Our daily roundup of retirement news your clients may be thinking about.
401(k) participants can determine whether they are realizing their retirement-savings goals using a new approach called projected income, according to this article on The Wall Street Journal. The new strategy enables workers to know their income at a specific age based on their plan's current balance. As we refine our thinking, total return is a fine metric, but annual income is the most relevant number, says John Rekenthaler, Morningstar's vice president of research. The Wall Street Journal
Mutual fund firms acting as service providers to 401(k) plans tend to favor their own funds and do not serve the best interest of the participants, according to a new study. These firms are less likely to remove poorly performing funds that are affiliated with the plan trustee, and more likely to add these funds to 401(k) options, the study finds. "[S]ubsequent performance of poorly performing affiliated funds indicates that these trustee decisions are not information driven." USA Today
Retirees receive about $16,800 in benefits from Social Security every year, with nearly 25% of beneficiaries getting at least $25,000 in benefits and 40% receiving only up to $15,000, according to Motley Fool. The benefits vary among retirees depending largely on their lifetime earnings. Retirees in the lowest income bracket receive over $800 monthly, while monthly benefits for those with the highest earnings amount to nearly $2,000. Motley Fool
401(k) participants now have the opportunity to invest in target-date mutual funds that offer them an annuity feature or a lifetime income in retirement, according to this article on Time Money. The federal government now allows employers to make target-date funds a default option in the 401(k) plans and has issued new guidelines for workers who want to use these funds in their plans to hold immediate or deferred fixed annuities. Target-date funds account for nearly 50% of all 401(k) contributions and the percentage could increase to 63% by 2018, according to Cerulli Associates. Time Money
Retirees who are going to take required minimum distributions for the first time this year need to know that the RMD rules vary depending on what retirement accounts they have, according to this article on MarketWatch. The RMD from their 401(k) plan and ESOP accounts can be determined by dividing the December 31, 2013 account balance by 27.4 if they turn 71 in 2015 or 26.5 if they reach 71 in 2014. There are exceptions to this rule for workplace retirement plans, traditional IRA based accounts, and personal Roth IRAs. MarketWatch
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