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How To Check Your 401(k) Account

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How to check your 401k online

No matter how much your investments are on auto-pilot, it is always beneficial to check your 401(k) account once or twice a year online. In your online account you can check your 401(k) balance, how your investments are performing, yearly rate of return and more. With this information, decide if any changes need to be made such as contribution amounts and investment choices. Summertime is the perfect time to check your 401(k) and see how you’re doing against your retirement and 401(k) contribution goals.

If you’re still new to retirement savings, check out John Oliver’s segment on retirement savings. He does the best job at making 401(k) plans entertaining.

How To Check Your 401(k)

First things first, how do you even check your 401(k) account online? Start by going to the website of your 401(k) provider. If you’re not sure who your 401(k) provider is, go onto your employer intranet and it should be listed under a HR resources section. Once you’re on their website, if you get stuck hit forgot username. If you’ve never set up an online profile this process will alert you to that pretty quickly. It’ll take a couple of steps to get your username and password retrieved / set up. Once you have this bookmark the page and save your username / password either through a password manager or somewhere you can reference later.

Check If Your Yearly 401(k) Contribution Goals Are On Track

In the summary tab online there should be a contribution box that tells you the percentage of you’re salary you’re contributing, your contributions this year and your employer contributions this year.

At minimum, always make sure you contribute enough to get your 401(k) employee match. This is free money that requires no additional effort. Additionally, consider contributing the maximum amount for tax benefits. Confirm if you are on track to get your company match. Are you halfway to your yearly contribution goals? If you want to contribute the maximum for tax benefits ($19,000 in 2019), have you contributed at least $9,500 this year?

If your 401(k) contribution goals aren’t on track identify what the gap is between where you are now and your yearly goal, how long it takes contribution changes to go through for your plan and how many paychecks will the new amount be withdrawn from. Then, figure out how much you need to increase your contribution per paycheck.

Check Your 401(k) Fees

When you originally picked your investments, how much attention did you pay to the fees charged? 401(k) fees can vary widely, anywhere from .5% to 5%. And, though the numbers may seem small it can add up to hundreds of thousands of dollars by the time you retire. While you may not have control of all fees in your 401(k) plan, understand which ones are in your control.

Look at the return of each fund option and the fees associated with each fund. Determine if the returns of those funds justify the higher fees. If not, switch funds. For example, if you are in a large cap equity mutual fund you can switch to a large cap equity index fund which will have lower fees. Mutual funds are actively managed funds which is why they have higher fees. Index funds are passively managed funds which follow as closely as possible the performance of its benchmark index.

To find the fees of each fund in a 401(k) plan with Fidelity, go to the Investments tab under your account and scroll down. Click each fund and each fund page will have the fees listed in the table.

Don’t think 401(k) fees are a big deal? NerdWallet shared findings that 401(k) fees could cost millennials $590,000 in retirement savings.

Check Your 401(k) Investments

For 401(k) plans with Fidelity, go to your account and look at your rate of return (both 1 year and year to date). Underneath the rate of return click on investment performance and research. Here, there are more details about the performance of each fund.

Some 401(k) plans offer target date funds which are funds aligned to the assumed year you will retire. If you’re enrolled in one of these plans, they tend to come with higher fees but require the least amount of effort from you to maintain. That way, the mix in your portfolio will shift automatically for you as the person who is managing it will change the investments over time. If you’d prefer to set it and forget it, you may decide this is worth the higher fees.

If you’re not invested in the target date funds, determine how the investments within your 401(k) plan are performing. While your 401(k) investments are in it for the long haul, it is always good to look at your investments once or twice or year. Should you be overweight or overweight in certain segments like international, large cap or small cap? Should you change only your future elections or current investments?

Lastly, how many years has it been since you’ve changed the mix in your portfolio? If you set your portfolio mix 10 years ago, you may be overweight on stocks and need to rebalance your portfolio to include more fixed income.

Check Your 401(k) Beneficiary

While you’re in your online account don’t forget to check that you’ve named a beneficiary for your 401(k) account. Typically, a spouse must be the beneficiary unless they sign a waiver. If you’re not married it’s important to name a beneficiary in your account. The Motley Fool shares additional tips on when someone inherits a 401(k).

Check Your 401(k) Balances From Former Employers

Did you switch jobs this year or in the past? While you’re doing a status check on your current 401(k) plan don’t forget about any previous 401(k) plans you have. If you don’t want to manage multiple 401(k) accounts, Fidelity outlines four options on what to do with an old 401(k) plan here.

Max Out Your 401(k) Contributions in 2021

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401k contribution limits 2020 - picture of computer with 401k graphs and contribution amounts

A 401(k) plan is a retirement savings plan sponsored by employers that allows employees to contribute to their retirement savings pre-tax. If you can, you should always max out your 401(k) plan. The 401(k) contribution limit for 2021 is $19,500, unchanged from 2020. 401(k) plans have many benefits including tax benefits, employee company match and accelerating funding your retirement. Maxing out your 401(k) every year, or contributing up to the contribution limit, enables you to take full advantage of all of these benefits. Even if you’re not sure how you’ll be able to afford contributing $19,500 to your 401(k) this year there are steps you can take throughout the year to get closer to this goal.

