Projecting Retirement Income

Recently proposed legislation in Congress would require retirement savings plans such as the TSP to better inform participants, particularly regarding how the accounts they are building might translate into income after retirement.

The bipartisan measure sponsored by senators active in aging-related issues is a reaction to the growing shift of retirement funding away from defined benefit programs, such as the CSRS and FERS systems, toward defined contribution plans such as 401(k)s and the TSP.

Under their bill, plans would be required to send out annual statements, modeled on the statements of potential benefits sent yearly by SSA, of what level of income the accounts would produce, based on age at retirement and other factors. Those projections would be based on standard models and would not necessarily account for all the potential options in a plan’s withdrawal policy that would affect the payout. However, sponsors say that even a rough estimate would be valuable for persons in their investment, withdrawal and other retirement-related decisions.