Bloggers Make Mistakes, Too

by Kevin on July 28, 2009

Yesterday I warned you that your 401k company was likely lying to you in an effort to make itself look better.

While I still believe this to be true I must admit I discovered a mistake in my personal calculations that warrants a discussion.

I told you that the company was showing that I had a 16% gain in the quarter. I then realized that part of the increase they were showing was due to my contributions rather than gains on previous contributions. Naturally this would pull my actual rate of return down.

I re-ran the numbers and realized I must have hit something wrong on my calculator as I was running the math. The individual rate of return showing on my statement was correct.

However, I think my point still carries some validity with it.

Your 401k Company Wants You — and Itself — to Look Good

This point is still true. Where my confusion came in is how the statement is structured. Here’s what it looks like using completely made up data:

  • Beginning Balance 4/1/2009: $1,000.00
  • Change this Period: $160.00
  • Ending Balance 6/30/2009: $1,160.00
  • Vested Balance: $1,160.00
  • Individual Rate of Return: 16%

The key point of confusion for me is the “change this period” section. The change for the period includes my contributions.

Yet the individual rate of return does not include contributions when you run the math. It shouldn’t, but I think that is pretty confusing in the layout of the quarterly review.

I’d like to see the change for the period broken down into contributions and growth (or loss). This would make it abundently clear how your account performed because you could see the dollar figure of growth or loss.

So what have we learned here?

  • Don’t trust everything you read from me. I’m just human. If you see a mistake, call me out. (I originally rechecked the numbers because a reader commented that what I was suggesting would be illegal for the 401k company to do.)
  • Check your 401k statement like a hawk.
  • Be aware that your 401k company wants to make itself look as good as possible so you will keep contributing.

{ 6 comments }

Holland July 28, 2009 at 2:07 pm

Yes a simply mistatke but I think your post still carries an important message – carfully look at your 401k statements and audit the informaiton for accuracy. You host an excellent blog, thanks for the tips!

Golfing Girl July 29, 2009 at 8:20 am

No biggie–the underlying theme is you always doublecheck the numbers when your money is involved. This goes for bank statements, grocery bills, etc. It may only equate to $1 or so, but when the 16 year old is ringing up my produce and thinks a zuchinni that is on sale is the same thing as a cucumber, I have to be dilligent and correct them on the spot!

Roger July 29, 2009 at 12:58 pm

Mistakes happen. You confessed your confusion, are (hopefully) a little more trusting of you 401(k) company (not enough to stop checking, but enough to feel a little better about it, at least) and got a few good posts out of the deal. Not too bad at all.

Kevin July 30, 2009 at 8:31 am

Glad to see everyone accepts me being human that makes mistakes. Thanks commentors! 🙂

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Rose May 6, 2012 at 6:03 pm

I have had my 401k for 11 years and my company matches up to 6% of my gross salary if I put 6% in. If your company does that, I highly recommend that you take advantage of the 6% from day one….basically I have always done 6% so in a way I have a 50% return on invesment.
Just a rosier way of looking at it?

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