The Four Levels of Income
One word, several different investment experiences.
A Good Point
Last Tuesday's column discussed the Department of Labor's "interim final regulation" that requires 401(k) plan administrators to translate participants' current account balances into "lifetime income" streams. These calculations assume that 401(k) account balances are used to purchase a single premium intermediate annuity. Out goes the principal, in come monthly payments.
A reader disputes the DOL's nomenclature. He writes, "An annuity payment is not 'income.' And the series of payments is not an 'income stream.' Income, in the investment and trust world, is the coupon from a bond. The dividend from a stock. The DOL should not be using this term to describe the payment (which includes return of principal) received from annuitization."
John Rekenthaler does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.