3 things your retirement statement is missing

Written by
Peter Dunn

You wouldn't believe the hate mail I get. Last week's Indy Star column was particularly divisive. Either I'm a glutton for punishment or I actually believe what I'm saying, because I'm back again this week with another controversial topic. Our retirement plan statements leave something to be desired. Mainly, they give us the exact information they say they don't want us to base our decisions off of. This is at best annoying, and at worst damaging to your financial life.

Chasing returns is a common, yet misguided practice. Retirement planning companies do not want you to chase returns, yet on every statement you not only see the rate of return for the investments you have, but also for the investments you didn't choose. This confusing practice is my beef of the day.

"If you’ve spent at least 15 seconds around the investment industry, you’ve heard or read the phrase 'past performance is not indicative of future performance.' Oh really? Then why is it the only piece of information investors are consistently provided? While I realize there’s only so much room on a statement, I think retirement plan providers are missing a chance to educate investors, and help them make better decisions. At the bare minimum, at least three other pieces of information should be included on your statement." Courtesy of the Indy Star

The first element missing from your statement is, what risk did the fund take to get that 30% rate of return? There are several different ways to measure the risk, and all I'm asking is that at least one of these be included on the statement.

Secondly, it would helpful if the statements mentioned if we are in a bear or bull market. If a statement provided this information, especially how a particular fund performs in each type of market, then you'd be able to compare the relative value to similar funds.

Thirdly, statements should prominently display fees associated with each investment.

"There currently are rules in place which require fees to be disclosed on statements. But as I was writing this column, I glanced at four recent retirement plan statements from four different companies, and didn’t find a fee disclosure on any of them. One statement I looked at actually read 'Account statements provide pertinent information on account transactions, such as contributions, loan payments and interest returned to the account, administrative fees, and gains or losses for the statement period,' but then neglected to disclose a single fee. Go figure." Courtesy of the Indy Star

In theory, investment companies want you to make smart investment decisions, but currently statements are not helping you do this. Better investment decisions require better information.

Ready my full Indy Star column here.

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