How to read your 401k statement
Your 401k statement could be overwhelming and filled with incomprehensible jargon, but knowing what to look for can make reviewing your statements a quick and painless process. The layout can vary by company, but they will all feature the same basic information.
Your “account summary” will feature your account balances, the funds, etc. you’re currently invested in (often called your holdings or asset allocation), and a summary of recent transactions.
An “account balances” section should indicate your “return,” or the amount your investments have increased or decreased in value. This may be listed as a dollar value, a percentage, or both. It should also indicate a “starting” or “beginning” balance, which is how much money you started with at the beginning of the statement period (a month or a financial quarter). It should also note any taxable or nontaxable income, which will be of use to you when tax season comes around.
The “holdings” section indicates what you are invested in. This can be stocks, bonds, mutual funds, index funds, or other financial products. Statements vary in the level of detail they provide; some will tell you precisely what stocks you own, while others will simply tell you your “asset allocation,” or what percentage of your money is invested in stocks, bonds, and cash.
Your recent transactions section should indicate any purchases or sales of assets, as well as contributions to and withdrawals from the account. You should keep an eye on this section to make sure nothing strange appears (e.g., large sales of stocks or bonds, selling and then buying the same stock, or cash withdrawals you don’t remember taking).
There should also be a section that exclusively covers “performance,” which reviews how successful your investments have been. This section should provide detailed information about how each of your investments is performing, and compare their performance to that of the market overall (this is usually done by comparing your returns to those of a major index such as the S&P 500).
By staying informed about your retirement plan’s performance, you ensure that your investments are inline with your retirement strategy and that you’re on track to meet your retirement goals. If your plan isn’t performing how you’d like, consider rolling your savings into an Icon IRA. With 100s of investments to choose from and low annual fees, it’s the easiest, low cost way to save for retirement.