Your statement of the meaning of the negative return is one way to interpret it - as with any investment that has gone down.

If you want to be assured the value of your 401k does not go down, your employer most likely has a "Stable Value Fund" as one of the investment options. Check into that. It will generally return in the 4% to 5% range annually - but that's never going to change whether the market is soaring or it's plunging.

One other thing to consider regarding the -4.18% personal rate of return. Are you getting employer matches on your 401k contributions? If so, depending on how much you are contributing, you are probably still making out ok. If your contribution rate is 3% and your employer is giving you a 3% match, even if the overall return is -4.18% annually over time, you are getting a 100% match up front - free money in my mind. So, you shouldn't be looking at the -4.18% as a potential reason for stopping contributions to the 401k.

Bichiluz,
The short answer is that a return of -4.18% may be good or bad, because it depends on what you're measuring it against.

Compared to some stock indices that have declined by 30%-50% over the past year, "only" -4.18% looks quite good. But compared to the returns on cash, which are positive, it looks "bad" because you lost money.

Not knowing what you're invested in, it is difficult to assess whether your return is good, bad, or "normal" because we can't be certain what you're comparing it to.

Generally speaking, though, a lot of people have lost a lot more money than this in various investments over the past year or so, which means it's probably not too bad to say the least.

I would encourage you to get a handle on what it is that you're actually invested in that produced this return, and see if you can find an appropriate index or "benchmark" to compare it to for performance. You may find that your 401(k) provider has some helpful information on the performance of this fund compared to appropriate benchmarks.

I hope that helps a little!

Personal rate of return is an interesting beast, especially inside 401k accounts in which you have investments in the market and continue to make new funding choices.

The financebuff has a good post on different ways that returns are calculated in 401ks - http://thefinancebuff.com/2007/07/personal-rate-of-return-dollar-weighted.html - as you can see, there are two different ways to calculate it.

The return can be based on time or dollar. I suggest you ask your 401k provider how they get to the number. The best way to judge if this is acceptable is what is the return in the market or markets that closely match your mix of investments in your 401k.