Why You Need to Read Your 401(k) Statement

Financial advisor Joseph M. Arndt III CLU, ChFC, tells us how to get our retirement plans up to snuff.

Recently, there was a news report of an employer who was caught misdirecting contributions to a 401(k) plan. The money was used for other business purposes, and even the employer's personal expenses.

When this happens, it can take a long time for participants to get all their money back, if ever. I am sure that most employees didn’t even notice for quite a while. Dishonesty aside administrative mistakes can be made, and 401(k)/403(b) Plans are rarely audited. 

Many investors don’t look at quarterly statements because of the recent dismal performance of their accounts and frequently reports are simply hard to understand. There are many reasons to read your 401(k)/403(b) statement.

First, make sure your voluntary and employer contributions actually go into your account in a timely manner, and that the amounts are correct. 

Second, make sure your contributions are allocated as you have requested. Investment options change, are removed, added, or names change and you may not recognize one of your investments. When an investment choice is removed from a plan, you are usually directed to a similar alternative. Make sure the new investment fits in with your original asset allocation model and has the same risk/reward characteristics.

(Outside resource from the U.S. Securities and Exchange Commission: "Beginners' Guide to Asset Allocation, Diversification, and Rebalancing.)

Third, monitor the performance of your investments to make sure they are of high quality. Is your growth investment growing?  You need to check. You probably have a dozen or two options from which to choose, so do some research and select carefully.  If you don’t have the time or knowledge, find someone who does.

Remember, your 401(k) is only part of your overall portfolio if you have other investments. Understand the risk/volatility of each option and how it fits in with your portfolio. If your employer does not provide an advisor to help you, perhaps it is time they hire one. Businesses should have regular group meetings and offer voluntary individual retirement planning sessions by an experienced advisor.

Finally, if you are still in the same investments in your retirement plan as when you began five or 10 years ago, you probably need to make some changes.  Regularly scheduled reviews usually prompt wise changes.

*Investing involves risk including the potential loss of principal.  No investment strategy, including asset allocation, can guarantee a profit or protect against loss in periods of declining values. Past performance is not a guarantee of future results.

* Securities and investment advisory services offered through Sagepoint Financial, Inc. member FINRA/SIPC and a Registered Investment Advisor. Arndt & Associates is not affiliated with Sagepoint Financial or registered as a broker-dealer or investment advisor.

Written by: Joe Arndt III, CLU, ChFC,  President - Arndt & Associates  8124 Big Bend Blvd. St. Louis, MO 63119


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