# How Much Monthly Income will that 401(k) Get You?

Reuters

If you think figuring out how much money to put into your retirement savings accounts is complex, wait until it's time to take money out.

That is emotionally challenging to people who have spent their lifetimes trying to build their nest eggs, but it is also a mathematical challenge. If you take too much out, you risk running out of money just when you might need it most to pay for care - a grim prospect. But withdrawals that are too low may not leave you enough to pay your bills or enjoy that retirement you've been saving for.

Much of the energy in the retirement planning community now is being devoted to helping workers figure out that magic number in advance: If you know how much you want to spend, and you can calculate how much of a nest egg it takes to generate that income, then you know exactly how much to save.

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.

The issue is how to do that calculation, and how far to go with it. An illustration based on an annuity formula would show you a much higher income stream than one based on an independent "safe withdrawal rate" rule of thumb. Doing a back of the envelope plan for how much you think you can withdraw is a far cry from turning your retirement account over to a company that says it can guarantee that income stream. You wouldn't necessarily want to count on a paycheck illustration that was calculated one way and then do something completely different with your money.

If you are managing your own money, conventional wisdom holds that you can pull 4 percent a year out of your savings, and increase that by about 3 percent a year for inflation. Here's some math for a 58 year old woman with \$150,000 in a 401(k) today(an amount Fidelity Investments says is about average) who expects to retire at 66: Invested at 7.5 percent, your retirement account should grow to \$249,000 by the time you retire. If you pull 4 percent out, that would get you a \$830 monthly check in the first year.