It is a good idea to review your retirement plan account statement in detail at least once a year. You will want to ensure that the information in your statement is accurate, as well as assess whether you should make any changes to your contribution level or investments going forward.
Confirm Personal Details
To start your review, confirm that the following information is accurate:
- Personal information (e.g., name and address.)
- Vesting calculations
- Contribution amounts (yours and your employer’s, if applicable)
- Investment allocations
Review Your Investments’ Performance
Any significant change—whether it goes 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 to keep the percentages you have invested in stocks, bonds, and cash alternatives in line with your desired asset allocation.
As a retirement plan investor, your investment goals are typically long-term. Thus, 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 downfalls in the stock market. However, if you are closer to retirement or your financial situation has changed — for example, if you have experienced a job loss, or have had to deal with significant, unforeseen expenses — you may have less tolerance for investment risk than before. If that is 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, though it can be disturbing when a fund you own has a negative return, it does not 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 given 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 and if it makes sense.
Check out the following video to learn about the investment options offered by your Popular retirement plan:
Mutual funds charge management fees to help cover the expenses of operating the fund. Typically, management fees compensate the investment managers who select and monitor the fund’s investments. Deciding whether to continue owning a mutual fund based on its annual management fees is a subjective judgment. If the management fees are higher than those of other comparable funds and the fund’s performance demonstrates no substantial difference, then it might be worth taking a closer look 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. A financial professional can also be a valuable partner in ensuring that you are on the right track towards a financially solid retirement.
For more information about the different retirement strategies available to you, please email our financial expert at email@example.com.
If you have a 401k plan with Popular, remember that you can count on our group of experts at TeleBanco Popular® for access to or guidance on using your 401k digital account at popular.com/401k. You may also call 787-724-3657 (press option 2 twice).
1 Asset allocation does not guarantee a profit or protect against losses.
2 Rebalancing a portfolio may create a taxable event if done outside of a retirement account.
3 You should carefully consider a fund’s investment objectives, charges, expenses, and risks before you invest. The fund’s prospectus, which can be obtained from your financial representative, contains these details as well as other important 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.
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The information provided is for educational purposes and for your independent consideration.
The information and overviews found in this article are designed to help you understand some of the factors that you should generally consider when evaluating the appropriateness of any strategy in your retirement plan. Any description included is for informational, educational purposes and for your independent consideration only; it is not to be considered, or viewed, as advice or as a suggestion to take (or be inhibited from taking) any particular action. Banco Popular de Puerto Rico, its subsidiaries and / or affiliates are not engaged in rendering legal, accounting or tax advice services. If legal, accounting or tax advice services are required, you should seek the services of a competent professional.