Using a 401(k) plan to save for retirement allows you to put your savings on autopilot with automatic payroll deductions. In addition, you receive tax breaks for your contributions, and the earnings aren’t taxed until you take distributions from the account. However, to make sure you’re on track for the retirement of your dreams, you need to keep tabs on your 401(k) balance from time to time. In addition to knowing your 401(k) balance, it’s also important for you to know how much of your account has vested, especially if you’re considering changing jobs in the near future.
Checking Your 401(k) Plan Balance
Your 401(k) plan is required to provide you an individual benefit statement at least once a year if your 401(k) plan doesn’t allow you to direct the investments in your account or at least every quarter if you can direct your investments.
In addition to these statements, some 401(k) plans offer online access to your retirement accounts to check your balance or rebalance your portfolio. Your human resources department for your company can provide you with all the information you need to set up an online login to check your 401(k) balance.
Vested Versus Unvested Balances
The vested portion of your 401(k) plan is the portion that you get to take with you if you stopped working for the company. You are always fully vested in the contributions that you make to your 401(k) plan, so don’t stop making contributions because you don’t know how long you’re going to remain with the company. But, if you’re not vested when you leave, a portion or all of the contributions your employer made on your behalf could be lost.
Vesting of Employer Contributions
Your employer, however, may implement a vesting schedule for contributions they make on your behalf, such as matching contributions. However, there’s only so much time the employer can require you to work before you become fully vested. Each vesting schedule must vest at least as fast as one of two options. The cliff vesting schedule requires that all employees be fully vested in employer contributions by the end of the third year of working. The graduated vesting schedule requires that employees be at least 20-percent vested after two years and vest an additional 20 percent each year after that.
For example, a vesting schedule that vests employees in employer contributions 10 percent after the first year, and then an additional 30 percent each year thereafter, would qualify because it’s always ahead of the graduated vesting schedule. However, a vesting schedule that fully vests employees after four years, but doesn’t vest at all prior to that point, would fail the test because, at the end of year three, the employee isn’t vested at all, which is behind both options.
- Depending on your company's 401(k) plan rules, you might also be able to determine your current balance by phoning or faxing a request to your plan administrator.
- If you are not happy with your current plan balance, you may opt to reallocate, or shift the percentage of your money in various investment vehicles, to better align your returns with your retirement savings goals.
- The balance reflected on any paper statement you may receive is, of course, the balance as of the day the statement was printed. This will likely be your end-of-period balance.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."