End of 2020 Reflection on My Retirement Accounts
It’s an understatement to say that 2020 has been a crazy year. Nevertheless, at the end of every year, I like to review how well my investments have performed. Regardless of how good or bad each account has done, I find it healthy to review them as objectively as possible to see if any changes should be made to them for the following year. In this blog post, I will go through each of my retirement accounts one-by-one, see if I met my contribution goals, check their overall performance, and determine if my current 401(k) plans need any rebalancing or reallocating.
Between my partner and I, we have the following retirement accounts:
My Traditional 401(k)
Partner’s Traditional 401(k) + Roth 401(k)
My Rollover IRA
Partner’s Rollover IRA
My Roth IRA
Partner’s Roth IRA
I should note that at the time of writing, it is 12/5/20, so I still have some contributions remaining before the end of 2020 and plenty of days left for more market volatility! The numbers you see below are real numbers, but they’re a snapshot taken on 12/5/20 and will be outdated by the time you are reading this.
Anyway, now I’ll go through each account one by one and analyze them. My simple way to determine if an account is doing well or not is by comparing its performance against a total stock market index fund, like Vanguard’s VTI, during the same period. Looking at VTI’s year-to-date performance, it’s had an amazing 17.10% return thus far!
My Traditional 401(k)
2020 contribution goal: A combined $21,000
$19,500 max pre-tax dollar contribution to the traditional 401(k)
$1,500 employer match contribution to the traditional 401(k)
Year-to-date account balance
Starting balance: $115,090.05
My contributions: $19,500 (I maxed out early)
Employer contributions: $1,500.00
Change in market value: $24,964.76
Current balance: $161,054.81
Year-to-date return: 18.34% (+1.24% higher than VTI)
My employer match contributions of $1,500 are relatively low. But hey, free money’s free money. Aside from that, my YTD return is slightly higher than the market, so I’m going to leave this account as-is.
Partner’s Traditional 401(k) + Roth 401(k)
2020 contribution goal: A combined $57,000
$19,500 max pre-tax dollar contribution to the traditional 401(k)
$11,400 employer match contribution to the traditional 401(k)
$26,100 post-tax dollars towards the Roth 401(k) via a mega backdoor Roth conversion
Year-to-date account balance
Starting balance: $112,398.83
Partner’s pre-tax contributions: $18,717.00
Partner’s post-tax contributions: $25,024.00
Employer contributions: $11,400
Change in market value: $41,486.75
Current balance: $209,026.58
Year-to-date return: 24.76% (+7.66% higher than VTI)
As a quick note, the $57,000 contribution goal is the combined employee + employer max contribution limit in 2020. My partner’s employer match contribution maxes out at $11,400 this year and is pretty solid. Definitely nothing to complain about! The $26,100 post-tax dollars contribution is automatically rolled into a Roth 401(k) via a mega backdoor Roth conversion, so earnings will grow tax-free!
I’m happy to see the YTD return quite a few percentage points above the market, so I’ll leave the investments as-is for the time being. However, it looks like the allocation has been large-cap/tech heavy this year, so I’ll keep an eye on its performance next year and see if I need to rebalance my investments.
My Rollover IRA
2020 contribution goal: $0 (no retirement accounts to rollover this year)
Year-to-date account balance
Starting balance: $69,143.84
My contributions: $0
Change in market value (minus fees): $9,615.97
Current balance: $78,759.81
Year-to-date return: 13.91% (3.91% lower than VTI)
Since the YTD return is quite a bit lower than VTI’s, that’s a problem. Looking at my investments, I have several REITs in there that haven’t quite recovered since the March ‘20 stock market crash, but I think I’ll leave them alone for now since I like the idea of receiving high dividend payouts in a tax-deferred account.
Partner’s Rollover IRA
2020 contribution goal: $0 (no retirement accounts to rollover this year)
Year-to-date account balance
Starting balance: $67,297.63
Partner’s contributions: $0
Change in market value (minus fees): $9,861.95
Current balance: $77,159.58
Year-to-date return: 14.65% (2.45% lower than VTI)
Since the YTD return is quite a bit lower than VTI’s, that’s a problem. Looking at my investments, a couple of stocks in there are slightly riskier and had more volatility recently, so they’ve pulled my returns down in the near-term. Again, I think I’ll leave them alone for now since my % allocation in those riskier stocks is quite low and at a risk level I feel comfortable taking.
My Roth IRA
2020 contribution goal: $6,000 via a Backdoor IRA
Year-to-date account balance
Starting balance: $7,101.66
My contributions: $6,000 (via a Backdoor Roth conversion)
Change in market value (minus fees): $4,413.81
Current balance: $17,515.47
Year-to-date return: 33.69% (+16.59% higher than VTI)
The September spike was due to the lump sum of $6,000 when I did the Backdoor Roth conversion into my Roth IRA. I wish I did it at the beginning of the year but I totally forgot about doing the backdoor. Also, while I’m doing some wishing, I would’ve preferred to contribute when the market bottomed during the March 2020 crash :) In any case, things still worked out well, as I’m up nearly twice as much as VTI is. I accomplished that with a well-timed stock pick that I quickly got out of and reinvested in VTI. So, it’s now allocated just as I want it to for the long-run.
Partner’s Roth IRA
2020 contribution goal: $6,000 via a Backdoor IRA
Year-to-date account balance
Starting balance: $7,086.76
Partner’s contributions: $6,000 (via a Backdoor Roth conversion)
Change in market value (minus fees): $3,433.68
Current balance: $16,520.44
Year-to-date return: 26.24% (+9.14% higher than VTI)
Similar to my Roth IRA, my partner’s Roth IRA had a September spike due to their Backdoor Roth conversion. Instead of taking the risky stock-picking route I did in my Roth IRA, my partner’s account went the stable, diversified route into an index fund. The returns aren’t as good as my account, but it’s fared exceptionally well, too.
Year-end Summary
It’s not quite the end of the year (at the time of writing), but I like to go through this exercise before the actual end of the year and then again in the new year. Just as I’ve analyzed my retirement accounts in this blog post, I also review my other investment accounts’ and rental properties’ performances, too. After all, if they’re not meeting or beating the market, the investment isn’t worth it.
Overall, I’m satisfied with my retirement accounts’ performance and am not going to rebalance my investments at all for the time being. But I will stay vigilant as the year comes to an end and especially as the COVID situation continues to evolve. That means I can largely continue to “set it and forget it” moving forward. As long as I continue to meet my contribution goals and dollar-cost average (DCA) my investments throughout the year, I should be in good shape. In fact, by automatically pulling money from my bank accounts and auto-investing in index funds, I don’t stress over short-term market volatility and I continually invest over time without hassle.
If you’re the type of person to commit to new year’s resolutions every year, consider some financial resolutions in 2021. Your future self will thank you later! Review your investments this year. How did they fare compared to a total stock market index like VTI? Did you meet your contribution targets for the year? What are some of your financial goals for 2021? What will you do differently? Comment below!
