Planning a successful retirement is important to us all. However, the amount of information on and offline can leave us feeling overwhelmed. One of the key places to find out where you stand is your quarterly retirement plan statement. The statement contains information that allows you to track your progress and where you need to pick up any slack. Here are the four most important parts.
1. Your Retirement Income Projection
The retirement plan projection is the most important part of our statement. The portion includes contributions made by the participant (you), employer matching contributions and vesting information. It also gives you a snapshot of where you are in comparison to where you want to be when you retire. For instance, you may see that you need to increase your contributions to reach your retirement goals.
2. An Asset Allocation Summary
The asset allocation summary is another important part of your statement. In this section, you will find a breakdown of the investments (cash, stocks, bonds, mutual funds, exchange-traded funds (ETFs), etc.). Think of your portfolio as a pie. Each slice represents an investment with outcome expectations. For example, a small-cap growth mutual fund may provide you with a higher return over time. In exchange for the chances of a higher return, you are also assuming higher risk. Asset allocation allows you to diversify your portfolioamong high return/high risk, moderate return/moderate risk, and low return/low risk investments according to your long-term goals. It is important that you monitor this section and rebalance your investments periodically to keep them consistent with your goals.