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How much monthly income will that 401(k) get you?
Old 08-08-2013, 07:55 AM   #1
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How much monthly income will that 401(k) get you?

Stern Advice: How much monthly income will that 401(k) get you? | Reuters

I know the topic of SWR has been rehashed a bazillion times on here, but I hadn't heard this part:

Quote:
The Labor Department has been preparing a rule that would require employers to provide 401(k) participants with lifetime income illustrations that translate their account balances into future monthly checks. The concept has broad support from everyone from the Pension Rights Center, a pro-labor group, to the insurance industry.
And, I'm just now fiddling with the BlackRock calculator referenced in the article.
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Old 08-08-2013, 07:58 AM   #2
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Many already have this. Mine has had this number for a while.
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Old 08-08-2013, 08:11 AM   #3
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My 401k statements have had this info as long as I can remember.
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Old 08-08-2013, 08:17 AM   #4
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I think that BlackRock calculator is a joke.
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Old 08-08-2013, 08:24 AM   #5
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Quote:
Originally Posted by RockyMtn View Post
I think that BlackRock calculator is a joke.
I see it only as a way to get people to come to Blackrock for advice.

From the website:
Quote:
I don't plan to retire at age 65. Do the CoRI Indexes have any relevance for me?

Yes. While the assumption is that the individual will retire at 65, there is value in the index levels for those who retire earlier or later. Prior to 65 the index value represents the current cost of future retirement income, beginning at age 65. For individuals 65 years old and older, the value represents the median price of an immediate annuity. For individuals seeking to retire prior to 65, the index can still be a useful metric for translating savings into income, but it won't be quite as precise.
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Old 08-08-2013, 08:28 AM   #6
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It would be nice if the monthly income was also expressed as a percentage of current take home pay. I know it's an easy calculation but having that number posted each week could provide some education/inspiration.
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Old 08-08-2013, 09:16 AM   #7
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My Megacorp would combine your 401K, your pension (or lump sum), and your SS. and show how that related to your current pay. A couple of interesting notes was that the default retirement age was 62 and my life default life expectancy was about 85.

This is old info because as soon as I turned in my retirement papers, my online access was blocked.

Megacorp's projections have proven to be very accurate. However, like many experts, Megacorp did not project the crash of 2008-2009.
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Old 08-08-2013, 09:50 AM   #8
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My megacorp(s) have never offered this. But I'm kind of glad they haven't since I find the number highly misleading. No accounting for inflation, market returns, etc
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Old 08-08-2013, 09:59 AM   #9
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My megacorp doesn't provide this either, and you'd be shocked if you knew who I work for.
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Old 08-08-2013, 10:03 AM   #10
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My megacorp doesn't provide this either, and you'd be shocked if you knew who I work for.
That makes me want to guess... LOL.

Black Rock (since they do the calculator)
An annuity company?
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Old 08-08-2013, 10:13 AM   #11
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Blackrock is a very large investment mgt firm partially owned by Merrill Lynch...ML has a 49.5% stake if I remember correctly.
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Old 08-08-2013, 10:14 AM   #12
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I agree. Saw the Blackrock calculator last week and thought it was useless.

Megacorp provides access to Financial Engines which provided this number even for early retirement. It is/was a valuable tool in my ER decision process and I continue to use it today.

Financial Engines is nice in that it allows you to input other asset accounts for a more accurate number.
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Old 08-08-2013, 10:59 AM   #13
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Originally Posted by rbmrtn View Post
Many already have this. Mine has had this number for a while.
Mine too.

Mine also tries to give you a stop light indicator (red, yellow, green) of whether you are good to retire when you want to, with the assets you have. However that part is a less useful because it only sees the assets it manages and it assumes you actually need 100% of what you make after you retire. It's dumb-ed down too much.
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Old 08-08-2013, 11:33 AM   #14
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My megacorp(s) have never offered this. But I'm kind of glad they haven't since I find the number highly misleading. No accounting for inflation, market returns, etc
Mine provides the assumptions that go into the calculation, including returns, inflation, retirement age, withdrawal rate, and contributions. So I don't know if it is misleading, but probably overly optimistic in its assumptions.

It's with Trowe, here is link to it https://www3.troweprice.com/ric/ricweb/public/ric.do
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Old 08-08-2013, 12:32 PM   #15
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A site for one of my wife's plans calculates an amount. The "?" box brings this up (relevant parts):

Quote:
This monthly income at retirement shows you how much money you may have each month during your retirement.

It is a simple calculation using your current retirement account balance, your historical contributions to your retirement account, and some generic variables and assumptions which may not be applicable to you.

...

This monthly income at retirement is a hypothetical illustration and not a projection of future values of your account. It is not intended to predict future investment results.

This illustration assumes a retirement age of 67, and a mortality age of 92, and it assumes a 25% combined federal and state income tax.
Prior to retirement, this illustration assumes a 6% annual growth rate on your investments, and a 2.5% annual inflation rate.
Upon retirement at age 67, this illustration assumes the purchase of a fixed annuity, crediting 4%.

...
It produced a number far in excess of what I estimate, mainly because the assumptions are wrong for us. I wonder how many people look at the number provided and think that's what they'll be getting. I'm sure many never click on the "?" to see what's underlying the calculation.
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Old 08-08-2013, 02:24 PM   #16
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I never noticed it in previous months, but the statement I just got for my Fidelity Solo 401K gives an "Estimated Cash Flow" figure. It is "the estimated monthly interest and dividend income and return of principal that your account may generate over the next 12 rolling months." For each type of investment:

Fixed Rate Domestic Bonds and CDs: The coupon rate.

Domestic Common Stock and Mutual Fund Income: Indicated Annual Dividend --IAD (as provided by a "third party vendor")

A note says that right now the "Estimated Cash Flow" doesn't include cash flow from preferred stocks, Intl stocks, ETFs, UITs, variable rate bonds, and Intl bonds, but these "may be included in future enhancements."

The information wasn't very useful in my case, since most of my holdings in this account are foreign stock MFs, so they aren't included in the number. If they eventually include foreign holdings and foreign/domestic ETFs, and if they use the same methodology as above, I think it might be a fairly useful number: The expected gain from dividends and interest for the next 12 months. For long-range planning it has the problem that it doesn't account for inflation, but for equities that's okay, since it's also not counting share appreciation. For a bond or CD-heavy portfolio, the lack of an inflation adjustment in this cash flow figure might lead some people to overestimate their ability to retain spending power over the long term.
There's only so much handholding that can be done. If the brokers/firms make common-sense assumptions and clearly spell them out when they provide the illustrations that's about the best that can be expected.
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Old 08-08-2013, 07:33 PM   #17
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Quote:
Financial Engines is nice in that it allows you to input other asset accounts for a more accurate number.
Well, we are getting Financial Engines on September 1. So there's that...
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Old 08-08-2013, 07:56 PM   #18
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Use 1.9% rather than 1.46% (it just went up)
I rolled my 401k over to Vanguard today with the Roth's.
(Mine will give me $2100 monthly from 52-60) LOL LOL

72(t) Calculator - Dinkytown.net Financial Calculators
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Old 08-08-2013, 07:59 PM   #19
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Originally Posted by SumDay View Post
Well, we are getting Financial Engines on September 1. So there's that...
Just be careful you done hit the "let us invest for you" button.
Happened to me about 10 yrs. ago.
Quick fix getting it back.........
But they will do it for you if you like, or are not careful...
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