How to Check on Your 401k and Review Your Investments

Regularly checking your 401(k) is an important part of financial planning for retirement. This employer-sponsored retirement savings vehicle plays a key role in accumulating wealth for your later years. Monitoring your 401(k) account helps ensure your investments align with your financial objectives and risk tolerance.

Accessing Your 401k Information

Locating your 401(k) account, especially from previous employers, is often the first step in managing your retirement savings. If you are currently employed, your human resources department can provide details on how to access your plan administrator’s online portal or assist with any login issues.

For accounts held with past employers, several avenues exist. Begin by contacting the human resources department of your former company, as they often retain records of past employees’ retirement plans. Reviewing old pay stubs or W-2 forms can also provide valuable clues, as these documents may list the plan administrator or indicate participation in a retirement plan.

If direct contact with a former employer is unsuccessful, you can reach out to the plan administrator directly if you remember their name. Many financial institutions that manage 401(k)s can help locate your account with personal identifying information like your name and previous employer. Additionally, federal resources such as the Department of Labor’s Retirement Savings Lost and Found Database can help locate forgotten plans. State unclaimed property databases are another potential resource, as some abandoned accounts may be transferred to state control over time.

Understanding Your 401k Statement and Online Portal

Once you have access to your 401(k) account, understanding its components is important. The current balance reflects the total value of your account, including contributions and investment gains or losses. This provides a snapshot of your retirement savings at a specific point in time.

Contribution details outline how money is being added to your account. These typically include your employee contributions, which can be pre-tax or Roth. Pre-tax contributions reduce your taxable income in the year they are made, with taxes deferred until withdrawal in retirement. Roth contributions are made with after-tax dollars, meaning qualified withdrawals in retirement are tax-free. Employer contributions, such as matching contributions or profit-sharing, are also detailed, showing how much your employer adds to your account.

A key aspect of employer contributions is the vesting schedule, which determines when you fully own the money your employer contributes. Your own contributions are always 100% vested immediately. However, employer contributions may be subject to a vesting schedule, which can be immediate, cliff, or graded.

Immediate vesting grants full ownership right away. Cliff vesting requires a specific period of service before you own 100% of the employer contributions. Graded vesting allows you to own a growing percentage of employer contributions over time.

Your statement or online portal also displays your investment allocation, showing your fund distribution across different investment types like stocks and bonds. A performance summary provides insight into how your overall account and individual investments have performed over various periods to gauge growth. Fees and expenses are another important section, detailing costs associated with your plan. These can include administrative fees, investment fees (like expense ratios), and individual service fees. These costs can vary significantly, with passively managed index funds generally having lower expense ratios than actively managed funds.

Finally, beneficiary information is an important detail to review. It specifies who will inherit your 401(k) assets upon your death. It is important to keep this information current, as beneficiary designations on retirement accounts typically override instructions in a will.

Reviewing Your 401k Investments

Assessing the investment options within your 401(k) plan is a continuous process to align your portfolio with your financial goals. Your plan typically offers a selection of mutual funds, which can include stock funds, bond funds, and target-date funds. Some plans may also offer index funds, which track a market index, or actively managed funds, which rely on a fund manager’s expertise.

Evaluating fund performance involves comparing your chosen investments against relevant benchmarks. Regularly reviewing performance over various timeframes, such as one, three, and five years, provides a comprehensive view.

Diversification is a strategy to spread investments across different asset classes and types. This means allocating funds across various stock and bond categories. Checking your current allocation ensures you are not overly concentrated in one area, which can expose you to unnecessary risk.

Your personal risk tolerance should guide your investment choices. Younger investors with a longer time horizon until retirement might opt for a higher allocation to stocks, which historically offer greater growth potential but also higher volatility. As retirement approaches, a more conservative approach often involves shifting towards a higher proportion of bonds to preserve capital. Target-date funds automatically adjust their asset allocation to become more conservative as you approach a specified retirement year, offering a hands-off approach to managing risk and diversification.

Making Changes to Your 401k

Periodically reviewing your 401(k) allows you to make adjustments to keep your retirement savings on track. One common change involves adjusting your contribution percentage. This can typically be done through your employer’s human resources department or directly via the 401(k) provider’s online portal. Increasing your contribution percentage can significantly boost your retirement savings over time.

Changing investment allocations or rebalancing your portfolio is another procedural step. Rebalancing involves adjusting your current asset mix to bring it back in line with your target allocation. This process can often be initiated through the investment section of your online 401(k) portal. Many target-date funds automatically rebalance, simplifying this task for participants.

Updating beneficiary designations is a straightforward yet important administrative task. Life events such as marriage, divorce, or the birth of a child should prompt a review of your beneficiaries. Most 401(k) plan administrators allow you to update this information online, though some may require a paper form. If you are married, federal law often requires spousal consent to designate someone other than your spouse as the primary beneficiary.

Finally, it is prudent to keep your personal information current with your 401(k) plan administrator. This ensures you receive important communications, statements, and tax documents promptly. These updates can typically be managed through the personal profile section of your online account.