Lifetime Income Illustrations Are Coming to Your 401K, Ep #154


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By Benjamin Brandt CFP®, RICP® and Benjamin Brandt CFP®. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.

Welcome back to another exciting episode of Retirement Starts Today. I want to say thank you to everyone who has participated in the Listener Survey. There is still time until the end of August 2020 to participate in the survey and voice your opinion about what you would like to hear on the show next year. You can fill out the survey here. It will take just a few short minutes of your time. In this episode, we’ve got a couple of listener questions plus you’ll hear about an interesting new addition to your 401K. Press play now to begin to learn how to make your retirement dreams a reality.

Outline of This Episode
  • [2:07] A new lifetime income disclosure rule
  • [7:46] Can you perform a Roth conversion while still contributing to a 401K?
  • [12:32] A Roth conversion tax question
  • [17:58] Don’t forget to take the listener survey
Lifetime income illustrations may be a new part of your 401K disclosure

The Labor Department has just revealed a new rule for plan administrators of contribution plans like 401Ks and 403Bs. This rule states that the plan administrators must begin to demonstrate how your account balance can be used as an income stream. They will need to illustrate how the retirement plan could realistically provide the account holder with a lifetime income. The goal is to help people understand how their savings could translate to retirement income.

How will this rule help you plan for retirement?

I think this visualization will be helpful but it misses the bigger picture. Seeing the basic math laid out is helpful for general retirement planning, but it won’t help you put the nuts and bolts together to build a comprehensive retirement plan. It’s important to remember that your retirement income is rarely linear. It changes throughout retirement. These illustrations can simply help you get a birds-eye view of how your savings can turn into retirement income. If you are looking for something a bit more comprehensive, download my Retire Ready Toolkit.

Can you contribute to a Roth and a 401K at the same time?

John asks if he can begin contributing to a Roth while also contributing to a 401K. You can make Roth conversions at any time. A Roth conversion is when you send money from your IRA to a Roth IRA and pay the taxes on that money. You can do this at any time since the government is always happy to collect your tax dollars. Press play to hear why I suggest waiting until retirement to start converting your IRA.

A Roth conversion tax question

Greg has a question on maximizing Roth conversions now to save on taxes in the future. It may make sense for some people to make large conversions this year. My opinion is that it’s better to pay the devil you know. The current tax cuts are set to expire soon so there will probably be tax hikes in the coming years. I like to call this the Golden Era of Roth Conversions. It’s always a good idea to fill up your tax bracket with Roth conversions as well. Having a decent amount of your money in a Roth IRA adds tax flexibility

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