s a sizeable number than don’t read their 401(k) statements either. This recent EBN article details all the pretty colors, bells and whistles some companies are using just to get 401(k) participants to read their quarterly statements.
Not to mention that even the most “oooh, shiny!” statement won’t do any good unless two things happen in larger numbers:
1. More employees have access to, and participate in, their 401(k).
2. Comprehensive financial education goes hand-in-hand with the plan offering.
What do you think? Do you think Bingaman-Isakson-Kohl are onto something? Would SSA-type statements be helpful to participants and encourage better retirement savings/planning?
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