How to Look at Your 401(k) and Understand It

A 401(k) plan is an employer-sponsored, tax-advantaged retirement savings vehicle. Employees contribute a portion of their salary into investment accounts, which can grow over time, often supplemented by employer contributions. Regularly reviewing your 401(k) account helps ensure it aligns with your long-term financial objectives.

Accessing Your 401(k) Information

Accessing your 401(k) account details starts with identifying your plan administrator, the company managing your employer’s retirement plan. Your employer’s human resources department can provide this information.

Most administrators offer online portals for account access. To set up first-time access, you may need identifying information from new hire paperwork or enrollment documents.

Administrators also send periodic statements to your mailing address. Phone support is typically available for account inquiries.

Understanding Your 401(k) Statement and Online Portal

Once you have accessed your 401(k) information, either through an online portal or a mailed statement, several key sections provide insight into your retirement savings.

Account Balance

The Account Balance shows the current total value of your investments, reflecting all contributions and investment performance. This figure provides a snapshot of your retirement savings at a specific point in time.

Contributions

The Contributions section details the money flowing into your account. This includes your personal contributions, which can be pre-tax or Roth. Pre-tax contributions reduce your taxable income in the year they are made, with taxes paid upon withdrawal in retirement. Roth contributions are made with after-tax dollars, meaning qualified withdrawals in retirement are tax-free. Additionally, this section will show employer contributions, which often include matching contributions based on a percentage of your deferrals or profit-sharing contributions that are discretionary.

Investment Holdings

Your Investment Holdings section lists the specific funds in which your money is invested, such as mutual funds or target-date funds, and the percentage allocated to each. This provides transparency into how your retirement savings are diversified.

Performance

The Performance section illustrates how your investments have grown or declined over various periods, such as year-to-date, one-year, or five-year returns. While these figures indicate past performance, they do not guarantee future results.

Fees

An important area to review is Fees, which can significantly impact your long-term returns. These typically include administrative fees for managing the plan, which can be a flat fee or a percentage of assets, and investment management fees (expense ratios) for the underlying funds. Expense ratios generally range from 0.5% to 2%, though lower is usually better. Some plans may also have transaction fees for specific activities like loans or distributions.

Vesting Schedule

Finally, the Vesting Schedule indicates the percentage of employer contributions you own. While your own contributions are always 100% vested, employer contributions may vest gradually over several years, commonly three to five years, or all at once after a specified period.

Key Information to Monitor

Regularly monitoring specific aspects of your 401(k) account is important for ensuring your retirement savings remain on track. Paying attention to your Account Balance Growth over time provides a clear indication of your overall progress towards your retirement goals. While daily fluctuations are normal, consistent growth indicates a healthy savings trajectory.

It is also important to routinely check your Contribution Rates. Ensuring you are contributing consistently, and ideally maximizing any available employer match, can significantly accelerate your savings. Employer matching contributions are essentially additional funds for your retirement account.

Reviewing Investment Performance allows you to see how your chosen funds are performing relative to market benchmarks or expectations. This review should focus on long-term trends rather than short-term volatility, which is inherent in financial markets. Understanding the ongoing impact of Fees on your account is also important, as even small percentages can accumulate over decades and reduce your total return.

Finally, keeping an eye on your Asset Allocation ensures your investment mix remains appropriate for your age and risk tolerance. As you approach retirement, you may consider adjusting your allocation to be more conservative. Reviewing your 401(k) statements and online portal at least quarterly or semi-annually can help you stay informed about these important details.