Providing Better Retirement Statements for Clients

Statements from investment companies and 401(k) plan sponsors don’t provide the information needed for retirement planning. Whether made available quarterly, monthly or on-demand, those reports are incomplete and sometimes misleading. Advisors can help overcome the shortcomings; clients need more frequent reporting that goes beyond asset-value statements and shows what their income in retirement will be.

I’ll propose the improvements that are needed.

In this June 7 Advisor Perspectives webinar, David Blanchett addressed the issue of incomplete information. In addition to portfolio balances, a more complete retirement planning picture requires projections of:

  • Social Security benefits
  • Future contributions to retirement savings
  • Income from pensions or annuities
  • Potential retirement income from housing wealth

For many clients, retirement income from those sources will far exceed amounts generated from existing savings, so the investment statements during their working years don’t provide nearly enough information.

Expanded investment statement

I’ll use an example to illustrate an expanded investment statement that includes the present values of those additional sources of retirement income. This will be based on a 45-year-old individual earning $100,000, planning to work until age 67, and contributing 15% of pay to a 401(k). This individual will receive estimated Social Security income of $38,000 per year (stated in current dollars) beginning at age 70 and has an assumed life expectancy of age 90. Existing savings are $500,000 in the 401(k) and $200,000 in taxable investments. This individual owns a home worth $400,000 with a $250,000 mortgage but will have the mortgage paid off before retirement.

Here is an investment statement that includes values for those additional items stated in current dollars.

Expanded investment statement



Taxable retirement savings


401(k) balance


PV of future retirement contributions


PV of Social Security benefits


Home equity




Source: author's calculations

But the expanded investment statement doesn’t do the whole job of providing information to clients about the status of their retirement planning and helping with important decisions. The key planning issue for clients is retirement income – its amount, variability and sustainability. In this Harvard Business Review article, economist Robert Merton criticized “communication with savers that is framed entirely in terms of assets and returns,” and argued for focusing instead on retirement income.This chart is based on the simplifying assumptions that wages grow at the inflation rate and the real risk-free rate used for discounting is zero, approximately in line with current TIPS yields. With the additional items, we see quite a different picture than one based only on investment statements for taxable savings and the 401(k). Total assets are close to $2 million and a substantial share is represented by present values of Social Security benefits and future retirement contributions – more akin to bonds than stocks. With this expanded view, a client might become more comfortable investing a substantial share of savings in stocks.