Making sense of your statementsBy Timothy Owen Younkin
February 5
th , 2000| So, how is your 401(k) performing compared to the market? Are you sure there are no accounting mistakes with your 401(k) account? To fully understand how your 401(k) account is performing you should periodically read and analyze your 401(k) statements. |
While driving home from our most recent winter blast 2000, I'm reminded how important it is to be patient and to drive slowly. A good driver will always have control of their car, rather than the car having control over the driver. The same can be said for investors. Either you have control over your finances, or you may have a sense of not having control. One of the best ways to keep your investments under control is to periodically read and understand your financial statements. Since Congress is currently allowing 401(k) plan participants to invest up to $10,500 for the current year 2000, a 401(k) account could amount to a lot of money given enough time. With so much at stake, it is probably a good idea to fully understand how to read and know what to look for on your 401(k) statements.
401(k) plan participants should receive their statements at least annually.* If a plan participant or beneficiary isn't receiving annual statements then they could submit a written request. ERISA section 105 mandates that a statement should be mailed upon a written request.
401(k) statements may be detailed with lots of information such as dates of contributions, N.A.V.'s for each transaction, an analysis of your funds performance, pie charts, etc... Other 401(k) statements may not have such detailed information. Obviously, the more information you have, the easier it will be for you to keep tabs on this account. Below are three basic things you should be looking for.
Contributions Deposited
One of the most important things to check is to make sure your employee and/or you employer-matching contributions were actually deposited. Gather your pay stubs and cross check that each of your employee contributions was deposited and that each deposit was the correct amount. Calculate and double check any employer matching contributions that may have been deposited as well. An easy way to keep track of all deposits, calculations, and dates is to set up a payroll spreadsheet (you will have to make modifications for your own spreadsheet) at the beginning of each year. When your 401(k) statements arrive you can refer to this one page spreadsheet rather than a handful of pay stubs. Trust me, it is a lot easier and faster using a spreadsheet.
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