What is a good rate of return for 401k?

[MinnieMom]

I have only been investing in my 401k at work for a little over a year now and up to this point I'm ashamed to say I haven't really looked at it much. I just have the $$ automatically sent in to the account and I have it on a program where the advisors manage it for me as the market changes.

I've been looking into some other investment options lately, so I took a look at my 401k online and saw that it only has a 4.75% rate of return for the last quarter. With the little financial knowledge that I have, I thought that seemed very low. Should I be concerned or is that about norm for a 401k?

 

[mommanne]

That does sound low. Do you have a choice of funds to invest in? Do you have a choice on using advisors? What company manages it?

 

[minnie1928]

I have only been investing in my 401k at work for a little over a year now and up to this point I'm ashamed to say I haven't really looked at it much. I just have the $$ automatically sent in to the account and I have it on a program where the advisors manage it for me as the market changes.

I've been looking into some other investment options lately, so I took a look at my 401k online and saw that it only has a 4.75% rate of return for the last quarter. With the little financial knowledge that I have, I thought that seemed very low. Should I be concerned or is that about norm for a 401k?

Did they also give you a YTD return figure?

 

[EthansMom]

I have only been investing in my 401k at work for a little over a year now and up to this point I'm ashamed to say I haven't really looked at it much. I just have the $$ automatically sent in to the account and I have it on a program where the advisors manage it for me as the market changes.

I've been looking into some other investment options lately, so I took a look at my 401k online and saw that it only has a 4.75% rate of return for the last quarter. With the little financial knowledge that I have, I thought that seemed very low. Should I be concerned or is that about norm for a 401k?

If it's the rate of return for just the quarter, then that isn't bad. On average, a rate of return of 8-9% per year in a stock-heavy portfolio is pretty good -- that's averaged over several years. This last quarter of 2006, the stock market was doing pretty good and a rate of return of 4.75% for the quarter (which is only 1/4 of the year) sounds about right.

Take a look at the account(s) you're investing in and try understand them better. Are the managers changing the allocation depending upon your age or upon the stock market performance? A lot of places offer an option where the allocation changes depending upon your age (more stocks when you're younger and more bonds as you get older)... I suspect that may be what you have.

Good Luck!

 

[dvcgirl]

4.75% a quarter in a normal year is outstanding....that would mean you were gaining 19% per year if it continued.

However, the S&P 500 was up 6.6% in Q4 2006......but we had quite a run up at the end of the year there.

Still, a 4.75% gain in a given quarter is a very good return. I wish they could all look that good.

I really wouldn't be all that concerned.

 

[ducklite]

4.75% a quarter in a normal year is outstanding....that would mean you were gaining 19% per year if it continued.

However, the S&P 500 was up 6.6% in Q4 2006......but we had quite a run up at the end of the year there.

Still, a 4.75% gain in a given quarter is a very good return. I wish they could all look that good.

I really wouldn't be all that concerned.

I agree. That's about what mine and DS's did, I haven't seen DH's statement for last quarter yet.

Anne

 

[VWLMember]

I manage my own 401K through my employer and had a return of over 17% last quarter, 63% for the year. Manage your own account and learn to be your own investment manager. No one else will take the time and effort like you would.

Note: This also relies on your employer offering funds that are able to gain these types of returns.

 

[dodukes]

Well I also dont know too much but i look into mine pretty often to see what is going on plus it helps we have excellent plan managers so they keep a pretty good eye on the funds that we have to choose from. I jsut went to cehck on mine and it said for last year (year ending 2006) i had a rate of return of 15.41%. Not too shabby altho i would mind being at 63% like PP...lol...what is your secret...hahaha

 

[snowbunny]

It totally depends on what you've selected for funds. Most 401k plans allow several options - a money market fund (sounds like what you have, particularly if you never selected it, it's basically a like a bank savings account) and a few other mutual funds such as an index fund and so on, which are likely to provide a higher rate of both risk and return. You need to pull out the literature you got from your company and review it again. Your return will be according to what the stock market returns are for your category of fund investment.

 

[ICF]

It totally depends on what you've selected for funds. Most 401k plans allow several options - a money market fund (sounds like what you have, particularly if you never selected it, it's basically a like a bank savings account)

There is no way her money would have grown almost 5% in a quarter in a money market fund....that's the type of full year rate of return you would get with a MM account.