Understanding Your 401k Statement And Account Report Cards

Doing the math

The timing of the reports you receive is determined by how often your plan is valued. Valuation occurs when the plan’s recordkeeper reconciles all account activities—such as contributions, matching funds, asset reallocations, fluctuations in investment values, and loan repayments—within a specific period.

With advanced electronic tools, recordkeepers can efficiently value your account daily, providing you with timely access to this vital information.

Frequent valuations offer greater flexibility in adjusting your investment selections, whether your assets are held in plan investments or brokerage accounts. For instance, if your plan is valued daily, you can typically switch your current investments and redirect future contributions every day. Conversely, if your plan is valued quarterly, you’ll have the opportunity to make portfolio changes on a quarterly basis.

A friendly voice

If you have a touch-tone phone, you can conveniently access your 401(k) information through a voice response unit (VRU), typically available via a toll-free number. These systems allow you to check your account balances, investment selections, and personal information, as well as request statements—24 hours a day, 7 days a week. To access your information, you’ll usually need to enter an ID number, which may include all or part of your Social Security number, along with a personal identification number (PIN).

Voice response units provide the same information found on printed statements but offer the added convenience of allowing you to reallocate your account—switching current investments or changing the allocation of future contributions—and update personal data easily.

However, keep in mind that the timeliness of your account balance depends on how frequently your plan is valued. If the recordkeeper conducts daily valuations, your account balance will reflect the previous day’s closing prices. Conversely, if your plan employs monthly or quarterly valuations, your investments will be priced as of the close of that specific period.

Reading the statement

Loan information

If you’re repaying a loan from your 401(k), the investment from which you borrowed will be indicated as a debit, along with the total amount you borrowed. This helps you keep track of your loan balance and its impact on your overall investment.

Transfers

Any transfers of money into or out of your account will also be reported. For instance, if you’ve rolled over funds from a former employer’s plan, those amounts will be clearly shown. This transparency allows you to monitor changes in your account and ensure all transactions are accurately reflected.

Making changes

The rules for changing your investments vary from plan to plan. Your plan description will outline how often you can make changes and when those changes will take effect. For example, if your plan permits daily investment switches, you may need to call or log in by a specific time for the change to be executed the same day. After making a change, your plan administrator will send you a confirmation statement.

Personal data

Your report will include essential personal information such as your name, address, date of birth, the date you joined the plan, beneficiaries, and annual salary. If any of this information is incorrect, it’s important to investigate further, as discrepancies may also affect how your account is valued.

Investment selections

This section details your current allocation across the investment options you’ve chosen. Most plans allow you to adjust your investment mix, but the frequency and timing of these changes will depend on your plan’s specific rules, often influenced by valuation dates.

Future account value

Some plans may offer projections of your account’s value at retirement based on different hypothetical rates of return, assuming you continue to contribute at your current rate.

Vesting status

Your report may include information about your vesting status, indicating whether you own your employer’s contributions to your account. If you are not fully vested, the report will specify the date you will become vested.

Account balance

The report will present your balance at both the beginning and end of the period, along with a breakdown of your pretax and after-tax contributions (if any), employer contributions (if applicable), and rollovers from a previous employer’s 401(k) plan (if any). By subtracting the total contributions you’ve made during the period from the overall change in value, you can calculate the investment’s rate of return.

Transfers

Any transfers of money into or out of your account will be detailed in the report. For example, you might see amounts added from a former employer’s plan.

Loan information

If you’re repaying a loan from your 401(k), the report will indicate the investment from which you borrowed, along with the total amount borrowed, shown as a debit.

In conclusion

Online access to 401(k) account information is becoming an increasingly popular feature in many plans. If your plan hasn’t transitioned to an online platform yet, it’s likely to do so soon. These plan websites offer the same comprehensive account information as printed statements and voice response units, all presented in a user-friendly format that you can view and print at your convenience.

To ensure the secure transmission of your confidential account information, plan administrators utilize specialized software. Accessing your account requires you to identify yourself with a unique user ID and password, providing an added layer of security for your sensitive financial data.

Wishing you a great week!