How Much your Retirement Portfolio Gained Last Year?

Starting with a question, how much did you gain in your retirement portfolio, at the end of the year 2013? In terms of absolute dollar value and in terms of percentage? The best way is to glance at your money management software, like Yodlee or Mint, if you have. Else, you can login to online accounts to check the growth.

With excellent stock market performance in 2013 your retirement portfolio might have grown handsomely over the last one year. Speaking about our retirement fund, our 401(k) plan grew by astonishing 80%. Since we started this account only in 2011, the initial amount at the start of the year was not much, hence the growth in percentage term looks so high.

I also got company profit-sharing contribution apart from regular company match, contributing to this above average growth. Now again turning to you:

How about your progress? In case you don’t know how to track year’s performance here are the possible alternatives

1. Login to your retirement saving online account (IRA or 401(k))and check balance history section. You need to select a date range as 01/01/13 and end date as today’s date
2. You can also see balance histories in money management software like Mint or Yodlee
3. If you don’t have online account access (before you try to get it), call up your fund manager’s customer support and ask for this information
4. Wait for the early paper statement

Whatever way you manage to find this number out you will do a ton of good to your financial health, don’t neglect this important step of personal finance!

Now, don’t compare your growth against ours, as I said we started the year with a low amount. So what should you be doing after you determine your retirement fund growth for the year?

Now it’s time to compare the increase (or decrease) with what should have been the increase to reach towards your retirement saving goal ultimately.

Let’s say your retirement goal is to save $1 M, and you assumed that rate of return on your investment is 5% (which is near long-term – average stock market return). You can now easily determine how much you needed by the end of 2013 to reach towards that goal.

Let’s say you needed $200,000 by this year-end to reach towards $1 M goal. Of course, your exact calculation would vary based on your contribution amount, future growth in contribution, the rate of market return, etc. Do you have that $200,000 in your retirement account(s)?

Ok, if the above method is too complex to understand, let’s use the retirement calculator again. Click the link and start filling out the numbers. Most probably the only number that changed from last year is the initial amount saved so far. Now don’t look at the suggested amount CNN tells you, check with your estimate and see if you are on track.

If you’re on track, congratulations, job well done so far, your challenge is to stick to the plan. Make sure you don’t have major income loss or another disaster that can derail your retirement saving progress. Have a financial backup plan in place to protect your fund.

If you’re not on track, you have a problem! Good that you’ve detected now, it’s time to do something. There can be three scenarios why this happened.

A. You didn’t have enough income – Time to rethink on your career, else you’ll end up working in your retirement. Either go for a side gig or learn to get a raise. Or, if you haven’t already done so, reduce your expenses.

B. Your portfolio didn’t have sufficient return – You had bad choices, looks like time to change your allocation, consult with your financial advisor and re-allocate funds.

C. You didn’t contribute enough to your retirement saving account – You’re a criminal to yourself and your family! Thank your lucky stars that you can now increase your contribution for the rest of your life. You may want to do tat now.

Now, another small reminder at the end, there are few important dates and milestones related to retirement planning that you need to remember, else you may have to suffer significant financial loss.

Hope you have great 2014 ahead in terms of your personal financial health.