Did your 401(k) have a good year? EP Wealth retirement planning advisors explain how to calculate your return rate and what you can do to potentially compensate for market losses. Advisors are available nationwide.

How Do I Determine This Year's 'Success' For My 401(k)?

You trust your 401(k) to provide for your retirement, and naturally, you want to know how your account performed this year. It’s hard to give a definitive answer because 401(k) success depends on many variables, including how much you contribute, the investments in your portfolio, and the current market environment. Let’s look at what’s considered a “good” 401(k) return.

Average Annual 401(k) Return

We can evaluate your plan using the average return on an employer-sponsored 401(k) as a baseline. Generally, the average 401(k) return falls between 5% and 8% per year. Your 401(k) success largely depends on how you invest the money in your plan. The investments you choose determine your plan’s growth potential and how much income will be available in retirement.

Because a large portion of your 401(k) funds are invested in the stock market, your return fluctuates with market shifts. EP Wealth retirement planning advisors help mitigate stock market losses by diversifying your portfolio. A strategic mix of conservative and aggressive growth funds balances risk and return to help you to potentially reach your retirement savings goals on time.

Calculating Your Annual 401(k) Return

Now that we know the average 401(k) return, let’s calculate your rate using this simple formula and hypothetical numbers.

First, we begin with the starting balance for your 401(k). Let’s say it is $35,000. You have contributed $10,000 to your plan throughout the year, and the year-end balance is $48,000. So, your investment gains for the year are $3,000. ($48,000 - $45,000 = $3,000.)

Using these numbers, you can calculate your annual return rate with the following formula: (Gains / ending balance) x 100 = Return rate or ($3,000 / $48,000) x 100 = 6.25%.

Based on these numbers, your return falls right in line with the overall annual average.

Adjusting Your Retirement Plan

While a less-than-stellar return for a single year isn’t going to sink your retirement savings, there are things we can do as retirement planning advisors to help compensate for market drops and keep you on track to meet your future financial goals.

We evaluate your investments, rebalance your asset allocation, and explore additional retirement accounts to grow your funds. EP Wealth provides custom retirement planning financial solutions and ongoing support to keep you on the path toward a bright future. Call or connect online to locate an advisor near you.

DISCLOSURES:

• EP Wealth Advisors, LLC. is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability
• Request an appointment with an EP Wealth Advisor when you have a minimum of $500,000 in investable assets – which includes qualified retirement plans (IRA, Roth IRA, 401(k), taxable brokerage, cash (savings/checking) and CDs. Investable assets do not include your home, vehicles, or collectibles.
• The information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions. Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice.  
• Hiring a qualified advisor and/or financial planner does not guarantee investment success and does not ensure that a client or prospective client will experience a higher level of performance or results. No guaranty or warranty is made that any direct or implied results or projections being represented here will be met or sustained.
• All investment strategies have the potential for profit or loss. Different types of investments and investment strategies involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's portfolio. The risk of loss can never be eliminated even if working with a professional.