Verifying Asset Income from Investment Accounts

Written by Katie Rawson Spectrum Enterprises

 When a tenant has an investment account such as a 401K or IRA, management must verify the dividends and the interest for the account.  This may prove to be trickier than one would think.  When reviewing a 401K quarterly statement we might see phrases like, “Personal Rate of Return,” which is followed by a percentage, “Investment Gain/Loss,” or “Yield.”  First, let me explain some of the differences.  Personal rate of return or total return includes the gains or losses on the investment plus the dividends/interest earned on the investment.  The yield is only the interest or dividend income earned on the investment.  Please see the quarterly statement below. 

Here, we see “Dividends & Interest,” “Investment Gain/Loss,” and “Personal Rate of Return.”  The correct amount to use is the $7.35 in dividends and interest.  The annualized amount of $29.40 would need to be included on the TIC.    If we were to use the 5.19% personal rate of return the amount would be $171.52 and much greater than the actual dividends.  You can see from this example how this issue could become particularly important when certifying a household that is close to the income limit.  Recently, many investment gains have been high due to the market.  In order to make sure qualified households are not turned away it is important to use only the dividend income and not include changing value of stocks.

 The above 401K statement example gave a great breakdown of the actual dividends/interest earned.  However, sometimes quarterly statements show the change in value but do not clearly show the dividends/interest earned.  In a circumstance, where the quarterly statement does not give a separate breakdown for interest and dividends earned it is important to follow up to obtain this information.  We recommend using an Investment Account Verification which specifically requests the annual interest or dividend income.  Please see Spectrum’s form.

Another issue concerning counting the correct amount of dividend and interest income is when the account loses value but yet still has dividend and interest income to include. An investment account is able to lose market value and still generate income.  In the example below, we see a 401K account which has lost value this quarter.  The change in value is negative $837.84, yet there are dividends and capital gains in the amount of $4,544.12.  In cases where the account has a negative change in value due to the market, make sure to still verify the dividends and interest earned.  

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