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How Much Monthly Income Will Your 401(k) Produce?

To help savers understand their retirement outlooks, more companies are beginning to alter their websites and statements. In an innovative approach, Putnam offers plan participants a website that automatically updates monthly income figures. Savers who are dissatisfied with the figures can slide bars to see what they can do change the outlook.

Say a participant is putting 4% of salary into his 401(k). By sliding a bar, the saver can instantly see how monthly income would increase if he put aside 5% or 6%. Those who want to increase their savings can change their contribution rates with a couple of clicks.

Putnam says that the new website is having a big impact on the savings habits of its plan participants. Among those using the new features, 30% have changed their savings rates. Of those, 80% have increased their savings.

"We have found that within six to nine months after the new features are introduced, the average saving rates can increase substantially," says Edmund Murphy, who heads Putnam's defined contribution plans.

Most plans still don't offer ways to estimate monthly retirement income. For a rough gauge, you can consult an online calculator. An easy one to use is Fidelity's Retirement Quick Check. Fill out details like your age, tax rate and the amount of assets you have, and it will estimate the monthly income you can expect.

If your estimate comes up short, play with the calculator and see the impact of adjusting your plans. By delaying retirement several years, you may improve the picture a bit. But the most effective way to boost retirement income is by saving more. Fox of Principal Financial says people need to save at least 11% of their salaries. By setting aside that much, savers can insure a solid monthly income in retirement.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
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