Review your retirement plan account statement in detail at least once a year to ensure that your information is accurate and see if you need to make any changes to your contributions or investments going forward.
It’s smart to make a point of reviewing your retirement plan account statement in detail at least once a year. You’ll want to ensure that the information in your statement is accurate and assess whether you should make any changes in your contribution level or investments going forward.
Ensure personal details are correct
To start your review, check the following for accuracy:
- Personal information (e.g., name, address, phone, etc.)
- Hire date (since it can affect vesting)
- Contribution amounts (yours and your employer’s, if applicable)
- Investment instructions • Beneficiary designation
Any large change—up or down—in one investment market can impact your portfolio’s overall asset allocation.1 Consider rebalancing2 your portfolio at least once a year so that the percentages you have invested in stocks, bonds and cash alternatives remain in line with your desired asset allocation. As a retirement plan investor, your investment goals are typically long term. As such, you may decide to allocate a greater percentage of your portfolio to stock funds3 since a longer investing horizon gives your portfolio more time to recover from any short-term declines in the stock market. However, if there have been changes in your financial situation— for example, you have experienced a job loss, or you have had to deal with large, unexpected expenses— you may have less tolerance for investment risk than before. If that’s the case, you may choose to lower your exposure to higher risk investments in your portfolio.
One of the best ways to measure your portfolio’s performance is to compare your investments to benchmarks. Benchmarking helps put performance in perspective. For example, it can be disturbing when a fund you own has a negative return. However, it doesn’t seem so bad if the fund’s comparable index dropped by a similar percentage.
Likewise, if the overall market fell 10% while your fund only fell by 5%, you would understand that your fund did well in the circumstances. However, if your fund earned returns of 5% during a period when its benchmark rose by 15%, then you may want to examine whether continuing to hold that fund makes sense.
Portfolio turnover rate
The term portfolio turnover rate refers to the percentage of a mutual fund’s holdings that changes over a given period of time. Certain types of stock funds may have high turnover rates because they pursue aggressive or growth strategies. Other types— value funds, for example—may have lower turnover rates.
It can be a red flag if a fund’s portfolio turnover rate is much higher than that of other funds in the same style category and the fund consistently underperforms similar funds and its benchmark. Portfolio turnover rate is just one of the many factors investors should review when assessing funds in their portfolios.
Management fees
Mutual funds charge management fees to help cover the expenses of operating the fund. Typically, management fees are used to compensate the investment managers who select and monitor
the fund’s investments. Deciding whether to continue owning a mutual fund based on how much it charges in annual management fees is a subjective judgement. If the management fees are higher than those of other comparable funds and the fund’s performance demonstrates no appreciable difference, then it might be worth looking deeper into the issue.
Work with a professional
Reviewing your retirement plan account statement can help identify strengths as well as deficiencies in your retirement planning and allow you to respond accordingly. Your financial professional can also be a valuable partner in ensuring that you are on the right track to a financially solid retirement.
- Asset allocation does not guarantee a profit or protect against losses.
- Rebalancing a portfolio may create a taxable event if done outside of a retirement account.
- You should consider a fund’s investment objectives, charges, expenses and risks carefully before you invest. The fund’s prospectus, which can be obtained from your financial representative, contains this and other information about the fund. Read the prospectus carefully before you invest or send money. Shares, when redeemed, may be worth more or less than their original cost.
NMG Capital Group helps high net worth individuals, families, and small to mid-size institutions grow and sustain their wealth through innovative and scientific investment practices. We offer a wide array of services to businesses from retirement planning and risk management to strategic and corporate finance advisory services.
Contact us at 1-855-507-0111 (toll free) or ned at moseco.com to set up an initial assessment meeting.
The information contained herein is based on sources believed to be reliable, but its accuracy cannot be guaranteed. Our firm does not provide tax or legal advice. All decisions regarding the tax or legal implications of your investments should be made in connection with your independent tax or legal advisor. The articles and opinions in this advertisement are for general information only and are not intended to provide specific advice or recommendations for any individual. All information as of 01/01/2021.
RBC Clearing & Custody, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC, provides clearing and execution services and/or custody services for accounts managed by your financial professional. The referenced product or service is available through that relationship.