When to Plan Your 401(k) Contributions

The beginning of the year is the best time to plan 401(k) contributions for the year. This way, you can spread out your contributions evenly throughout the year. The amount taken out per paycheck will be consistent that way. However, if you do hit the maximum amount early you’ll get a nice surprise of extra money in your take home pay at the end of the year as well as extra money taken out for taxes. If you wait until later in the year to plan your 401(k) contributions it may not be financially feasible. You’ll have to contribute more per paycheck to hit the max, or you may not earn enough the rest of the year to hit $19,500 in contributions. Don’t forget to check your 401(k) in the summer to ensure your contributions are on track to max out your 401(k) this year.

Make Sure To Always Get the Company 401(k) Match

Does your company automatically enroll you into their 401(k) plan? If not, make sure you sign up! Most companies that offer a 401(k) plan also offer a company match. At minimum, you should always contribute enough to your 401(k) to get the full company match. This is free money! The 401(k) company match is one of the top benefits of a 401(k) plan.

It’s hard when you first graduate college and starting from scratch- all the fees with the first apartment, first furniture buys, starting those student loan payments, etc. You may also have to save for bigger purchases like a house down payment and a car. It’s easy to feel like there is just no money to save for retirement.

Instead, look at how you are spending your money and find a way to contribute enough so you get the full company 401(k) match. After that, there are strategies to increase your contributions without feeling like you now have less money to spend over time.

Increase Your 401(k) Contributions During Raises and Promotions

Every time you get a raise or promotion you could afford to increase your 401(k) contribution more. Most companies have an annual raise cycle and if you’ve set your 401(k) contributions to a percentage of your salary your contributions will automatically increase when you get your raise. This time of year is also a great time to increase the percentage you contribute. You have already learned to live on your previous salary, do you desperately need that increase to buy more stuff? If you get a $5,000 raise you can increase your contributions by $1,000 a year and still have $4,000 of your raise. You won’t miss that last $1,000 while you’re adjusting to the extra $4,000 you are now earning every year. Using the table below, you can take the annual amount and divide it by the amount of paychecks per year to get the amount withheld out of each paycheck.

Increase Your 401(k) Contributions When You Finish Paying A Big Expense

Whether it’s putting down your first down payment, or paying off your last student loan, you now have one less expense. Reallocate what you would have spend on that expense to your 401(k) contributions. You won’t miss having the “extra” money because you didn’t have it before.

Enroll In The 401(k) Annual Increase Program

Some plans offer an annual increase program where you can establish annual increases. It depends on the plan, but at least some Fidelity plans allow 401(k) contributions to increase 1% or more each year automatically. You have the ability to align it to pay increases as well and then just set it and forget it. Automating 401(k) contribution increases is the easiest way to increase your contributions. If you end up needing more cash every paycheck you can always go online to your 401(k) plan provider website and reduce your contributions.

401(k) Tax Benefits

You know contributions to a 401(k) plan is pre-tax, but have you ever done the math as to how much you’re saving in taxes by contributing to your 401(k)? You may think you can’t contribute anymore but don’t forget you’ll also save money on taxes.

If you contribute $19,500 to your 401(k) in 2020 here are the tax savings you can expect with the current federal tax brackets. If you are single and making $62,825 a year (mean salary in the 22% tax bracket) you’ll avoid $4,290 in taxes. When you’re making $62,825 a year as a single filer for every 1% additional of your salary you contribute to your 401(k) you’ll avoid $138 in taxes.

401k contribution limits in 2020 - How much in taxes you avoid by tax bracket as a single filer by contributing the maximum amount to 401k in 2020
2020 Tax Savings for Increased 401(k) Contributions for Single Filers
*Assumes average income of tax bracket
**Assumes all income would have been taxed at the rate of that bracket
401k contribution limits in 2020 - How much in taxes you avoid by tax bracket as a married filing jointly filer by contributing the maximum amount to 401k in 2020
2020 Tax Savings for Increased 401(k) Contributions for Married Filing Jointly Filers
*Assumes average income of tax bracket
**Assumes all income would have been taxed at the rate of that bracket

401k Benefits Include Compound Interest

Last, but not least, if you need a little more motivation to max out your 401(k) don’t forget about compound interest.  The hardest time to contribute to your 401(k) is when you’re young, as you have a lot of big expenses on the horizon and likely the lowest income you’ll ever have. But, thanks to compounding, the more you save early on the less you’ll need to save later. Take this example from the team at J.P. Morgan Asset Management in their  2014 “Guide to Retirement.” Here, they share how much money you can make from investing $5,000 a year over time depending on when you start.

Compounding interest graph showing how much you will make from investing $50,000 over time.
Example of Compounding from J.P. Morgan Asset Management 2014 Guide to Retirement

Don’t forget, a 401(k) is one of several options to save for retirement. After you’ve hit your employee match in your 401(k) plan, start contributing to your Roth IRA account before maxing out your 401(k) in order to fully optimize the tax benefits in your retirement savings strategy.