401(k) Projection Model In The Future?

Senator Jeff Bingaman (D-N.M.), Johnny Isakson (R-Ga.) and Herb Kohl (D-Wis.) have crafted legislation that would require 401(k) sponsors to provide participants with statements projecting how much investors would have each month in retirement based on how much they have saved. These statements would look very similar to the Social Security statements that we periodically receive.

“It is estimated that half of American households will lack sufficient retirement income to maintain their pre-retirement standard of living,” said Bingaman, “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. The who??? Not only do many Americans actually read their SSA statements, my opinion, I know for a fact that since the bottom dropped out of the economy, there’s a sizeable number that don’t read their 401(k) statements either.

Mandated statements 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 a social security type statement be helpful to participants and encourage better retirement savings/planning?