31% cumulative

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69chevy
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Joined: Fri Nov 01, 2013 12:58 pm
Location: Kentucky

31% cumulative

Post by 69chevy »

This morning I was looking at my wifes old 401k (she's no longer working, to stay home and raise our son) and noticed the company who holds the 401k shows her return as a "cumulative rate" of 31.79%.

Image

I'm assuming this is just adding each month's return which totals the 31.79%? If so that means she's earning less then 3% each month on her 401k. If that's the case then I'm going to think we need to look at what is being invested and change it or maybe even rollover her 401k to an IRA with Vanguard and re-invest there!?!

Am I thinking this wrong or is 31.79 cumulative actually really good?

Thanks!
livesoft
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Re: 31% cumulative

Post by livesoft »

You need to compare to a benchmark. 32% could be good or it could be bad.

Here are some benchmarks for the past 12 months:
https://personal.vanguard.com/us/funds/ ... arkreturns

It seems that 20% to 41% was pretty normal, so 32% is about average, but below what the Total US Stock Market Index fund did in 2013.
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Leeraar
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Re: 31% cumulative

Post by Leeraar »

I think you have it a little backwards. How are the funds invested? What is your expected return? What is the ER? How did the investment compare to a relevant benchmark?

Rolling it to an IRA might have unintended consequences, like hampering your ability to do a backdoor Roth.

L.
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bogleblitz
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Re: 31% cumulative

Post by bogleblitz »

31% for 1 year is very good year. If you had 1 million, you now have 1.31 million.
32% was the stocks S&P benchmark earn in 2013, so you are probably 100% all equity stocks.

No need to rollover to any IRA.
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HomerJ
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Re: 31% cumulative

Post by HomerJ »

Umm.. why is this bad? Later year the market went up about 30%, and her 401k shows that her 401k went up about 30% last year.

I don't understand the problem. You do realize that 3% a month is really really good right?
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jimb_fromATL
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Re: 31% cumulative

Post by jimb_fromATL »

Do you have the figures for the start and end of 2013?

How is it invested?

That would be in the ballpark for the increase in a broad all equities fund like the S&P 500 or a total market fund. For comparison Vanguard's S&P 500 index fund VFINX had an increase of 32.18% for 2013. Vanguard's total market index fund VTI did a little over 33%.

jimb
Bacchus01
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Re: 31% cumulative

Post by Bacchus01 »

Only here would someone complain about 3% per month.

And it's closer to 2% monthly.
ajcp
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Re: 31% cumulative

Post by ajcp »

Wait, back up. What do you think she should be earning per month?
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happymob
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Re: 31% cumulative

Post by happymob »

Does this also include contributions? Many retirement plans love to show a total increase over time, including adding additional principal, which leads to some really misleading "rate of returns".
Rodc
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Re: 31% cumulative

Post by Rodc »

happymob wrote:Does this also include contributions? Many retirement plans love to show a total increase over time, including adding additional principal, which leads to some really misleading "rate of returns".
She is no longer working.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
an_asker
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Joined: Thu Jun 27, 2013 2:15 pm

Re: 31% cumulative

Post by an_asker »

Bacchus01 wrote:Only here would someone complain about 3% per month.

And it's closer to 2% monthly.
+1
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