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FIREdreamer · 12-23-2008, 08:24 PM

Is your 401K provider quoting you an IRR?

As I understand it, the XIRR formula is based on cash flow, i.e. how much went into / out of the account and when did that transaction occur. XIRR calculations give you an annualized rate of return, so your account has to be opened at least 1 year for your results to be accurate.

So my guess is, if your transferred your 401K from one institution to another during the last 12 months, then the IRR quoted by the new institution is probably meaningless because they have less than 1 year worth of cash flow data to work with.

12-23-2008, 08:24 PM	#18
FIREdreamer Thinks s/he gets paid by the post Join Date: May 2007 Posts: 2,491	Is your 401K provider quoting you an IRR? As I understand it, the XIRR formula is based on cash flow, i.e. how much went into / out of the account and when did that transaction occur. XIRR calculations give you an annualized rate of return, so your account has to be opened at least 1 year for your results to be accurate. So my guess is, if your transferred your 401K from one institution to another during the last 12 months, then the IRR quoted by the new institution is probably meaningless because they have less than 1 year worth of cash flow data to work with.