Understanding your 401K
Your trusted Financial Planners and Educators
Understanding the details of your 401(k) can help you make informed decisions about your retirement savings. Here's how you can gain a better understanding of what's in your 401(k):
- Review plan documents: Start by reviewing the plan documents provided by your employer. This typically includes a summary plan description (SPD) or a similar document that outlines the features, investment options, contribution limits, and any employer matching contributions. It will also provide information on how to access your account and make changes.
- Access your account online: Log in to the online portal or contact the plan administrator to access your 401(k) account. The online platform will provide detailed information about your account balance, contribution history, investment options, and transaction history.
- Understand contribution details: Review your contribution history to see how much you've contributed to your 401(k) over time. Note any changes in contribution amounts or rates. Be aware of the contribution limits set by the IRS for the year and ensure you're maximizing your contributions if possible. Many employers now offer the option of contributing to a ROTH 401k as part of the plan. Make sure you understand how to contribute as well as if they are able to match post tax contributions (Roth 401k contributions)
- Explore investment options: Take a close look at the investment options available within your 401(k) plan. Typically, there will be a variety of mutual funds, index funds, or target-date funds to choose from. Understand the risk profile, historical performance, and expense ratios associated with each option. As part of our service we evaluate how you are invested in your 401k if you are unsure about the funds that are selected.
- Evaluate your asset allocation: Assess how your contributions are allocated across different investment options. Your 401(k) may provide tools or resources to help you understand your asset allocation and the diversification of your investments. Ensure that your allocation aligns with your risk tolerance and long-term goals.
- Monitor fees and expenses: Pay attention to the fees and expenses associated with your 401(k) investments. Review the expense ratios and any administrative fees charged by the plan. High fees can eat into your investment returns over time, so consider opting for lower-cost funds when available.
- Understand vesting schedules: If your employer provides matching contributions, understand the vesting schedule. Vesting refers to the timeline or conditions under which you become entitled to the full amount of employer contributions. This information will be outlined in the plan documents and can impact your overall account balance.
- Seek professional guidance if needed: If you find it challenging to understand your 401(k) or need help with investment decisions, consider consulting with a financial advisor. They can provide personalized advice based on your specific goals, risk tolerance, and retirement timeline.
- Stay informed and review periodically: Keep yourself updated on any changes to your 401(k) plan or investment options. Review your account periodically to ensure it aligns with your evolving financial goals. Make adjustments as needed based on changes in your risk tolerance, investment performance, or retirement horizon.