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goal, how long it takes contribution changes to go through for your plan and how many paychecks will the new amount be withdrawn from.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.