Three senators have proposed a law that would require employers to tell their 401(k) participants how much money they are projected to earn each month based on the current balance of their account. Since most Americans don’t have much money in their 401(k) accounts, the disclosure would quickly highlight how much more they need to save. For instance, the average 401(k) account produces just $225 a month in income. From there, one of two things could happen.
Best case, they increase the amount they contribute to their 401(k), which presently averages 7%. Or, worst case, they increase the amount they invest in stocks, thus increasing their exposure to market risk. At the moment, the evidence seems to suggest that many workers don’t have a clue about how to invest the money in their 401(k)s.
For older workers who need their retirement nest eggs soon, the worst case scenario is potentially devastating. Full story at Marketwatch.